French Taxation of US Retirement Income

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French Taxation of US Retirement Income


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Old 22nd May 2013, 11:44 PM
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Default French Taxation of US Retirement Income

Hello. My wife and I are planning on retiring to France in three years. It could be longer, however, depending upon our net income after taxes. I have read the Tax Treaty between the US and France, the 2004 and 2009 amendments and the technical explanations for each. And I have searched this forum, which by the way is the best single resource I have found for just about every topic related to moving abroad, and other on-line and printed resources and have specific questions re the French tax treatment of various sources of funds.

In fact, I would very much like to engage someone who could simulate French and US tax returns. I contacted two firms in Paris by e-mail, but received no response. If anyone can offer a referral to an accountant/lawyer who might provide that service, I would be appreciative.

Preliminarily, what I would like to know is how the French would treat the following:

Monthly distributions from a state gov't pension. It appears that they would taxable only in the US, like US social security.

Withdrawals from:

457 retirement plan
401(k) retirement plan
IRA
Roth Ira

And one wealth tax question: how is the value of my pension computed, if at all, by contributions or by an estimate of the value based the likely pay out over mine and my wife' anticipated life spans?

Thanks for any help,
Brien

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Old 23rd May 2013, 05:55 AM
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Easy one first - for the wealth tax, the "value" of your pension is the amount of money (or investments) in the account. However, certain categories of retirement plans may (or may not) fall into the definition of particular "life insurance" contracts which may not be counted as part of your "patrimoine." (Yeah, it's tricky.)

Generally speaking, your US based pensions are not subject to French income tax, though you do have to report the income, and that may be subject to "cotisations" - which is a flat rate tax (8% I think, but sometimes only 6%) meant to cover the debt of the national health service here. This "tax" is not considered an income tax for US tax purposes, and thus is not deductible on your US taxes. You do get a credit back for part of that tax on the next year's French income tax.

401K and IRA deductions are tricky. Technically speaking, they aren't income at all to the French, as the "income" element is from a long time ago, before you became subject to French taxation. And, because the US is collecting only "deferred" tax due (not on the Roth, I know) it's treated as though you simply had a big old savings account over in the US that you dip into now and then. The question comes up only on earnings of the accounts while you are resident in France.

Right now is not a good time to be contacting French-US tax folks, as the due date for French declarations is fast upon us, as is the filing date for US tax returns for those resident abroad. You may want to just wait until the end of June or so and maybe try again.

The other option is to look into membership in AARO, a US expat organization that offers information on taxes and other legal issues to its members. AARO - Association of Americans Resident Overseas
Cheers,
Bev

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Old 23rd May 2013, 01:13 PM
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Thanks for the reply and AARO recommendation. I was already planning on health insurance through them.

Would cotisations be an issue if we are not part of he health system? We will not be employed.

Our retirement plans will be earning income (I hope), so how is that addressed?

I realized that tax season might be an issue. Will wait a bit before trying again.

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Old 23rd May 2013, 02:39 PM
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BMllr -- your situation seems quite similar to ours. I'm in the same boat trying to predict cost of living and taxes for an upcoming retirement.

One useful guide on taxes is here: http://www.pwc.com/us/en/hr-internat...ance-folio.pdf.

If you haven't already reviewed that.

You also may want to contact your closest chapter of the Alliance Française. I know at least some of them can provide references to service providers in their area for help with French law, taxes, immigration, and similar topics.

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Old 23rd May 2013, 03:24 PM
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Quote:
Originally Posted by BMllr View Post
Thanks for the reply and AARO recommendation. I was already planning on health insurance through them.

Would cotisations be an issue if we are not part of he health system? We will not be employed.
The 8% tax that is referred to by some as "cotisations" is applied to every income source that has not already been subject to cotisations (mainly salaries and salary-like income). But you should ask AARO about this - I know there was some discussion of this a few years ago when I was still a member there.

Quote:
Our retirement plans will be earning income (I hope), so how is that addressed?

I realized that tax season might be an issue. Will wait a bit before trying again.
Basically, it's not addressed (at least by most US expats in France). I noticed this year there have been some changes in the French tax law that seem to apply to "foreign retirement plans" but I haven't had time enough yet to go through them carefully. Might be another good question to put to AARO.
Cheers,
Bev

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Old 23rd May 2013, 06:20 PM
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Bevdeforges and fils de l'Oregon, thank you both.

fils de l'Oregon-i have noticed that your situation seems similar to ours. Any information that you discover you think might be helpful, please share. I will do the same.

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