Credit d'impôt égal à l'impôt français

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Credit d'impôt égal à l'impôt français


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Old 23rd May 2019, 06:24 PM
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Default Credit d'impôt égal à l'impôt français

I'm sure this is a stupid question.

If I have US revenue such as interest and dividends that give rise to a tax credit equal to the French credit, if I am liable to be taxed on that income in the US but don't actually pay anything to the IRS because some of it is tax-free there or I don't have enough revenue, do I still put the taxable amount anywhere on the 2047/42?

I doesn't make sense to me to do that, but there's something in the back of my head - which may be completely unrelated - saying I'm supposed to!

janet

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Old 23rd May 2019, 07:52 PM
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For French tax purposes, it really doesn't matter whether or not you actually pay anything to the IRS.

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If I have US revenue such as interest and dividends that give rise to a tax credit equal to the French credit,
However, I don't believe that US source interest and dividends allow you to claim the tax credit equal to the French tax. You report those on both forms 2042 and 2047 (at the gross amount of the interest or dividend - before any taxes you did or didn't pay). There is a formula for how much theoretical "US tax" you should have paid on that, and it's that amount that is used to calculate your French taxes and any applicable French tax credit.

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Old 24th May 2019, 08:23 AM
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Originally Posted by Bevdeforges View Post
However, I don't believe that US source interest and dividends allow you to claim the tax credit equal to the French tax. You report those on both forms 2042 and 2047 (at the gross amount of the interest or dividend - before any taxes you did or didn't pay). There is a formula for how much theoretical "US tax" you should have paid on that, and it's that amount that is used to calculate your French taxes and any applicable French tax credit.
This is generally true, but under the tax treaty, there's an exception for persons who are "both a resident of France and a citizen of the United States." In those cases, dividends and interest are eligible for a credit equal to the French tax as long as they are paid by (among other entities) a "company that is a resident of the United States." My understanding is that this includes U.S.-based mutual funds, even if those funds hold foreign investments.

Personally, I've always received a credit equivalent to the French tax for my U.S.-source dividends and interest.

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Old 24th May 2019, 10:52 AM
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Originally Posted by newyorkerinparis View Post
This is generally true, but under the tax treaty, there's an exception for persons who are "both a resident of France and a citizen of the United States." In those cases, dividends and interest are eligible for a credit equal to the French tax as long as they are paid by (among other entities) a "company that is a resident of the United States." My understanding is that this includes U.S.-based mutual funds, even if those funds hold foreign investments.

Personally, I've always received a credit equivalent to the French tax for my U.S.-source dividends and interest.
Thanks, New Yorker, that's what I understood from the Notice for 2047.

Under Revenus Imposables en France, B: Credit d'Impôt Égal de l'impôt Francais (8TK), it says (loosely translated) that this method of eliminating double taxation is 'prévu' by the tax treaties with a number of countries, including the United States.

And now that I've read the section with a clear head, it also says that the credit is only given when the tax has been actually paid, so that answers my other question.

Later in the Notice giving the the tax treatment of foreign revenue listing various countries, it specifically says that for US citizens residing in France, dividends and interest are accorded a credit equal to the amount of French tax corresponding to those revenues.

Well, that's it for me then, I'll send my declaration and cross my fingers!

Thanks for all the tax advice, Bev and NY, I couldn't have done it without you.

janet

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Old 24th May 2019, 11:17 AM
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Thanks to both of you for clarifying that for me. As you can tell, I don't have much (anything?) in the way of investments so haven't ever dived into that particular line of research.

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Old 31st May 2019, 05:32 PM
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I just logged on to ask a similar question. After several trips to the tax office, we were sent home and told to calculate our dividends and interest under "revenues ouvrant droit à crédit d'impôt payé à l'étranger" (but only from the date we moved here last year) After an exercise in frustration as to how we would determine the tax paid just those months (our income fluctuates), I stumbled on this guidance at the AARO: https://www.aaro.org/vote/140-editin...taxes-for-2018

It says to list the amounts under "revenus ouvrant droit à un crédit d'impôt égal àl'impôt français" and again in section 6 and in 2TS 2TR and 8TK on form 2042. I came here to get validation that this is true (or untrue). From what I am reading in this thread, it seems true. If so, a million times easier (and more beneficial, since our effective tax rate was very low in the US) than calculating the credit equal to me tax paid. Thanks for any advice, confirmation, or correction on this!

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Old 31st May 2019, 10:02 PM
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Hi Libby,

I've just checked my declaration.

I listed dividends and Interest in Section 6 of the 2047 (dividends and interested listed separately) and then on 8TK on the 2042.

I didn't put anything on 2TD or 2TR, but I am filing 'separately' and that might be different.

In any case if they see the dividends and interest on the 2042 and then on the 8TK, at least I've declared them.!

From what I understand from Bev's advice, we don't have to figure out the amount of the credit, they do it for us. There was something about an abatement - I can't remember the exact figures - but that was if you were declaring that you wanted your tax figured at the progressive tax rate rather than the newly instituted flat rate for investment income. The abatement related to how long you had held the investments.

I'm sure someone will come along and explain that for you.

Good luck - I'm so glad I've finished mine!
janet
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Old 1st June 2019, 06:49 AM
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Quote:
Originally Posted by libbylovespluto View Post
I just logged on to ask a similar question. After several trips to the tax office, we were sent home and told to calculate our dividends and interest under "revenues ouvrant droit à crédit d'impôt payé à l'étranger" (but only from the date we moved here last year) After an exercise in frustration as to how we would determine the tax paid just those months (our income fluctuates), I stumbled on this guidance at the AARO: https://www.aaro.org/vote/140-editin...taxes-for-2018

It says to list the amounts under "revenus ouvrant droit à un crédit d'impôt égal àl'impôt français" and again in section 6 and in 2TS 2TR and 8TK on form 2042. I came here to get validation that this is true (or untrue). From what I am reading in this thread, it seems true. If so, a million times easier (and more beneficial, since our effective tax rate was very low in the US) than calculating the credit equal to me tax paid. Thanks for any advice, confirmation, or correction on this!
If that's how AARO is advising you do it, I'd go with that. Their advice is usually very good - and many of their members are the high priced tax attorneys in Paris.

For future reference, you may want to look into something like ClickImpot for next year (and beyond). There are some features where, in the case of an "option" (like that thing about having certain investment income taxed at either a flat rate or at the tax table rates) it will do the calculation for you and advise you which option to select.

The other handy thing about ClickImpot is that it generates an estimated avis d'imposition so you can see what the difference is if you report something "this way or that" - I've learned lots from that single feature.
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Old 1st June 2019, 07:35 AM
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A lot of people still have the concept of "Dual/Double taxation " in their heads when looking at the tax treaties and feel that because they have paid tax in one jurisdiction they do not need to pay it in another In fact the reason for the updating of the tax treaties over the last few years is to eliminate the use of two "nil tax" bands not to avoid being taxed twice and to give a structure to the differing tax systems It is perfectly possible to have to pay tax twice on the same income if the exchange rate is favourable against the Euro and you have a high pension or income For example a few years back when the £ went up against the € many Brits with substantial state occupational pensions had to pay tax in France as well but normally us mere mortals will not

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Old 1st June 2019, 09:18 AM
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Apologies to Noblesse for going a bit off the original topic.

In my search trying to confirm the AARO advice, I think I found it on page 26 of the tax treaty, which states: In the case where the beneficial owner of the income arising in the United States is an individual who is both a resident of France and a citizen of the United States, the credit provided in paragraph 2 (a) (i) shall also be granted. (And 2ai says a credit in the amount of French tax attributable to such income). It list the income applicable and it applies to dividends and interest paid out by a us goverment entity (which should apply to muni bonds, etc) or a company resident in the US.

There are other forms of income listed, too, if it helps anyone else looking for info. I am feeling fairly confident that the forms filled out per AARO instructions are correct. The person helping us at our appointment Monday is un peu méchant, so I want to be armed with information when we go in since he instructed us to fill ut the other section where we apply the us tax paid against the French tax.

PS Clickimpot sounds great and i would have paid right now to use it, but we are a mac household (it's windows only). Has anyone seen a mac or online utility?

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