If you are "running" the US company from France, then you are working in France and need to be paying into the French tax and social insurance system. Where your company is incorporated or where the customers are located is completely irrelevant here.

That said, there are a number of options for you. If you don't want to combine the US and the French companies in a single French company what you could do is to have the US company pay you a salary, which would then be subject to French taxes and social insurances. (Again, there are a couple different options how to do this - including having the US company register as a French employer with no French presence so it would be the company paying you, and making the appropriate tax and social insurance payments for France.) And, depending on how you set things up, there is usually an option with a French business of having the business pay its own taxes or running the results of the business through your personal tax declarations - although you still need to be signed up for the social insurances ("cotisations") and pay those separately.

Technically speaking, you are supposed to report your worldwide income to both the IRS and the French Fisc, invoking the appropriate credits or deductions on each side designed to avoid double taxation. You don't get to choose which country you pay your taxes to - and generally speaking, you'll probably wind up paying the higher of the two taxes (net) once everything is handled properly. On the US side of the tax issue, you declare everything (both US and French source incomes) and then for the most part you take the Foreign Tax Credit for the taxes paid in France. This is where it could be advantageous to you to become an employee of the US company because then your salary is eligible for the Foreign Earned Income Exclusion (as is your income from the French business) up to the FEIE limit.

You may want to consult with your local CCI (Chambre de Commerce et d'Industrie) and/or possibly look into the US expat group AARO, which offers lots of tax information for its members as well as contacts with many of the tax attorneys in Paris who have experience dealing with these "international" types of situations.

 

Two companies? Find an accountant (or two) and a lawyer (or two).

 

As an American living in France, you would be considered a resident in France for tax purposes and would be required to report your worldwide income to the French tax authorities. This would include any salary and dividends you receive from your U.S. company.
However, there is a double tax treaty in place between France and the United States which would prevent you from being taxed twice on the same income. You would be able to claim a foreign tax credit for any taxes paid in the United States on the income from your U.S. company.
Regarding the U.S. company paying the French company for your time, it is possible that this could be considered as a service fee and would be subject to French VAT (Value-Added Tax) but it would not affect your personal income tax. However, it is best to consult with a tax professional to ensure compliance with both French and U.S. tax laws.

Regards
Jamal Shah

https://juicerfusion.com

 

This would include any salary and dividends you receive from your U.S. company.
However, there is a double tax treaty in place between France and the United States which would prevent you from being taxed twice on the same income. You would be able to claim a foreign tax credit for any taxes paid in the United States on the income from your U.S. company.

Sort of. If you are "tax resident" in France (i.e. doing the work from France) then your salary will be taxed in France and you will be subject to French social charges (which run considerably higher than those you would pay in the US). There is no tax credit for the social charges paid in France (though in France you will get to deduct something like 85 or 90% of the social charges you pay from your gross income before it is taxed). You also want to be careful with dividends which, as I understand it, are pretty heavily taxed in the French system.

Also, Jamal may have misspoken, but while the US tax authority allows for a Foreign Tax Credit for taxes paid in France, the French tax system works differently and doesn't usually offer direct tax credit for taxes paid to the US. If you read the instructions for the French tax form 2047, you'll find a description of their approach to mitigating the double taxation issue on the various types of foreign source income. You will find, however, that the French Fisc is very helpful when it comes to tax questions (at least for personal income tax issues).

Honestly, I don't see any point in maintaining separate business entities for the work you do for US customers vs. EU customers. Given that you are doing the work while physically present in France, both income streams are declarable and taxable in France, assuming that you are drawing a "salary" and receiving "dividends" from both companies. (And there are some heavy duty reporting requirements for the US IRS for the French business entity, assuming you own at least 10% of the company.)

 

@uncaged -- As has been stated before, both the U.S. and France tax worldwide income. Also, the way you describe your situation, it might be hard to prove that other than registration, your U.S. company has no substance in the U.S., so it may also be considered a French company for French tax purposes, in addition to it's U.S. reporting requirements..

Additionally, your French company (in addition to reporting,) would probably be liable for the GILTI tax on the U.S. side. I agree with @Bevdeforges , the simpler the better. It may make sense to have two separate registrations, to better attract clients, but you might consider one company being a wholly owned subsidiary of the other. Having two "mirror" companies with the same ownership can be problematic.

You might also consider the "check the box" regulations concerning CFC reporting. It may make sense to treat your French company as a "disregarded entity" for U.S. tax reporting. There are lots of ways you can set yourself up. You should study the rules for both countries and establish a structure hat is relatively simple for both reporting and tax purposes. Cheers, 255

 

You might also consider the "check the box" regulations concerning CFC reporting. It may make sense to treat your French company as a "disregarded entity" for U.S. tax reporting. There are lots of ways you can set yourself up. You should study the rules for both countries and establish a structure hat is relatively simple for both reporting and tax purposes. Cheers, 255

Thanks. I didn't spell out my reasons for thinking of using 2 separate companies, but one reason is for the disregarded entity for CFC avoidance. I currently have a U.S. company with a branch office (not subsidiary) registered in France. My bank is closing down my French business bank account, and I'm finding banks not wanting to deal with companies that don't have their headquarters in France. My business advisor owns 5% of the business. I'm thinking of moving my company to be headquartered in France, creating a new U.S. company, having my advisor have a piece of that company but not the French company, and making the French company a disregarded entity. The U.S. company would be taxed as an S Corp, which is a big reason for splitting the companies, since France has a 25% company tax I'd avoid. I'm thinking of making my advisor the president of the U.S. company, and for any work I do for it, the U.S. company would pay the French company for my time.

 

The CSG/CRDS is deductible as a "tax" - but not the social charges paid through payroll deduction and the employer portion appearing on the paye slip. As a French business entity (one of the suggestions as to how the OP could handle this situation), the business entity pays for a range of social charges, which are not deductible for the Foreign Tax Credit. The CSG/CRDS is merely a "sur-tax" on certain types of income that is not subject to "prelevement."

The actual "cotisations" for social charges (health care, retirement, unemployment, etc.) for a person working in France run anywhere from about 25% to as much as 40% of their gross salary.

 

@ungaged -- It does sound like you've thought about you proposal, just a few extra thoughts:

1) Usually Americans choose S-Corp. taxation to get around having to pay FICA. If you're resident in France you are exempt anyway. S-Corp status, just seems like an extra complication.

2) Your current situation seems reasonable. You might consider the bigger banks, that will more readily accept Americans. I fairly recently was able to open an account with BNP Paribas in Paris, despite being denied 3 years ago. It seams they are taking advantage of a lost need. I know BNP Paribas' fees are higher than other banks (which I was also denied accounts previously.)

3) With different ownership structures, you will probably get by with not having the IRS consider one company an "alter ego" of the other.

4) Your new U.S. company sounds like it would be considered a CFC by the French, so I don't think you'd be gaining much by your proposed structure. You might consider instead of choosing S-Corp. taxation to just make it a C-Corp. where you're just reporting foreign stock ownership to France and zero out it's net income every year.

5) Making your French company a disregarded entity would also eliminate your responsibility for paying the GILTI tax.

6) I don't know what kind of numbers you're working with, but on the U.S. side you can always shelter income into pension plans for work done in the U.S. -- say you earned a bonus while working in the U.S. at Christmas.

7) Unless you need a "clean slate," you can just make adjustments to the ownership structure of your current U.S. company. If you form a new company, you'll need new bank accounts, credit lines and your start date will be new, making getting new lines of business credit harder.

8) If you are the sole owner (or you with your wife,) you're eligible to open a solo 401K and contribute significant amounts for compensation earned over the FEIE or for monies earned while temporarily in the U.S.

9) Payment of dividends is not generally a tax-wise way to get money out of a company.

10) You might consider a "buy-out" or merger of your current U.S. company by/with your new French company. This might be another way to simplify your life and reporting requirements. Your original companies' "formed date" may also be adjusted to your original U.S. company formation date.

I realize that some of the above comments conflict with each other -- I'm just trying to give you a little "food for thought." Good luck with your endeavors. Cheers, 255