Expat Forum For People Moving Overseas And Living Abroad banner

1 - 5 of 5 Posts

·
Registered
Joined
·
6 Posts
Discussion Starter · #1 ·
Hi,
My family is planning to move to France next year from the US. We have been deferring some of our salary to deferred compensation plan (409A) so we can take early retirement. I was wondering if anyone has some experience in regards to how such account is taxed. Since the work was performed in the USA, my understanding is that the income taxes should happen in the US and not in France. Has anyone some experience with this?
Thanks
 

·
Administrator
Joined
·
50,412 Posts
For a more complete explanation, you should take a look at the US-France tax treaty http://franceintheus.org/IMG/pdf/Consolidated_version_of_French-US_tax_treaty.pdf
Article 18 lists the US deferred tax accounts that are considered to be equivalent to a US "government" pension and thus only taxable by the US. If your deferred comp plan is listed here, you must declare withdrawals on both your US and French returns - but there is a mechanism to further explain the "income" so that it receives a full credit on your French declaration. (The amount of "foreign income" is used in the overall French tax calculation, but fully credited if it is a "government pension" under the treaty terms.)
Cheers,
Bev
 

·
Registered
Joined
·
192 Posts
If your type of account is not on the treaty list, then since it represents compensation received for work prior to french residence, withdrawals made after becoming a french resident would not be taxable any more than withdrawals from a pre-existing balances in a bank account, would they? But earnings in the account after becoming a resident would be subject to the impot sur revenu, correct?
 

·
Administrator
Joined
·
50,412 Posts
If your type of account is not on the treaty list, then since it represents compensation received for work prior to french residence, withdrawals made after becoming a french resident would not be taxable any more than withdrawals from a pre-existing balances in a bank account, would they? But earnings in the account after becoming a resident would be subject to the impot sur revenu, correct?
That's my interpretation of the treaty. If it's not on the list as a "foreign pension" then you'd treat it as a foreign bank or investment account.

I'd include it in my list of foreign bank accounts that is part of the French tax declaration, just to be sure. Or possibly as a "foreign assurance vie" which you also have to report each year. That way, if there is ever a question, you can show that you were trying to "do the right thing." Believe me, that counts for a lot in the French tax system.
Cheers,
Bev
 

·
Registered
Joined
·
6 Posts
Discussion Starter · #5 ·
That's my interpretation of the treaty. If it's not on the list as a "foreign pension" then you'd treat it as a foreign bank or investment account.

I'd include it in my list of foreign bank accounts that is part of the French tax declaration, just to be sure. Or possibly as a "foreign assurance vie" which you also have to report each year. That way, if there is ever a question, you can show that you were trying to "do the right thing." Believe me, that counts for a lot in the French tax system.
Cheers,
Bev
Thank you for all the answers and for the link to the treaty. Section 409a is not listed however it can be seen as a form of retirement (money is blocked until a certain date, distributions is via lump sums or regular payments, etc) and could fall in the third definition since it qualifies for a tax relief and is used as a retirement arrangement.

"(iii) a pension or other retirement arrangement is recognized for tax purposes in a Contracting State if the contributions to the arrangement would qualify for tax relief in that State."

I am wondering if anyone else has first hand experience with this.

Thanks
 
1 - 5 of 5 Posts
Top