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MOST FREQUENTLY ASKED QUESTIONS
2. I am planning to move to France, which taxes will I have to pay ? 4. What is the C.S.G. and the C.R.D.S. ? 5. What is the rule of the "taux effectif" ? 7. Where can I get an income tax return ? 8. When and where do I have to deposit my income tax return (2042) ? 9. I do not have a bank account in France. How can I pay the tax I owe in France ? 11. I have a house in France I keep for my personal use. Do I have to pay local real estate taxes ? 14. Where can I get forms RF2 EU-5054 and RF3 EU-5055? 15. I receive a low income from France source. However, I am taxed at a 25% rate. Why?
TAXATION ON REAL PROPERTIES
B - I am considering purchasing a property in France. How much would I have to pay in fees?
WEALTH TAX
A - Two local taxes applied to real properties in France: Residence tax: (taxe d’habitation) : this tax is due by any person who occupies a furnished property. If the property is not occupied or if the tenant did not pay the tax, the owner is liable for its payment. This tax is calculated by applying the rate set by local governments to the official Land Registry rental value. The residence tax is assessed on a yearly basis. The tax is due on January 1st of each year. No rebate is granted if the property is sold or if the occupant moves out during the year. Non-residents cannot benefit from any reduction or relief. Real estate tax: (taxe foncière): This tax on lands and buildings is assessed on a yearly basis. Is is due by any person who own a property on January 1st of each relevant year. New constructions benefit from a two year temporary exemption. The real estate tax is also based on the official Land Registry rental value. I am considering purchasing a property in France. How much would I have to pay in fees? B - Existing buildings: deed recording transfers of properties are subject to a single registration formality. They are subject to a 3.60% departmental registration tax, a 1.20% city tax and a 2.5% collection service fee computed from the departmental registratin tax, i.e. a total of 4.89 % based on the purchase price. Lands approved for development and newly built properties: purchases of such properties are liable to a standard rated real property value-added tax (19.6%). Purchases of lands approved for development are totally exempt from registration fees. However, sales of buildings are liable to a reduced departmental duty of .60%. I wish to sell a real property I own in France? What are my reporting obligation? How is the capital gain tax computed? C - For all sales of real properties in France, please consult the following sites: - http://alize.finances.gouv.fr/dgiboi/boi2005/8FIPUB/textes/8m105/8m105.htm (Please report to Fiche No 14 of the above-mentioned document pertaining to taxation of non-residents) and - file:///U:/Site Internet/PLUS-values immobilieres 8m-1-06.htm
I own a property and hold a bank account and a few investments in France. Am I liable to wealth Tax (ISF)? I - Married or cohabiting couples and persons who have contracted a PAC (Civil Solidarity Pact) should file a joint tax return. Non-residents are only liable to the ISF on the assets they have in France. Financial investments are expressly excluded from the basis of taxation. In order to promote financial investments made by non-residents in France, article 885L of the French tax code exempts those investments from ISF. Are considered French assets:
The threshold of taxation for 2006 is € 750,000. As a result, the ISF is not due when the value of the taxable assets is less than or equal to € 750,000 on January 1st, 2006 On January 1st, 2007, the total value of my French assets was over € 760,000. How is the wealth tax (ISF) computed? II – Assets in excess of € 760,000 are taxed according to the following schedule:
Note: Non-residents liable to the ISF, must file a tax return and pay the tax before before September 1st if they reside in North America. Tax returns and checks should be sent to “recette des Impôts des Non-Résidents, 10 rue du Centre, TSA 10010, 93465 NOISY LE GRAND
1 - I retired in the United States and receive a pension taxable in France. When do I have to pay the French income tax ?
A - When pensions paid by a French pension plan to a US resident are taxable in France, the tax is withheld at the time of the payment of the pension. However in certain cases (multiple pensions or pension exceeding
38,214 Euros in 2006 (pensions), you must file an income tax return 2042 and the regularization of the payments is made by the
Centre des Impôt des Non-Résidents (Tax center for non-residents). The tax return must include the details of the taxable pensions and of the withholdings.
2 - I am planning to move to France, which taxes will I have to pay?
A - As a preliminary matter, it is important to remember that American citizens and residents (green card holders) remain taxable in the United States even if they live abroad. However, to avoid double taxation, the tax paid abroad on the same income is deductible from the US tax (foreign tax credit).
The French tax system is based mainly around five types of taxes
(for more details, got to:
http://www.impot.gouv.fr/portal/dgi/public/documentation?pageId=docu_impots&espId=-1&sfid=410
3 - I am planning to move to France and work for a company in France. When do I pay the French income tax?
A - For employed people, the C.S.G. and the C.R.D.S. are withheld from the wages. The French income tax is paid only the year following the perception of the income. Thus, income tax on 2003 wages is paid in 2004 in three installments (February 15; May 15, the balance is due during the last months of the year) or in monthly payments (from January to October with regularization at the end of the year) based on the tax paid for the previous year (2002). When there is no tax reference (new taxation or no taxation on the previous year), the tax is paid only at the time of the reception of the tax statement of the year following the perception of the income.
Thus, a taxpayer who settled in France in January 2004, will have to file his first income tax return in March 2005, and pay the corresponding tax at the reception of the tax statement which should reach him during the end of the year 2005.
4 - What is the C.S.G and the C.R.D.S?
A - To the personal income tax are added the "Contribution Sociale Généralisée" (7,5% of the income) and the "Contribution pour le Remboursement de la Dette Sociale" (0,5%). These two additional taxes, are usually withheld from the income received by individuals considered as domiciled in France for income tax purpose.
5 - What is the rule of the "taux effectif" ?
A - The French income tax is usually calculated by application of a progressive rate. For taxpayers domiciled or residing in France, this rate can be applied by taking into account, not only the income exclusively taxable in France, but also the exempt income or the income exclusively taxable in another country (articles 170, 197 C of the French Tax Code). This rule known as of the "taux effectif" applies for example:
To avoid double taxation, a tax credit (attributable to the US source income, which is not taxable in France) will be granted on the amount of the French taxes .
Such income, calculated with form 2047, must be reported on the 2042 income tax return (point 8, line TK ).
The tax credit has to be reported in paragraph 8, line TA of the 2042 income tax return.
6 - I am employed and paid by the French Government and working in the United States. Where do I pay income taxes?
A - Article 19 of the French-US income tax treaty provides that compensations paid by a contracting State to an individual, for services rendered in this State, be taxable only in this State, unless the services are rendered in the other State by a person who is a resident of and a national of this other State and not at the same time a national of the first-mentioned State.
In addition, article 29-2 provides that the United States may, in some cases, tax their residents as if the treaty did not exist. Article 29-3b specifies that this possibility does not eliminate the benefits granted pursuant to article 19 to people who are not citizens of the United States and do not have in the United States the statute of immigrant.
Pursuant to these provisions, a French civil servant who is not a US citizen or does not have a green card, does not pay US federal income tax on the public remuneration he receives from France.
The salary received by a US citizen working for the French government and who is not a French citizen, is taxable only in the United States.
The local agents who are either, French, dual citizens and others, will report to France, the annual amount provided by their supervisors. However, if they have to file tax returns in the US, they must report their total gross income, as well as their other French source income (real estate income, dividends, interests...)
SUMMARY
Country of taxation French citizens Dual citizens US citizens Others French/US French/other without with without with France yes yes yes yes yes no yes Etats-Unis no yes yes no yes yes yes foreign tax credit
no yes yes If taxation in a yes no If taxation in a
Where to file your returns:
In France : Centre des Impôts des non-résidents- 10 rue du Centre, TSA
10010, 93465 NOISY LE GRAND
In the United States : check with the IRS.
7 - Where can I get an income tax return?
A - If you were subject to income tax the previous year, you will automatically receive an income tax return (2042) in
April. Otherwise, you can get this document and its attachments:
- by downloading the forms from the site of the Ministry of Finances :
-If you live in France and you are filing for the first time, you can get the tax return at the tax office (centre des impôts) near your domicile.
8 - When and where do I have to deposit my income tax return (2042)?
A - For the taxpayers residing in France, the last day of filing for 2005 is May
31, 2006 You have to mail your return to the tax center (centre des impôts) close to your domicile or to the tax center where you were taxed the previous year.
Note : in France, you do not compute the tax when you file the return, the administration does it for you. You do not have to mail any payment with the return. You will receive a statement at the end of the year.
- For the taxpayers residing in the United States, the last day of filing is
June 30 of the year following the perception of the income.
The tax returns must be mailed to the Centre des Impôts des Non-Résidents (CINR) The address of this tax center is:
9 - I do not have a bank account in France. How can I pay the tax I owe in France ?
A - Your mandatory payment along with the reference slip to be detached from the tax assessment form must reach the "Trésorerie
de Paris des Non-Résidents" before the payment deadline.
If you do not have the possibility to send a check in Euros, you can write a check in US dollars (the exchange rate of the "Trésorerie" will be used for the conversion of the dollars into
Euros to the order of "French Government" and mail it to the "Trésorerie" of the French Embassy in Washington. (See useful addresses )
10 - How to report an erroneous taxation?
A - If you notice a taxation error, you can address a complaint to the tax center which established the taxation (the address of this center is on the tax statement). The deadline to file a complaint is:
11 - I have a house in France I keep for my personal use. Do I have to pay local real estate taxes?
A - The owners must pay the "taxe foncière" whatever the use of the property (personal use or rental).
- the "taxe d'habitation" is established in the name of the people who occupy or have the possession of a
built property. If he does not rent the premises, the owner must pay this tax even if he does not live regularly on the premises.
12 - My French wages (or pension ) are taxable in the United States. How do I convert its amount into dollars?
A - To convert a remuneration or a pension from French francs into dollars, you must use the conversion rate of the day of payment. the source of this conversion rate has to remain the same. You should be able to justified it with the IRS For regular income, such as compensation or pensions. You can use for example the average rate of the Trésorerie of the French Embassy (1
$ - FF 7.13 in 2001, 1 $ = 1.07 Euro in 2002, 1 $ = 0.89 € in 2003, 1$ = 0.80 €
and 1 € = 1.24 $ in 2004, 1 $ = 0.79 € and 1 € = 1.25 $ in 2005,
1$ = 0.796 € and 1 € = 1.2563 $ in 2006).
13 - A 25% withholding tax was charged on my dividends from French source - The treaty states a 15% tax. How can I be refunded of the difference?
A - In order to benefit from the reduced withholding tax rate, you have to send a form RFI-AEU no 5052 (or US form 6166) to your bank before the payment of the dividends. To be refunded the excess of withholding tax, you have to send to your bank a form RFI-B-EU no 5053. This form has to be certified by the IRS, proving that you are a resident of the United States for tax pupose.
14 - Where can I get forms RF1-EU-5052, RF1-B-EU-5053, RF2 EU-5054 and RF3 EU-5055?
A - These forms necessary to justify your residence abroad can be obtained by fax request to:
- IRS (International taxpayer service) : (202) 874-5440
- the Centre des Impôts des Non-Résidents : Fax : (011) 33.1.57.33.83.50
- Or you can download them from the first page of this site.
After having filled the form, you must have it certified by your IRS "service center" (Foreign document certification unit). Once certified, you will mail the form to the French paying establishment.
15 - I receive a low income from France source. However, I am taxed at a 20% rate. Why?
A - The income tax of individuals who are not domiciled in France and are taxed in France on their sole French source income, is computed by application of the progressive rate and the "quotient familial" (number of people in the family).
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