Essential tax and finance guide for U.S. Expats in France
Nothing great ever came easy a wise person once said. And when it comes to being an American living in France, dealing with your tax, reporting requirements, and knowing how to manage finances to suit US IRS rules, is essential to making life great. Get it wrong, and you’ll sure know about it. Luckily there is help and plenty of support to make sure you get it right and live the good life in France that you planned.
Whatever stage you’re at – moving to, living in, or returning from France, you need to bear in mind “citizenship-based taxation” because if you’re an American, you must still file tax returns in the US. It doesn’t matter how long you’ve lived in France (or anywhere else), the IRS rules apply. And it’s not just about filing tax, you’re also restricted in the types of investments you can hold and that includes certain pension and life insurance vehicles. And some investment vehicles may seem like a great idea but may not provide the details the IRS require, making them unsuitable for Americas, for instance the Assurance Vie.
Add to that mix the complications of French financial systems and investment vehicles and says Amy Witherbee of Sanderling Expat Advisors “you have the makings of a mess. But it doesn’t need to be painful, as professional tax and investment advisors specialising in helping American expats in France with their finances, we will make sure that everything is sorted out, reports are filed correctly and all the paperwork is taken care of.”
Moving to France
If you’re at the stage where you’re considering moving to France, Sanderling Expat Advisors say this is an ideal time to get everything in order with your finances so that when you arrive, you know that’s one worry you don’t have on your plate. Instead you can focus your energies on creating the life you dreamed of.
“Before leaving the U.S. for France, we help by developing a list of documents the client will need to report assets, open accounts etc. in France,” says Douglas Soons of Sanderling Expat Advisors. “Crucially for us Americans, we also help clients make adjustments to their U.S. investment accounts before their new EU-based status makes certain holdings (i.e. mutual funds) become a tax problem. And again, there is a question of how the sale of a home, or investment assets might be treated before certain deadlines vs. others. For instance, if you know you are going to have capital gains on a home sale at closing, you want to be sure in advance that the timing of that sale gives you the benefit of a primary home tax break (before you move and make your primary home into a secondary one).
Likewise, if you will need to take money out of your U.S. investment account (i.e. to buy a property in France), you might want to do that sooner, rather than later, so that you are reporting that only on American tax returns.”
Living in France
Already living in France? It’s absolutely not too late to get things sorted out. Get help to create and manage the reporting requirements that you are by law required to undertake under US financial rules. We won’t go into too much detail here but just as an example – FBARs and FATCAs. Or to give them their full names – FATCA: Foreign Account Tax Compliance Act, basically an IRS requirement to provide details of financial assets held outside of the US. FBAR: Foreign Bank and Financial Accounts – like a FATCA but filed on a different system. If you’d like to read more about the requirements, who has to do this, how, what, where and when to file, read Sanderlings Expat Advisors FATCA and FBAR jargon-free explanation here.
And when it comes to filing returns in the French system, Sanderling Expat Advisors can also help you with that.
Moving back to the U.S. from France
As you can imagine, it’s not just a question of packing up your belongings, shipping them back and hopping on a plane. Sort out the financial requirements before you leave to help for a smooth move.
“Before returning to the U.S. we recommend people identify what reports, filings and taxes will be due to each country during the next 12 months. This helps us create a checklist of deadlines for the client and pull together what they will need to submit. But it also helps us determine whether the client is better off to close certain accounts, move assets, etc. before particular deadlines, i.e. the end of a tax year. Or if certain accounts, like the PEA, (a French investment vehicle) for instance, might need to stay in place a while longer to avoid punitive taxes.”
Find out more and book your consultation with one of the qualified cross border financial and tax advisers at Sanderling Expat Advisors: sanderlingexpat.com