Do I have to pay taxes in France?
If you find yourself asking this question, there is a pretty good probability that you are a resident of France for tax purposes. The good news is that this entitles you to participate in one of the world’s best health care systems. And of course, there are the clean streets, beautiful public parks and reliable access to bakeries anywhere you go in the country. But of course, being a French resident also means filing a French tax return. So, who is a resident and what should you expect from the French filing system?
Determining residency
You should first note that residency requirements are not always crystal clear. According to the French government (https://www.impots.gouv.fr/residents-france), you are a resident for tax purposes if:
Your household or main abode is in France
Your primary professional activity (if you have one) is in France
The “centre of your economic interests,” (which is to say, where you source most of your income) is in France.
As part of these criteria, the French government often uses a 183-day rule. Under that test, if you stay in France for more than 183 days during the same year, you are assumed to be a French resident for tax purposes. This is because you will by definition have spent more time in France than anywhere else, meaning that France is your “main abode.” But note that you can still have a main abode in France even if you are in country less than 183 days, so long as you spend more time in France than in other places. It’s also worth saying that you can have a residency status different than that of your spouse.
So, let’s say that you meet the definition of residency for French tax purposes. What next?
You want to note three very important points as you get your head around U.S. and French filing requirements:
1. As an American citizen or American green card holder anywhere in the world, you must file a tax return in the U.S. on all income, whether it was earned in the U.S. or France or anywhere else in the world- even if you don’t owe any U.S. taxes.
2. As a French resident, you also must file a tax return on all sources of income earned anywhere in the world.
3. Even though you have to file on your income in both countries, a very handy French-American tax treaty will save you from paying taxes twice on the same income.
Begin with the French returns.
In practice, you are going to start by filing your French tax return. This will be due in the spring. The exact deadline will depend on your départment but you can get started as soon as the window opens on the impôts.gov.fr website. In 2022, postal returns were due by May 19th, while online deadlines ran from May 25 to June 7th. You will find the 2023 tax calender here: https://www.impots.gouv.fr/professionnel/calendrier-fiscal/2023-01.
Your French return is almost always done online and starts with the Form 2042, which will be conveniently pre-filled for you after your first year of filing. You will then use a different form on the government site for each type of income you receive. These vary depending on whether you are a freelancer, have a business, etc… But most of us will also be filing out a Form 2047 for income earned abroad (you will also list this on your main 2042) and a Form 3916 for bank accounts held abroad. You might also have a Form 2074 for capital gains income if you have an investment account somewhere or sold a property.
All set with your French filing? Let’s move on the U.S. paperwork…
Once you have paid your French impôts, you will be ready to file your U.S. return. And you will almost certainly be asking for a credit against your French taxes. Don’t worry, the IRS gives American expats an automatic 2-month extension to file. So, as long as you are living abroad, your U.S. return will be due on June 15th. You will attach a Form 1116 (Foreign tax credit) to your U.S. return and will likely owe no U.S. taxes. Just remember—you still have to file.
NOTE: on your U.S. tax returns, you can forego the foreign tax credit and instead take the foreign earned income exclusion, the foreign housing deduction or the foreign housing exclusion. But those of us in France are just about always better off with the tax credit because of France’s higher taxe rates. Read more about your options on this IRS page, and note the fact that French CSG and CRDS taxes were approved for the tax credit as part of a 2019 agreement: https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit.
Finally, don’t forget your FBAR and FCAT filings in the U.S. You can find out whether those apply to you here.