In 2019, if they don’t claim, US citizens tax residents in France will have to pay income tax on their French revenues both in France and in United States
2019: Are you prepared to pay an income tax twice ?
In the very year 2019, certain US citizens tax residents in France will have to pay on their French revenues:
- US income tax on 2018 French revenues
- French income tax on 2019 French revenues
That is the effect of what we call the White year “année blanche”which could become in fact a Black year for US citizens.
Up to now, individual income tax was due with a one-year lag.
Since as of January 1st 2019, French government will put in place a withholding tax operated in order to withhold income tax directly on wages and other so called “non-exceptional revenues”.
The French legislator has set up a mechanism of tax credit (CIMR) on ordinary 2018 income so that during 2019, income tax will be due on current wages received during 2019 and exceptional income received during 2018 only.
The consequence is ugly for US tax payers resident in France: As it is common for a US person (citizen or lawful permanent resident/greencard holder) who lives and works abroad for an extended period of time, he/she will continue to be held to the US income tax laws as resident of the United States, filing Form 1040 and reporting worldwide income on an annual basis. When a US person is required to pay tax in that host country, they are eligible for foreign tax credit on the US income tax return to prevent double taxation.
In order to claim the tax credit, an individual can choose the accrued or paid method to report the tax due to the other country. When a country withholds income tax each period throughout the year, it is common to use the paid method for the credit on the US return. When a country, such as France under prior regulations, does not withhold, it is common to accrue the tax credit. Therefore, up until now, most US individuals in France have accrued the tax on the US tax return each year to match the correct tax liability incurred there even if not paid in the same year. As France implements the exceptional credit for 2018, (CIMR) there will be no tax associated with the non-exceptional income in that year to accrue and offset the 2018 US tax. No French tax means non US credit.
Who has to consider to pay twice?
US citizens tax residents in France having earned in 2018 French non exceptionnals revenues and:
- having earned above US € 104 000 of foreign revenues for that year ;
- having not enough US tax credits ;
- having made option for “accrued” system.
What kind of French revenues?
- Wages and salaries, pensions ;
- Fees, commissions, farm income.
How can you avoid it?
We have built strong arguments to defend a reimbursement of this “double taxation” by introducing claims to the French administration. You have to contact us as soon as possible should you want us to assist you in this litigation.