December 18, 2024
When someone reaches out to us expressing an interest in retiring in France as an American, we’re able to give pretty exciting news.
In addition to its excellent social infrastructure, affordable rents (relative to those in the U.S.), and cultural appeal, there are many strong cross-border financial planning strategies available to U.S. citizens seeking to retire in France. This is largely due to an extremely favorable tax treaty between the U.S. and France.
Whether you’re just beginning to explore retiring in France or have been dutifully working on the language for years, this article is for those seeking to better understand the financial considerations that accompany moving to France for retirement from the U.S.
Retirement Age in France
First things first: What is the retirement age in France?
While this question may not be relevant to all Americans seeking to retire in France, it’s good to be aware of the country’s retirement age, particularly because it was recently changed.
In early 2023, current President Emmanuel Macron made international headlines when he successfully passed controversial legislation raising the retirement age in France. The change, which applies to anyone born in or after 1968, raises the French retirement age from 62 to 64.1.
While many Americans raised eyebrows at how early the French retirement age was compared to the U.S., the decision was met with fierce resistance by the French nationwide who decried both the change and that it was implemented directly, with no vote in the National Assembly.
Although the French retirement age change remains contentious to this day, it’s worth pointing out that a key reason for doing so was to continue funding the Social Security system. Like many Western European countries, the average lifespan of a Frenchperson is much longer than that of an American.
How can Americans retire in France?
Now, this could and has been written about as an entirely separate topic. However, there is a component of retiring in France as an American that you need to consider from a financial perspective, which is what we focus on below.
The most common visa used for retirement in France is called the Long-Stay Visitor Visa (VLS-TS Visiteur). (1) However, a word of caution: This visa is not suitable for Americans seeking to semi-retire or simply slow down but continue to work.
To qualify for the visa, you must fully retire and declare you will not work while residing in France. You are allowed to receive passive income from your foreign retirement and investment accounts, many of which retain the preferential treatment they enjoy in the U.S. thanks to the tax treaty that exists between the U.S. and France.
Opening a bank account in France
In theory, opening a French bank account does not look very different from opening one in the U.S. In practice, however, U.S. legislation obliges foreign banks to report their American clientele to the U.S.
As a result of this friction, foreign banks, including French ones, often pass off this challenge to their would-be clients, turning away U.S. expats.
If you are having trouble opening a French bank account, be polite but persistent. Some banks have less qualms about American clientele.
If you are just beginning your research, here are a few big names to get you started: BNP Paribas, Société Générale, CIC, Crédit Mutuel, and Crédit Agricole.
Taxes in France for Americans
Americans living in France as retirees are subject to taxes by both the French and U.S. governments. There are tax breaks that can offer relief for expat retirees, however, the best strategy tends to vary from person to person.
When is the French tax season?
Like the U.S., tax filing in France begins in April. Deadlines range from mid-May to early June and depend on where in the country you reside, with different departments grouped together for efficiency.
During your first year of tax filing in France, you will use a paper form, which is notably shorter and less complex compared to the IRS forms. That said, foreign filers residing in France should take care to declare their foreign bank accounts correctly. Many individuals overlook this detail, putting themselves at risk of financial penalties. Unlike the FBAR, (2) there is no minimum balance for reporting.
After completing your first year of tax filing in France, you will receive a fiscal number and online filing password for future submissions. Tax returns are typically processed by the end of July or early August.
The U.S.-France Tax Treaty
The U.S.-France double taxation treaty is one of the most advantageous for U.S. expats anywhere.
In effect since 1996, the lengthy document details to which country tax is owed and paid and under which circumstances. (3) In the following sections, we’ll highlight two sections of the tax treaty that are particularly resonant for U.S. retirees.
Article 18 - Pensions
This article details the treatment of pensions. To summarize, all U.S.-source pensions are only taxable in the U.S., and the same goes for Social Security payments. This rule applies whether they are taken as a lump sum or received over time.
That said, knowing your rights and applying the tax treaty correctly when filing are two different things. It’s not uncommon for retirees to run into trouble trying to claim the French tax credit that offsets tax owed on their U.S. pension distributions, largely because doing so involves some paperwork.
With respect to this specific aspect of filing your French tax return to claim the correct French tax credit, you will need to ensure that French tax forms 2042 and 2047 are correctly filled out, and that you make a note that you are an American citizen in the free-form textbox (la mention expresse) that accompanies the submission.
Article 24 - Investments
Addressing the issue of double taxation on investment income, Article 24 states that investment income that originates in the U.S. is exempt from French taxation and taxed in the U.S. This applies to interest, dividends, royalties, and capital gains. This applies even when a U.S. citizen is a tax resident in France.
One key detail to highlight here is that this rule only applies to U.S. corporations, not foreign ones. So, for example, a Taiwanese stock held in a U.S. brokerage account would be subject to tax in the country of residence, i.e., France.
A note on managing U.S.-based investment portfolios as a retiree in France
In cases where a U.S. retiree has a substantial (typically around $1 million) asset base in the U.S. and/or complex estate planning considerations, it can be helpful to speak with a financial advisor qualified to support Americans in the French jurisdiction to guide you through a globalized review and expert reallocation of your assets (as needed). Our advisors are U.S.-registered and held to the fiduciary standard – which is not required of European advisors.
This significantly lessens the financial planning burden U.S. citizens encounter when they try to move abroad. While an advantageous tax treaty in theory does not lessen the practical and logistical challenges associated with moving to France for retirement, our intent with this article is to provide fact-based words of encouragement.
Moving ahead, we’ll briefly look at questions that arise during retirement.
Forward planning as a retired American in France
While moving to France is a wonderful way to fully switch gears into “retirement” mode, at some point questions arise around how to navigate organizing your financial legacy as an expat.
Below, we review common questions and provide general answers as a starting point.
Inheritance tax in France
France operates according to the Napoleonic code which involves “forced heirship.” This means that to a certain extent, you cannot exclude certain people from your will.
Children fall into the non-excludable category, meaning that they receive a set amount of their parent’s estate by default. Spouses also have inheritance rights, although in the event that the couple were married in France, the specifics of the entitlement are largely informed by the marital regime chosen by the couple. (4)
Is U.S. inheritance taxed in France?
In a word, yes. When a U.S. citizen residing in France passes away, the applicable French taxes apply to all of their worldwide assets. This also has tricky implications where trusts are concerned, as French taxes apply on any trust to which the deceased is the settlor.
In general, it’s best to get started on estate planning sooner rather than later when you’re an expat in France. There is an estate tax treaty between the U.S. and France that can mitigate some inheritance tax consequences, and it depends on how long the beneficiary or settlor of the estate has been resident in France.
Navigating the cross-border implications of retiring in France
Thanks for staying with us this far!
In conclusion, we want to emphasize that everyone’s situation is unique and what works for one person may not be optimal for someone else.
A closing note for high net-worth Americans considering retiring in France
Financial planning for U.S. expats is cross-border by nature, and we are one of the only firms in Europe that is U.S.-registered with our U.S. expat financial advisors living in the countries we work in.
If you have additional questions related to retiring in France as an American, or in Europe more broadly, we would be pleased to meet at your convenience.
Retiring in France - FAQ
Does France tax U.S. retirement income?
Typically, no. In accordance with Article 18 of the tax treaty between the U.S. and France, U.S. retirement distributions are taxed at U.S. rates and exempt from French taxation for American retirees residing in France.
Should I transfer my U.S. pension to France?
No, there is no need to take such action when the U.S.-France tax treaty contains provisions recognizing the beneficial treatment U.S. retirement accounts receive.
References
Disclaimer
This material is purely intended to be general and educational in nature, and should not be construed as specifically-tailored investment, financial planning, tax, legal, or other professional advice. Information and data contained herein is as-of the date of publication, and may be subject to change in the future without notice. Any investment performance referenced is purely past performance, which is no guarantee of any future performance. Nothing contained herein should be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or other financial product or investment strategy. All investment, tax, and financial planning strategies involve risk that you should be prepared to bear. You are highly encouraged to consult with professionals of your choosing before taking any action based on this material.
Written by
Schedule a complimentary financial consultation