Taxation of Pensions in France Made Simple | SJB Global | Financial & Pension Experts (2023)

FAQs

How are pensions taxed in France? ›

In France, pensions are subject to income tax after the deduction of a 10% allowance per household (capped at €3858 based on 2021 figures). After you pass your tax-free allowance (€10,084 based on 2021 figures), income tax rises to 11%, rising to 45% for high-income earners.

If you're a U.S. citizen with a U.S. retirement account (no matter where you live) that money is only taxable in the U.S. If you're a U.S. citizen living in France with a French pension, that pension would only be taxable in France.

In France there are three categories of taxes on income: the corporate tax, the income tax for individuals and taxes for social purposes (CSG and the CRDS, paid by the households). Taxes paid by employers on wages, namely social contributions, are not considered as taxes by the French central government.

Because of the US-France tax treaty, most Americans living in France are already exempt from double taxation. However, the IRS also offers several other tax credits and deductions for expats, such as: Foreign Earned Income Exclusion. Foreign Tax Credit.

You'll pay up to 55% tax on payments from your pension provider if they make an 'unauthorised payment'. This is a payment made outside of the government's tax rules and usually includes: any payments before you're 55 (there are exceptions)

The average of your best 25 years salary whilst paying cotisations in France (capped at a maximum figure of 40,000) is used to calculate your pension. Payment rate means the percentage of your average salary used to calculate pension. The maximum is 50%.

Distributions from your 401(k) and pensions are still taxed as income, albeit they're treated as unearned income—meaning you won't be able to claim them under the Foreign Earned Income Exclusion.

Americans who retire overseas still have tax obligations. Typically, you will have to file a tax return with both the US government and your new host country. You may even have to file a tax return with the US state you used to live in.

What happens to my State Pension if I move abroad? As long as you've paid enough National Insurance, you can claim your State Pension while living abroad. The main difference is that if the State Pension increases, you may not benefit from the extra amount if you're living in certain countries.

The nobles and the clergy were largely excluded from taxation while the commoners paid disproportionately high direct taxes. The desire for more efficient tax collection was one of the major causes for French administrative and royal centralization.

What are the two taxes in France? ›

Individual taxpayers in France pay two types of taxes: national and local.

The tax-to-GDP ratio in France has increased from 43.4% in 2000 to 45.1% in 2021. Over the same period, the OECD average in 2021 was above that in 2000 (34.1% compared with 32.9%). During that period, the highest tax-to-GDP ratio in France was 46.1% in 2017, with the lowest being 41.5% in 2009.

The USA's national index is 71.05 while the French national index is 74.14. Therefore, the cost of living is 4% higher in France than it is in the USA.

For any stay in France exceeding 90 days, you are required to apply in advance for a long-stay vis. In this instance your nationality does not exempt you from requirements. Whatever the duration of your planned stay, the duration of your long-stay visa must be between three months and one year.

People in France who are not tax residents are only taxed on income from French sources. Residents of France are taxed on the entirety of their income earned from French sources or from foreign sources. International tax treaties may also provide for specific arrangements.

You can take 25 per cent of any pension pot as a tax-free lump sum. However, it is possible to cash in an entire pension pot as a single lump sum.

Overall, though, the income tax rates are comparatively reasonable, and residents age 60 and older can exclude up to $12,500 of pension and other retirement income (including dividends and interest, capital gains, IRA and 401(k) distributions, etc.).

Can you collect a pension and Social Security at the same time? ›

Yes. There is nothing that precludes you from getting both a pension and Social Security benefits. But there are some types of pensions that can reduce Social Security payments. Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP the Magazine.

If you are a resident of a country that has a U.S. social security agreement, (other than Austria, Belgium, Denmark, Germany, Sweden, or Switzerland), we will continue your U.S. Social Security payments.

How long can a retired U.S. citizen stay out of the country? SSI benefits will stop if a recipient is outside the United States for more than 30 days, and benefits won't start up again until the recipient is back in the country for at least 30 days.

If you leave the U.S., we will stop your benefits the month after the sixth calendar month in a row that you are outside the country. You can make visits to the United States for specific periods of time, depending on how long you've been outside, to continue receiving your benefits.

One of the main catalysts for the IRS to learn about foreign income which was not reported is through FATCA, which is the Foreign Account Tax Compliance Act. In accordance with FATCA, more than 300,000 FFIs (Foreign Financial Institutions) in over 110 countries actively report account holder information to the IRS.

Do US Expats Pay State Taxes? The answer is yes— If you're living abroad, you might not realize that you're still considered a resident of your home state and are subject to paying state taxes. This includes income tax, property tax, and sales tax.

Yes an American can retire in France. For visits longer than 90 days you will need to apply for a visa de séjour temporaire (a residence visa). You cannot apply while on vacation in France, you ust apply for this residency visa from your nearest French consulate in the U.S.

Can I get my pension if I live abroad? Personal or workplace pensions can be paid to you wherever you live.

The full amount of age pension that a person is eligible for is payable while overseas for 26 weeks.

Why are taxes so high in France? ›

France is a welfare state : Primarily, France is a welfare state. Welfare is a concept that aims to support the poorest in our society so that they can meet basic human needs like housing, getting enough food, etc.

King Louis XVI, aware of the injustices of the French tax policy, tried to reform the tax code to make it more fair, but was repeatedly thwarted by the overrepresented nobles and clergy. This angered the Third Estate, which refused to vote in the Estates General, and formed instead the National Assembly.

French social security contributions

The contributions are shared between employer and employee; on average the employer's share of contributions represents 45% of the gross salary. For 2022, the employee's share of French social contributions represents approximately 20% to 23% of the remuneration.

A wage received by a pupil or student under 26 years of age is exempt from income tax up €4,936 (2022 income). An apprentice with a contrat d'apprentissage is also exempt from income tax up to €19,744 (2022 income). If they earn more than this amount they only need declare the excess sum.

The French administration had taxes like Tithes (giving one-tenth of the agricultural produce to the Church) and Taille (tax to the State). They also levied taxes on salt and tobacco.

France's diversified economy is led by tourism, manufacturing, and pharmaceuticals. The government has partially or fully privatized many large companies but maintains a strong presence in such sectors as power, public transport, and defense.

The seven best places for expats to live in France are: Paris, Brittany, Lyon, Montpellier, Luberon, Dordogne, and Provence. These choices are based on what we think will matter most to those of you that are thinking about moving. Check out the table below for our summary, and read on for further detail!

Moving to France from the United States to enjoy the country long-term is an involved process. You'll need to secure a visa, inventory your belongings and find a place to live before you arrive. If you can't work remotely or don't already have a job, you'll need to find employment as well.

Can a U.S. citizen have dual citizenship with France? ›

U.S. law does not mention dual nationality or require a person to choose one nationality or another. A U.S. citizen may naturalize in a foreign state without any risk to his or her U.S. citizenship.

U.S. citizens/residents may purchase French real property in their individual names. If they do so, the French real property, as immovable property and under international private law rules, will be governed by French inheritance and tax laws. This includes forced heirship rules.

The resident card of a non European national loses its validity after at least 3 consecutive years of residence: Outside of France for the resident card; Outside the territory of the Member States of the European Union for the resident card with the wording “long-term resident – EU”.

The members of the first two estates, that is, the clergy and the nobility, enjoyed certain privileges by birth. The most important of these was exemption from paying taxes to the state.

France allows both local and foreign citizens to open bank accounts here. Also, there also several types of accounts one can set up, in accordance with their needs. The French banking system is a modern one allowing for certain transactions to be carried out online.

Distributions from your 401(k) and pensions are still taxed as income, albeit they're treated as unearned income—meaning you won't be able to claim them under the Foreign Earned Income Exclusion.

Foreign pensions are generally subject to US taxation. Taxpayers may have to report their foreign pensions on additional tax forms, such as a FATCA report or the FBAR.

When you take your entire pension pot as a lump sum – usually, the first 25% will be tax-free. The remaining 75% will be taxed as earnings. If you're thinking of doing this, it's important to contact Pension Wise first.

If you leave the U.S., we will stop your benefits the month after the sixth calendar month in a row that you are outside the country. You can make visits to the United States for specific periods of time, depending on how long you've been outside, to continue receiving your benefits.

Which country is most tax friendly for retirees? ›

Tax on your pension lump sum

You can withdraw money from your pension pot as a lump sum. However only the first 25% is tax-free and doesn't affect your personal tax allowance. Withdrawing anything more than this is taxable. It's also added to any other income you have, which could push you into a higher tax bracket.

Is your pension subject to French tax if you retire to France? The simple answer is yes. Once you become resident in France, all overseas income and investments must be declared on your annual tax return. That includes any monthly, quarterly, or annual income from pensions and lump-sum pension payments.

U.S. Taxation of Foreign Pension Plans

In general, while a foreign pension plan will usually grow tax-free or tax-exempt in the country of source (such as a UK SIPP) — the growth may not be considered tax-exempt under the US Tax Code and 402 rules. In general, U.S. persons are taxed on their worldwide income.