Europe is king of high taxes, right? You probably think France is no exception, but most expats have zero idea of the relief that something called a double tax treaty can give you abroad. In this video, we'll talk specifically about how American retirees could potentially save tens of thousands of dollars every year while living in one of the most beautiful, most historic countries on Earth. But first, let's discuss why taxes can be so burdensome for American expats overseas. And by the way, I'm no tax expert, but I do my research and have lived abroad myself in 15 countries. When Americans move abroad, they face a nightmare 99% of other immigrants and expats around the world never have to confront because of citizenship-based taxation. You're still stuck paying US taxes on everything you earn. Plus, you now owe taxes on your income, no matter where it's earned, to your new country if it's not a territorial taxed country. Of course, this double taxation can destroy your retirement savings and overseas streams faster than you can count to 10. Countries like Germany hit you with 40 to 45% income tax rates. Spain taxes foreign pensions at rates up to 47%. Plus, they have a wealth tax. Portugal used to be tax friendly but eliminated most benefits in 2023, leaving American retirees scrambling. If you move abroad, you probably think you're escaping high US taxes. But you end up paying two governments, not just one. Most Americans don't realize this until they're already living abroad and get hit with their first tax bill. Financial adviserss and and planners rarely explain that moving abroad often means higher total taxes, not lower, especially for high earners. and those moving to tax unfriendly jurisdictions. We've personally seen clients who moved to high tax European countries and had to return to the US within 2 years because they couldn't afford the tax burden. The worst part is that most of these people could have avoided this mess entirely by understanding how international tax works before they moved. There are ways around this double taxation nightmare and it starts with understanding how tax treaties actually work and territorial tax systems, but we can talk about that in a future video. The United States has signed special documents called double tax treaties with about 70 countries to prevent this exact problem. These treaties establish rules for which jurisdiction gets to tax which income first for tax residents in those countries. Most people familiar with these documents think these treaties eliminate all taxation, but not so fast. Double tax treaties typically make you pay the higher tax rate between the two countries, not zero taxes. Here's an oversimplified example. You move to Germany. The German government wants 40% effective rate of your income. And the US, because you're a US citizen, wants 20% effective. So, you pay 40% total, not 60%. The treaty prevents double taxation on the same income, but you still pay the higher rate and you pay it first to the country where you're tax resident, in this example to Germany. Then you get a foreign tax credit in the US for what you already paid in tax to Germany. Most countries structure their double tax treaties this way because they want their share of tax revenue from residents. So all this to say, you're not escaping taxes. Rather, you're just paying them to one government instead of two. You rarely pay less than the higher of the two rates. This is exactly why so many American retirees are shocked by their tax bills in Europe. They thought the treaty would save them money, but they end up paying European rates instead of US rates. No bueno. Unless you're in Malta, Cyprus, the Balkans, Eastern Europe, or other tax friendly jurisdictions in Europe. France breaks this pattern though completely with a treaty that can actually benefit American retirees. The US France tax treaty is completely different from most other countries. Just a reminder before we jump into the details, I'm not a tax professional. I've just read the treaty and consulted a few experts on the topic. Consult the certified pros before you make any big decisions. Instead of making you pay the higher rate, the US France double tax treaty could actually eliminate French taxes on some of your retirement income, leaving nothing left to tax. This treaty gives American retirees benefits you can rarely find elsewhere in Europe. Article 18 of this treaty is where things get really interesting. It splits income into two buckets. First, social security. This one is US only. If you're living in France and collecting US social security, only Uncle Sam will tax it. France won't touch it. Second, private pensions and retirement accounts like IAS or 401ks. These are different. By the letter of the treaty, they're taxed in France if you live there. But there's a twist. Because of the saving clause, the US can still tax them too. In practice, both countries may want their cup. But then comes Article 24, which uses something called the deo. That's my attempt at French. France will include your US taxed income like dividends or certain capital gains when they calculate your overall tax bracket. But then they give you a credit equal to the French tax that would have been due, wiping out your French liability. It's what tax pros call exemption with progression. You don't pay France twice on income the US already taxed, though it can still nudge your French tax rate upward. So, while American expats in Germany pay 42 or even 45% on their US investment income and social security, Americans in France could pay zero French taxes on that same income. But I'll warn you, this can also get tricky. The law is the law, but practice differs. French tax authorities sometimes ignore their own treaty. Even though the law clearly states you don't owe French taxes on certain income, some local tax offices will still try to collect it anyway. There's one exception you need to know about US rental property income under article 6 and and article 24 in the treaty. This gets taxed by the US first, but France includes it for rate setting and then gives you a credit equal to the French tax on that item. So, let's say you have a rental property in Florida generating $20,000 per year. You'll pay US taxes on that income, of course, and France will include that $20,000 when calculating your tax bracket, but then they give you a full credit for any French tax owed on it. France is the only major European country where American retirees can pay zero local taxes on their retirement income. So, with the right structure, you can keep US tax rates while living in Europe. You need to know this treaty inside and out. But even more so, you need to work with professionals and advisers who know their stuff and can help you. So, the question is, what would you do with tens of thousands in extra cash every year? Upgrade your home, splurge on vacations, invest that cash, and earn even more? I'm curious. Drop a comment below and let me know. Okay, so now we covered how to potentially drop your taxes while living in one of the most pretty, most historic countries in Europe. But how do you actually move there? Getting to France is easier than most people think. There are two main visa paths for American retirees that don't require speaking French or or buying property. And the full immigration process can take 3 to 6 months if you're organized. The financially independent person visa or FIP requires about €60,000 in annual income and gives you renewable one-year residence permits, but that's the legal minimum. We typically recommend having closer to 25 to€30,000 for a single applicant. If you come with your spouse, add on even more qualifying income or the equivalent in savings. The application process involves showing bank statements, getting health insurance, a policy that covers you in the shenen zone, and booking temporary housing for a few months. It really is a straightforward process. The Freedom Files helps you apply from the US, submit your paperwork, leers with the government, and wait for approval. The hardest part is often just getting organized with the right documents. After you arrive in France with your approved visa, you register with local authorities and get your residence card. You need to spend at least 183 days per year in France and make the country your bonafideed home to maintain tax residency and claim the aforementioned treaty benefits. This doesn't mean you can't travel. You just need to make France your primary residence. The talent passport, on the other hand, requires a 300,000 euro investment in a French business, but gives you up to a 4-year initial permit. This path works if you want to start a business or or make a larger investment in France. But obviously, far fewer clients are interested in investing in France than those who can just prove their income and and source of funds and get a free temporary residency visa. And this typically shocks our clients. France has one of the shortest naturalization timelines in all of Europe. After 5 years of legal residency with near full presence each year, you can apply for French citizenship. This gives you an EU passport and the right to live, bank, invest, study, work, and get healthcare treatment anywhere in Europe. Well, in the 27 members of the European Union, the citizenship process requires basic French language skills and an interview, but thousands of Americans do this successfully. This combination of potentially zero French taxes on some income and easy residency makes France pretty unique for American retirees, at least in the European retirement landscape. Now, if you're serious about retiring to France, or want to explore your options abroad, download our free 162page guide, Retire Earlier and Live Better Abroad, or skip the research and book a freedom consult with our relocation experts to map out your ideal path abroad. This is our pride and joy, and we'd love to help you just as we have with many, many others. If you're curious about lower taxes while living abroad, we broke down the top five low tax jurisdictions practically begging for Americans to retire there. Check it out on your screen right now. Thanks for watching. We'll see you soon.
