So you have decided to move to France.
You have got a dreamy apartment, cheaper groceries, delicious wine and the kind of work-life balance unheard of in corporate America. You may have even surpassed long wait times and paperwork procedures to open a French bank account and obtain a carte vitale.
However, there is another, less visible layer to setting up your life in France - investments.
In a new country with new tax laws, it is important to re-examine not only your US investments but also your present options in France.
“An American living in France is beholden to two authorities, because they will always be subject to US taxes,” said financial advisor Jerome Perkins. That makes it crucial to ensure your investments are spread out. Otherwise, you could risk being taxed by both French and American authorities - also known as double taxation.
Your tax identity
Between the US and France, the Foreign Earned Income Exclusion, foreign tax credits and US-France tax treaty can all work to alleviate double taxation.
Foreign Earned Income Exclusion refers to a tax benefit that allows Americans to exclude a certain amount of their earnings abroad from US income tax.
One of the benefits of the treaty is that distributions from qualifying American retirement accounts are generally only taxable in the US. France may take note of this income as well, but the treaty makes it unlikely you will be taxed twice. That being said, it is always worth consulting with a cross-border tax expert to make sure this is true for your case.
The rules are a little more challenging when it comes to distributions from the Roth IRA — a unique American vehicle that offers tax-free withdrawals in the US but may be subject to French taxes without proper preparation and documentation.
Mr Perkins, who works at Harrison Brook, a financial advisory firm for expats, said it comes down to how the rules are interpreted, and it is best to consult with a tax advisor.
When it comes to contributing to a Roth IRA while receiving a salary in euros, in principle, the fact that the currency has changed should not impede contributions. However, if you claim the Foreign Earned Income Exclusion, and it covers all the income you received, your taxable compensation in the US becomes zero, according to Greenback Expat Tax Services. As a result, you can no longer contribute to your Roth IRA (or traditional IRA, for that matter).
The tax firm recommends working around the problem by using Foreign Tax Credits, or by only claiming the Foreign Earned Income Exclusion for part of your income.
Trusts, a popular way to avoid probate in America, are also harder to navigate in France because the legal system here does not recognize them the same way. They often lead to lengthy paperwork and potential tax complications.
Regulations on both sides
American citizens and French tax residents find themselves in a unique situation when it comes to investment options in France.
On one hand, popular French options like assurance vie, essentially a flexible investment account, could expose Americans to double taxation.
“The assurance vie is not a vehicle that is recognised by the US government,” Mr Perkins said. “Therefore, while it has its tax-advantaged nature in France, those tax-advantaged natures disappear on a US return.”
It is related to the IRS’ tax regime for PFICs, Passive Foreign Investment Companies, which require complicated reporting in the US and potentially higher taxes.
So what about investing in US funds?
Mr Perkins said it depends on the individual. However, keeping a part, if not most of your investments in the US can be a smart choice.
When it comes to purchases you make after moving to France, things get a little more complicated.
As French residents, Americans abroad are subject to EU financial regulations that prevent buying non-European registered funds. The simplest solution may be to have a cross-border financial expert buy US-domiciled funds like ETFs (exchange-traded funds) on your behalf.
Assessing your options
Investing in real estate has become an increasingly popular option in France. In Paris alone, Americans represented 25% of foreign buyers purchasing older apartments, Le Parisien reported in 2024.
Traditional bond investments and other fixed income investments in France also represent relatively safe options.
Legally, Americans in France can open a PEA (Plan d’Épargne en Actions) — a type of French financial account. Here, in order to avoid high IRS tax rates on PFICs, Americans should buy shares in privately-held companies rather than funds like ETFs, according to a blog post by the financial consulting firm Sanderling Expat Advisors.
An ETF, or exchange-traded fund, is a basket of securities you purchase or sell on the stock exchange.
However, with all the PFIC and reporting complications, it may not always be the smartest option, nor does it guarantee the most attractive investments, Mr Perkins said. Not to mention, many Americans will find there are more investment options on the US side than the French one.
For those adamant in having euro investments in a French account, Mr Perkins said he usually advises clients to get a simple compte-titres. That way, they can end up with individual equities on Euronext.
A compte-titres is a general investment account which you can use to purchase securities with less geographic restrictions, according to an article by Aisa International France, a financial advisory firm. That includes stocks on the Euronext exchange. It often comes with less restrictions than a PEA, but it is also less tax efficient.
No matter what investment plan you choose, it is important to report your income and financial activity correctly - both to American and French authorities. EasyFranceNow, a relocation platform, recommends paying close attention to these three US forms: the FBAR, Form 8938 and Form 8621 (if you own PFICs). French authorities ask that you declare foreign accounts on Form 3916 and investment income on the annual return.
It is also worth speaking to an expert who can advise you based on your specific profile.
“If you want to look for a way to get started, having that conversation is usually very helpful,” Mr Perkins said.
