Taxation Of Retirement Income In France

“Kathleen, I am a new subscriber to Lief Simon’s Simon Letter and have a very critical question. ‘Critical’ because we just sold our house this morning!

“We want to move to France and live on our annual IRA withdrawal and our Social Security. I have read twice where the French government taxes all income except Social Security and IRA withdrawals. They made an agreement with the United States related to Social Security and regard IRA withdrawals as taking money from a savings account, which it truly is.

“Am I correct in assuming that they will not tax these two sources of income?”

–Kenny G., United States

Lief Simon replies:

The tax treaty between the United States and France can be found here.

Article 18 covers pensions. It’s clear that Social Security payments are taxable in the country that pays them, i.e. U.S. Social Security payments are taxable in the United States.

It’s less clear how IRAs are handled by French tax authorities, but paragraph 2 (b) iii of Article 18, which is copied below, seems to indicate that IRAs would be taxed in the country where they were contributed for tax relief.

That’s how I’d interpret all this. However, I’d strongly advise confirming these particulars with a tax specialist in France. We recommend Jean Taquet.

Here’s the relevant excerpt from the U.S./France tax treaty:

(iii) a pension or other retirement arrangement is recognized for tax purposes in a State if the contributions to the arrangement would qualify for tax relief in that State.

“Kathleen, love your articles. I await your correspondents’ picks of the best places in the world to live/retire but feel it would really have meaning if you asked us, your readers, who have travelled far and wide and often lived in many places, where would we choose?

“My wife and I are both British by birth but have lived in France, the UK (of course), Costa Rica, Guam, Hawaii, and the United States and have traveled extensively in many other countries with a view of potentially living there.

“You are right that every individual may choose something different and have different priorities, much of them depending on age, so your survey of readers should include their age, as I feel that is very important. For example, at my age, 74, I look for health care, good non-GMO organic food, moderate climate, good clean water, and community as my main priorities. Someone 20 years younger would no doubt look for great bars and restaurants and a vibrant beach life.

“Keep up the good work. I particularly like your approach to presenting both the good and the bad, as believe me, seldom are the bad ever mentioned.”

–Keith T., United States

Continue reading: Where To Retire In France And Argentina

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