My wife and I plan on moving to France in 2-3 years from now. I am doing Roth IRA conversions every year, and am trying to find out if the distributions that we later begin taking from those Roth IRA’s are to be reported on French tax forms along with our U.S. Social Security, my pension and my wife’s French pension. I have had a hard time finding a clear answer anywhere. Thank you for any help.
Hello Peter. Good to have you join our discussion group.
(Sorry for the delayed response Stella but I’ve been busy laying a base for our new garden patio.)
So then – to the question in hand to which the answer is I believe both YES and NO at the same time.
What makes a ROTH IRA different from a Traditional IRA is that the US tax break comes when the money is withdrawn rather than when it is paid in. So the monies in the ROTH IRA have already been assessed for US tax, and it doesn’t matter whether any actual tax was paid or not, although it most probably was. Basically the ROTH IRA is simply a savings account with beneficial conditions in that the growth experienced by the monies therein is exempt from US tax when it is withdrawn.
So Peter, I now have to make an assumption that the ROTH account holders are, and will continue to be, American citizens.
As and when you become permanently resident in France it would be reasonable to re-set the ‘basis point’ of the ROTH account to the date of becoming so resident. The monies in the account as of that date have already had all US tax paid in respect of them, and therefore can be viewed as straightforward savings like any other savings account.
From that date onward, the growth in the ROTH account would be viewed as dividends and interest by the French authorities, and would on the face of it be liable to French taxation despite being exempt from US tax. However, the good news is that Article 24 of the Franco / American tax treaty states that such ‘passive’ income received by an American citizen who is tax resident in France is exempt from both French income tax and Social Charges.
However, even though said ‘passive’ income (the growth element) is French tax exempt, it still has to be reported on the French tax forms in a special section reserved for that purpose. This is because part of the monies withdrawn need to be included in the calculations made by the French tax office to establish the overall “Revenue Fiscal de Reference” which is used for purposes such as calculating Taxe d’Habitation reductions and access to fiscally beneficial savings accounts with enhanced interest rates here in France.
So let’s say that as of the date you become fiscally resident in France the value of the ROTH stands at $100,000.
One year later the account has grown by 10% (due to good management) to $110,000 and you decide to make a withdrawal of $10,000.
Of that withdrawal amount, 10% ($1,000) would be viewed as being profit which would have to be declared on the French forms even though it is French tax exempt, and the other $9,000 would be viewed as simply a withdrawal of monies that you had already saved into a savings account with all taxes previously paid.
So that $1000 would be taken into account when the tax office calculate your ‘Revenue Fiscal de Reference’ figure, but you would not pay any tax or social charges on it by virtue of Article 24 of the Franco / American treaty.
Further withdrawals in subsequent years would have to be re-calculated according to the total percentage of accrued value since you became tax resident in France, but the ‘basis point’ value would always stay the same (the account value as of the date you became fiscally resident in France).
Yes, it is indeed a bit of a mathematical nightmare, but then one has to remember that ‘bureaucracy’ is a French word.
Of course I have to add my usual caveat that I am not a professional expert in this field but rather am just someone who has been resident in France since 2005 whilst regularly filing both American and French tax returns relating to IRA accounts.
Tax rules and regulations are of course subject to change at any time.
Have a great day and I hope you find my observations useful.
Robert.
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Thank you so much for your response Robert!
You gave me the answer I was hoping for! I had read elsewhere that the Roth IRA should be reported just as you would a Traditional IRA, and that didn’t seem at all fair. Treating it as a savings account and reporting the yearly growth (interest, dividends and capital gains) makes much more sense. If France treated the Roth IRA as they would the Traditional IRA, it might have made more sense to withdraw everything from the Roth IRA and put it into a savings account (which defeats the purpose of the Roth IRA and would affect our U.S. tax.).
I will remain a U.S. citizen and my wife Chantal is a green card holder and French citizen. We will both be collecting U.S. Social Security and I have a U.S. pension. My wife will also be collecting a French pension which, I assume, will be impacted by our U.S. income, as far as the French tax rate calculation (and which is where the Roth IRA comes into play).
I was wondering if you could tell me how the U.S income is reported to France. Do we have to show tax documents every year when we report our income? And, if we only declare the earnings on the Roth IRA, do we have to explain that it should be treated the same way as a savings account, or just enter it as income (and then would the interest, dividends and capital gains inside the Roth Ira all have to be reported separately, to allow for different rates of tax)?
Also, concerning cost basis, since we have several mutual funds within our Roth IRA’s (each with different rates of growth), wouldn’t we just calculate the earnings made on any amount that we withdrew? And, if the value ever happened to fall, I guess we would not declare any amount of gain (or loss) from the withdrawal?
I hope my many questions are clear enough. I’m happy to have finally found someone who can make sense of the Roth IRA and its treatment by France.
We still have a ways to go before our move. We just lost our old cat (nearly 22 years old) and she was our only reason for still being here. So we are sad and I’m trying to distract myself by trying to figure out what we need to know and what steps we have to go through before our big move.
Thanks so much Robert, for all your time and help! I can’t wait to one day have a garden patio in France!
Peter
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The sooner, the better, Peter - the weather is glorious 
The sooner, the better, exactly!
We now have to begin sorting and getting rid of belongings, and then put our house up for sale. Maybe by next year…
I’m so glad I came across this website!
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(I’m resending this because I’m not sure I replied correctly the first time)
Thank you so much for your response Robert!
You gave me the answer I was hoping for! I had read elsewhere that the Roth IRA should be reported just as you would a Traditional IRA, and that didn’t seem at all fair. Treating it as a savings account and reporting the yearly growth (interest, dividends and capital gains) makes much more sense. If France treated the Roth IRA as they would the Traditional IRA, it might have made more sense to withdraw everything from the Roth IRA and put it into a savings account (which defeats the purpose of the Roth IRA and would affect our U.S. tax.).
I will remain a U.S. citizen and my wife Chantal is a green card holder and French citizen. We will both be collecting U.S. Social Security and I have a U.S. pension. My wife will also be collecting a French pension which, I assume, will be impacted by our U.S. income, as far as the French tax rate calculation (and which is where the Roth IRA comes into play).
I was wondering if you could tell me how the U.S income is reported to France. Do we have to show tax documents every year when we report our income? And, if we only declare the earnings on the Roth IRA, do we have to explain that it should be treated the same way as a savings account, or just enter it as income (and then would the interest, dividends and capital gains inside the Roth Ira all have to be reported separately, to allow for different rates of tax)?
Also, concerning cost basis, since we have several mutual funds within our Roth IRA’s (each with different rates of growth), wouldn’t we just calculate the earnings made on any amount that we withdrew? And, if the value ever happened to fall, I guess we would not declare any amount of gain (or loss) from the withdrawal?
I hope my many questions are clear enough. I’m happy to have finally found someone who can make sense of the Roth IRA and its treatment by France.
We still have a ways to go before our move. We just lost our old cat (nearly 22 years old) and she was our only reason for still being here. So we are sad and I’m trying to distract myself by trying to figure out what we need to know and what steps we have to go through before our big move.
Thanks so much Robert, for all your time and help! I can’t wait to one day have a garden patio in France!
Peter
Hi Stella,
I’m not sure if I’m replying properly; Should I click on the blue reply box or the grey one directly under the post (as I just did)?
Thank You.
If you hit the grey reply it links your reply to the post which you are replying to…
If you hit the blue reply, your reply is just a general reply on the thread and, depending on whether or not someone is typing faster than you are… your reply might well be out of sync… 
So - for a General Reply - hit the blue reply box.
For a Reply to a specific person’s post - hit the grey reply.
Got it! Thanks Stella.
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Hi Peter,
I think that as this series of posts has already been read by over 170 people (as they are perfectly entitled to do of course), I’ll reply to your latest more specific questions by means of a Personal Message in order to better protect your personal information. That way the conversation will just be between the two of us.
Robert.
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Excellent idea Robert.
@PeterK when you get a private message, you just hit reply to answer privately too.
Hopefully none of your secrets will be revealed by mistake 