US citizens living in France are in for a tax break. The 7-year long battle against paying Generalized Social Contribution Tax (CSG) to the US government is finally over.
What was the issue?
French citizens who were born in the US or have American parents had to pay Generalized Social Contribution Tax as a mandatory social charge to the IRS without scope for any exemption or foreign tax credit. The tax was not deductible because it was claimed to be a social levy. The unfair tax was levied on all US citizens living in France popularly known as accidental Americans because US tax eligibility is based on citizenship and not residency. This includes individuals who have never even been to or have little or no connection to the US. Thus, now the latest ruling brings immense relief to the thousands of accidental Americans living in France who were bound to pay this tax labelled as a social charge since so many years.
US Tax laws to citizens residing in foreign countries
The US tax code has always been very stringent when it comes to its citizen’s domestic or foreign earnings. If you are a US citizen or resident alien, then you are bound by the US tax laws on any income accrued by you in a foreign country. Such taxes are also eligible for a foreign tax credit to avoid double taxation, but the same was never a case with the Generalized Social Contribution Tax.
How does it affect you if you stay in France?
If you are a US citizen living in France, then the ruling will permanently reduce your tax liabilities to the US Government. The taxes in light are the Contribution Sociale Généralisée (CSG) and CRDS which the IRS has accepted are not social charges, but taxes wrongly levied on French citizens since so many years.
It is a sign of relief that the prolonged 7-years battle has come to an end which was started by two US citizens living in France who filed a case against the IRS, creating a precedent for all concerned individuals. It is estimated that roughly $100 Million are at stake, and some individuals might seek refunds dating back to the last ten years.
However, only those American citizens would be eligible to file for a refund who had paid US income tax and have wages above the foreign earned income exclusion.
The members of the Association of Accidental Americans who are devoted to fighting for the rights of the French citizens wish that this landmark decision becomes a more general recognition of the issue.
It is expected that France will renegotiate its FATCA tax treaty with the US and consider pulling out if it can’t find a way to protect citizens with dual French-American nationality.
Wrapping up, it’s time for accidental Americans to take a long sigh of tax relief. Know more about your eligibility to file for CSG refund and let us help you take a tax break and reduce your tax liability.
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