How France Taxes 401(k), IRA & Roth Withdrawals for Americans: US-France Tax Treaty Guide

The first French tax return after a move usually contains a mistake about a US retirement account. Either the 401(k) distribution is left off the French return because the United States has already taxed it, or it is declared as an ordinary foreign pension and taxed twice, or French tax is paid and then claimed back on the US return as a foreign tax credit that the treaty never intended. Each error comes from not reading two short paragraphs of the Convention between the United States and France for the Avoidance of Double Taxation with respect to Taxes on Income and Capital, signed on 31 August 1994 and amended by the Protocols of 8 December2004 and 13 January 2009 (the U.S.-France Income Tax Treaty).

This article is aimed at US citizens and green-card holders who are, or expect to be, tax resident in France while drawing on a 401(k), a traditional or Roth IRA, or US Social Security, and at their French and US tax preparers. It walks through Article 18 and Article 24 as written, shows how the position is reported on both returns, and is explicit about what the treaty leaves unsaid. It does not restate the general cross-border picture, which the cornerstone article on financial planning for Americans in France covers, and it treats Roth conversions only as far as the treaty does.

This article describes how United States federal tax law and the U.S.-France income tax treaty apply to US persons. It summarises French rules only as published by the Direction générale desFinances publiques (DGFiP), for context, and is not French tax, legal or succession advice - those questions belong with a French-qualified professional.

What Article 18(1) actually says

Article 18(1), as replaced by Article VI of the 2009 Protocol, provides that payments under the social security legislation of one Contracting State to a resident of the other, or to a US citizen, and pension distributions and other similar remuneration arising in one State inconsideration of past employment and paid to a resident of the other, whether paid periodically or in a lump sum, shall be taxable only in the first-mentioned State. The operative words are taxable only.

The second sentence, introduced by the 2004 Protocol and untouched in 2009, supplies the test for where a distribution arises: pension distributions are deemed to arise in a Contracting State only if paid by a pension or other retirement arrangement established in that State. A 401(k) plan or IRA administered in the United States is established there; the distribution therefore arises there, and the treaty gives the United States exclusive taxing rights over it, whatever the recipient's residence.

The Treasury Department's Technical Explanation of the 2004 Protocol describes the paragraph as providing for exclusive source country taxation of social security benefits, pension distributions and other similar remuneration paid by a pension or other retirement arrangement established in one Contracting State to a resident of the other, and confirms that the rule applies to both periodic and lump sum payments. That matters for a French resident who takes a full IRA balance in one year: the treaty draws no distinction between an annuity-style withdrawal and a single payment.

Which accounts the treaty names - and which it does not

The treaty's list of US retirement arrangements appears in Article 18(2)(c)(ii), the paragraph on cross-border contributions, which states that qualified plans under Section 401(a) of the Internal Revenue Code, individual retirement plans including individual retirement accounts and annuities and Section 408(p) accounts, Section 403(a)annuity plans and Section 403(b) plans shall be considered to generally correspond to a French pension arrangement. A 401(k) plan is a Section 401(a)qualified plan, so it is on the list under that name.

Two things follow. The list is expressed to be for purposes of that paragraph - contributions - and no treaty text separately defines a pension or other retirement arrangement for the purposes of paragraph 1. In practice a traditional IRA or 401(k) distribution is treated as paragraph 1 income on the strength of the second sentence quoted above and the treaty's own description of these accounts as retirement arrangements; the Technical Explanations do not say so in terms, and this article does not pretend otherwise.

The word Roth appears in no treaty text at all. The only primary-source sentence on the subject is in the 2004 Technical Explanation, which observes that although not specifically mentioned in the Protocol, Roth IRAs under Section 408A are of course a type of individual retirement plan and therefore also automatically eligible for benefits under paragraph 2 — the contributions paragraph. Nothing in the treaty, the two Protocol Technical Explanations or the 2009 Memorandum of Understanding addresses how France should treat a Roth distribution that bears no US tax, and nothing addresses a Roth conversion. Those are open points for an expert-comptable and a US tax professional to work through together, not settled rules to be quoted.

The saving clause, and why Article 18(1) escapes it

Article 29(2) of the treaty lets the United States tax its residents and citizens as if the Convention had not come into effect. Article 29(3)(a) then provides that the saving clause shall not affect the benefits conferred under, among others, paragraph 1 of Article 18 and Article 24. Since the 2004 Protocol widened that exception to the whole of paragraph 1, an Article 18(1) pension is taxed where the treaty says and nowhere else, even for a US citizen.

The Technical Explanation of the 2004Protocol gives the example the other way round: a US citizen who resides in the United States and receives distributions from a pension plan established in France will be subject to tax solely in France on that distribution. The same logic applies to a US citizen resident in France drawing a French régime général pension or an Agirc-Arrco complementary pension: the payment arises in France, is taxable only in France, and the 2009 Technical Explanation adds that France has the exclusive jurisdiction to tax payments under its social security legislation to a resident of France who is a US citizen. On the US return the position that a treaty modifies the taxation of a pension is one for which Form8833 disclosure is waived under Treasury Regulation §301.6114-1(c)(1)(iv); how it is presented on the return is for the US tax professional.

One category is less clear. French public-service pensions fall under Article 19, and Article 29(3)(b) excepts Article 19 from the saving clause only for individuals who are neither citizens of nor have immigrant status in the State where they reside. How that interacts with a US citizen living in France on a French civil-service pension is not resolved by any Technical Explanation text located for this article.

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How France relieves the double count: the credit equal toFrench tax

Article 24(1)(a) provides that income arising in the United States that may be taxed or shall be taxable only in the United States under the Convention shall be taken into account for the computation of the French tax where the beneficiary is a resident of France, who is then entitled to a tax credit against the French tax. For income outside clauses (ii) and (iii), the credit is equal to the amount of French tax attributable to such income.

Pensions are not in clause (ii), which deals with independent personal services, nor in clause (iii), which covers dividends, interest, capital gains under Article 13(1), directors' fees and entertainers and grants a credit equal to the US tax paid. By elimination they fall under clause (i): a credit equal to the French tax. The classification is by the structure of the article rather than a sentence naming pensions; a former clause (iv) of Article 24(1)(b) that dealt expressly with pensions of US citizens was deleted by the 2004 Protocol, whose Technical Explanation calls it obsolete in light of the amended Article 18.

The French forms give the mechanism its everyday name. Form 2047, section 6, collects income that opens a right to acrédit d'impôt égal à l'impôt français and carries the total to line 8TK of Form 2042; foreign pensions of that kind go on lines 1AL to 1DL. The notice to Form 2047 explains the effect: the method consists of computing the French taxon the foreign income and then neutralising it by a French tax credit of the same amount, and it adds that for this purpose French tax means income tax plusprélèvements sociaux. The practical consequence is that the US distribution pays no net French tax but still lifts the rate applied to the household's other French-taxable income.

Who taxes what: a French resident's US and French retirement income

For a US citizen or green-card holder who is treaty resident in France, the allocation below follows from Article 18(1),Article 19, Article 24(1) and Article 29(3) as verified in the treaty texts. Where the primary sources are silent the table says so rather than filling the gap; those rows are the ones to take to an expert-comptable and a US tax professional.

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Reporting the position on the US return

On the US side nothing about the distribution changes because the recipient lives in France: it is ordinary income on Form 1040. What changes is withholding. The IRS states that a payee who is a US citizen or resident alien cannot elect no withholding for any periodic or nonperiodic payment to be delivered outside the United States, so the usual election out of the 10% default withholding on an IRA distribution is unavailable at a French address.

An eligible rollover distribution from an employer plan paid to the participant rather than rolled over directly carries mandatory 20% withholding, wherever it is delivered.

Form 8833 is not required for the Article18 position: the regulation waives disclosure where a treaty reduces or modifies the taxation of pensions, annuities and social security. Because France charges no net tax on the distribution under the credit mechanism, there is ordinarily no French tax on it to claim on Form 1116 - a point worth stating, because a foreign tax credit claimed for French tax that was itself neutralised by a treaty credit is the third of the common mistakes.

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Early distributions and required minimum distributions

US rules on timing travel with the account. A distribution before age 59½ carries the 10% additional tax under Section72(t) unless an exception applies - death, disability, substantially equal periodic payments, separation from service in or after the year of age 55 for employer plans, among others. Required minimum distributions begin at age 73for those who reached 72 after 31 December 2022, rising to 75 for those who reach 74 after 31 December 2032.

The first RMD may be delayed to 1 April of the following year; a shortfall attracts an excise tax of 25%, reduced to 10%if corrected within the correction window. Roth IRAs carry no lifetime RMDs for the owner, and designated Roth accounts in a 401(k) or 403(b) have had none for taxable years beginning after 31 December 2023. On the French side the treaty text draws no distinction by the age of the recipient or the reason for the payment: a distribution is Article 18(1) income whether it is an RMD at 73 or a withdrawal at 50, and it goes through Form 2047 in the same way. The 10%additional tax and the RMD excise tax are US matters that the French credit does not touch.

The French social charges question

The notice to Form 2047 defines the Frenchtax neutralised by the Article 24 credit as income tax plus prélèvementssociaux, which is why a US pension declared on the credit lines does not, inpractice, end up bearing French social levies. Whether prélèvements sociauxattach to a particular pension in the first place depends on Frenchsocial-security rules this article does not cover; that is a question for anexpert-comptable.

The DGFiP's published exemption from CSG and CRDS on capital income refers only to persons affiliated to a compulsory scheme in an EEA state or Switzerland; it says nothing about affiliation to US Social Security.

For the US side of the same question, the IRS states that in 2019 the United States and France memorialised an understanding that the Contribution sociale généralisée (CSG) and the Contribution au remboursement de la dette sociale (CRDS) are not social taxes covered by the totalization agreement, and that it will not challenge foreign tax credits for them on that basis. Neither levy is named in Article 2 of the treaty, and whether they are covered taxes for treaty purposes is not stated in any primary text located; the credit route runs through Form 1116 and its ordinary limitations.

Roth conversions from France: what the treaty does not say

A conversion of a traditional IRA to a Roth IRA is a US-taxable event in the year of conversion, and each conversion start sits own five-year period for the 10% additional tax on early withdrawal of the converted amount. The treaty, both Protocol Technical Explanations and the 2009Memorandum of Understanding contain no reference to conversions, and no DGFiP commentary was located. How France views an amount taxed in the United States without being paid out is an open question.

The US-side considerations - the bracket the converted amount lands in, the interaction with the Net Investment Income Tax threshold, and sequencing across years — are set out in the article on Roth conversions for Americans living overseas and are not repeated here. From France the additional question is simply whether the expert-comptable and the US tax professional agree, before the conversion, on how the French return will treat it.

A hypothetical distribution through both returns

The illustration below follows one traditional IRA distribution through a US return and a French return using only the rates and forms verified for this article. It assumes no investment return, uses an exchange rate chosen for arithmetic convenience, and leaves out the 10%French pension deduction, the quotient familial, the décote, social levies and every other adjustment a real return contains. It shows the shape of the mechanism, not a result.