As an expat, how can I avoid double taxation?

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As an expat, your tax declaration can easily prove a headache if your country of residence for tax purposes is not the same as the source country of your income. Luckily, there are ways and means to avoid being subject to double taxation. By which we mean paying tax on your income in the country you are living in as an expat and also in France.

What is double taxation?

Each government has the right to tax the income earned by its taxpayers however it sees fit. As the global economy is becoming increasingly more international, as more and more people are moving about between different countries, and as employment contracts and the status of workers (secondment, expatriation, etc.) are becoming ever more complex, tax authorities and taxpayers are beginning to panic slightly. The aim of latter, if they are expats, is to avoid income they earn, i.e. salaries, interest and capital gains, being taxed twice (once in their home country and once in their host country). That also includes income generated by real estate.

How can I spare myself from double taxation?

Many countries have adapted and most are now linked by bilateral agreements governing how tax liabilities are divided up. France has entered into agreements with no less than 170 other countries, including, of course, all the major destinations French expats head for (USA, Canada, Germany, etc.).

International tax treaties are reference documents for taxpayers residing in one country and earning income generated in a different country, to prevent such taxpayers being subject to double taxation. They establish the rules of exemption (the country of residence does not tax income paid out of the source country) and of allocation (all income earned is taxed in the country of residence).

There are two questions an expat must answer:

Where are they resident for tax purposes?

Some confusion exists around the notion of expatriation, which is often taken to mean being sent by one’s company to work in another country. For tax authorities, an expat’s status matters little, only one thing counts: one’s country of tax residence. In theory, one’s country of tax residence is determined not based on personal choice, but based on the time spent in a country during any one year, 183 days/year being the threshold over which you can be considered as being a resident for tax purposes. It is up to expats to determine whether they are entitled to work and which social security system will apply to them when they leave France.

What does the tax treaty established between France and the country of expatriation stipulate exactly?

Often, this type of legal document is not at all easy to understand, it may even be necessary to hire the services of a tax specialist to eliminate any doubts…

How can I find out whether my country “double taxes”?

Let us take the example of an expat living in Copenhagen who is wondering where they should be paying tax:

  • You simply need to go onto the website of the European Commission where you will find a list of the international agreements in existence between all the member states of the European Union by country (you can view the list here);
  • Click on Denmark to be redirected to the website of the Danish Finance Ministry;
  • Click on “Frankrig” to obtain the agreement signed between Denmark and France. The agreement in question was signed by the President of the French Republic and His Majesty the King of Denmark, “born out of the desire to avoid income tax and wealth tax being paid twice […]”, on 8 January 1957.

If the host country is not within the European Union, you need to get the information from the French Finance Ministry who can provide a full list of the international agreements currently in place (you can see the list here).

What is fortunate is that international tax treaties have been signed by France with most other countries (all European Union countries and most of the major destinations French expats head for). Their existence means that expats, the source of whose income is France, can avoid double taxation on that income.