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VOICE-OVER:
This podcast channel it’s about you, successful international entrepreneurs, successful ex-pats, successful investors. Sponsored by HTJ.tax
DERREN JOSEPH:
So good evening to those of you in France and good morning or good afternoon to those of you in different time zones. Welcome to Htj.tax. We do these live streams every week, every week, a different tax related topic of interest. So this week will be US taxes. Right? Thank you. So please keep your yes, please stay on mute. Please stay on mute. We will have Q and A at the end. So the way we normally do it is that our survey, our honored guest, France, French tax expert, we’ll run through some slides, give you basic overview and would actually answer some of the questions that some of you paused, but we’ll get to the Q and A afterwards. And once he’s finished with his presentation, then we’ll get into the questions and answers part of our, of our session. So we’ve received about 15 questions. Thank you for those that send it in for those who have not yet done it, feel free to type in the box below. If you are on zoom, if you’re on Facebook, LinkedIn, Twitter, or YouTube, you can type in the box below as well. And I’ll hop across every once in a while and check it out. This is being recorded. So again, if you don’t want your image to show, only need to do is keep your camera switched off. Otherwise you’ll be recorded as well. So without further ado, oh, well of course we always have to give the usual disclaimer, because we are both licensed by a relevant jurisdiction. So we are legally obligated to tell you that nothing we say here should be construed as advice. We having a general conversation around general principles. If you want some, if you want intelligence that is specific to your unique circumstances, you would need to engage a team who will then know your situation inside out. So you can treat this as educational. It could even treat it as entertainment, but it is not meant to be advice. And that is really important. And I hope you keep that in mind. So now without further ado, I turn it over to Hervie, the floor is yours.
HERVIE BELOUVRE:
So yeah, I’m a chartered accountant in France. I will share my screen. You should see a magnificent PowerPoint. Yes you do. You see clearly. Okay. So I try to entertain you with taxes with French taxes. The ones that you may be exposed to, if you have some activity in France, first, a bit of a statistics starting a business in France is usually seen as difficult. Who are, we have the impression that has complicated people. So is there is a world bank study every year, which is a doing business, the dog. And there was a rank for France, for starting a business is 37. So not in the top top, but not so bad. And we have a global enough notify for 93.1 to start a business. So it is not, maybe not so difficult in your usually to start a business. You need what we call a set number, which is the number four to identify any company, any business in France. And it’s usually one week to get it. So it can be quite quick. And the main questions you have to answer to, to set it properly is what is the legal status of my business? Do I want to set up a company? Do I want to work as an independent? You have to choose at the beginning on what is the type of tax which will be used to, to tax as the revenues every year, it is personal income tax or corporate tax is my activity professional, not professional.This will drive the taxation to social contributions and which is linked to the social status. I am self-employed. I am employed by my company. There are a quarter, there are some important choices to make, and they are the drivers, the structure of the companies that are really important for the future. So is there are two main taxes to detect the revenues you have first lampposts or assess it is a company income tax, or you have a we’ll speak up later as a personal income tax for the company income tax, the taxpayer will be the company. It is based on the net result, determined by accounting books. This means you absolutely need some accounting books. And what is taxed is a net result as a general rule for taxes in France is that you are taxed on your revenue, less all the expenses needed to get the revenue or to get your, to keep it. So, and the state, sometimes some clients tell me, but can I do this? Or can I do that? It is not written. It is your responsibility to determine whether it is needed to run the activity, to get the revenue or keep it. And in case the taxpayers intakes in, in case the tax office tells you, it shouldn’t be, or in your accounts, you tell them you have to, to prove it at its place. So this tax can be punished with some tax credits. The main ones is the most expensive one for the states are, is a tax credits used for researchers. So <inaudible> <inaudible>, which are two types of tax rates to help the really innovating companies to get developed. The rates for the small medium companies are 50% of the net result, still a yearly result of 38,120. And it is 26,005, a move for 2020. It should be 25 in 2022. That was the objective a few years ago, are they don’t have any you’d use a to change. So you can, you should be able to consider that it will be 25% next year when the company operates and it is taxed on the company and compacts, what is left. It is at the disposal of the shareholders. When you pay dividends to the shareholders, shareholders in their private income tax will have to suffer a 30% taxation on these dividends. The second main type, the usual type of tax, which is due by any person, living in France is the personal income tax. So as always telling you, it is usually seen as complicated. In fact, it was established in 1917. So it that it has proved its efficiency for the, for the tax office to collect taxes and it’s quite efficient. So it is paid by physical persons. Only if, if you have a company, you don’t pay this tax. But if you have a company which is not taxed at the company income tax, then the revenue of the company is directly distributed among the shareholders and that it is tax at the level of the shareholders. So this tax, this income tax, if you have some activities and from France, you, you may wonder whether you have to pay these taxes or not. So this tax is a in fact subject to the two international treaties. So there is one who any country. So as there as one, when the United States that says which revenues are to be taxed, where the objective is that no revenue is double taxed in both countries and the usual rule between countries for non-residents. They don’t have to pay this personal income tax except on their real estate revenues for the really real estate, which is situated in France, that, that the global world can be some literal exceptions. So there is no for the personal income tax. There is no consideration of nationality. You are a taxpayer. If you live in France, more than six fonts in there be you a American or French. So it is paid by about 40% of the population because the, the rate of this tax begins at 0%. And depending on, on your revenues, it goes from zero to 45%. And there is a temporary contribution for high revenues. It’s a three or 4%. It’s something like when you get more than 500,000 euros a year, what is important compared to the countries is that the personal income tax is calculated for the household. Basically the household is two adults maximum, and then we’ll have a legal link. So they are married or they have a PACS. And the children are in the household term. If they have some revenues. For example, if they work, even though they are less than 18, the revenue is added to the revenues of the parents. So every child, every child at till 18 is considered to be in the household because the 18 and 25 years old, the children can be in the household with their parents or pay separately is our income tax. Zero is no obligation of people having the same address. So for example, you can have a husband in one countries, a wife, the other, et cetera, it can be one household. And so all revenues are our revenues in Israel are counted together to determine the taxable revenue. I have made a, a small shot here was a red line and the blue line, it shows ZFS in fact of a household, because for the same revenue, there is a red line is a tax you pay. If you have zero revenue for only one person, one adult, and if you have two adults and two children for the same revenue on the blue line, you have the tax to pay. So there is, there is a real effect, a real progressive effect of, of this taxation on the household. Remember it was set up in the years, 1917, when usually in a family, you had one father, one mother, some children, but mother was not working. So, as I told you for a company can tax the taxable revenues across revenue, the less the expenses to get it or keep it. So, in fact, it is a good idea that as many possible information comes from a Nosa source than the taxpayer. So for wages and pensions, in fact, it is the employer as a social body that will send the relevant information to the tax office. If you have investment income, capital gains, it will be globally your bank, which sends the information to the tax office. And when you have income from the property, you need some accounting, which is quite simplified. And in this case, as you provide yourselves information is a, and if you have low revenues from properties, you can use the, the micro phone CA schedule, which is in fact, you just declare your, a, your revenues, your gross revenues, and there is a percentage to, to represent all the expenses. So, so for the business profits and non-commercial profits, that’s, for example, for doctors or consultants, and I heard culture prefer profit, the rule is to use is to get accounting books and then predetermined and altruism. If you have small businesses, there are some simplified ways to be, to determine the revenues which are micro entrepreneur, micro element P. So I lemon P it is people rent a real estate with furniture and one on professionals. So, yeah, microbiota is for agricultural. <inaudible> can be also for, for a non-commercial profits, for example, for consultants who have a low revenue. So in all of this simplification, as I told you, in fact, the rule is you D you declare your turnover. And depending on that, the, your expenses are calculated, automatically calculated with a percentage. So, problem is I think, yeah, I does. That’s why I tell you is this last phase, it is way too simplified the tax return. It is not a way to optimize your tax, because if you have low revenues, as soon as you get one Euro of revenues, you pay some taxes. If you use accounting books, maybe you have quite a bigger regressor venue, but you can report all your expenses to get it. And maybe you have a deficit and pay no tax. So depending on your situations, most simple is not always the best to get some rebate on these personal tax tax income. So there are some tax credits. The main one is if you employ someone at term, you have a tax credit of 50% of what to pay to the people, plus the social contributions. So you introduce that you must employ directly your employee or your best user license companies. And there are about 50 services available for housekeeping gardening and for a chartered accountants, we can use this schedule to assist you to file your tax return. It is only available for people who live inside France. It is not available for non-residents just a point of revenues coming from YS. So the world will be really state. So there is revenues from real estate are taxed in the, in the country. Whereas the real estate is in fact, if you have an apartment in France and you rent into trust, you have to pay some taxes in France. And as a, as a non-reader, you are non-residents the minimum taxation will be 20% for other revenues. In fact, you have to declare the revenues as, as it’s most for, for residency advanced, if you are a resident in France, but have some revenues in the US then as the revenue is to be declared in France and you’re to get a tax credit to avoided about taxation, that’s that the main room. And of course it is completely useless to say, oh, on this revenue, I have paid the taxes in the US even though I shouldn’t, in fact it is, it will be not relevant. If you are controlled by the French tax office, the us tax office will send no money to the French tax office. Okay? The, it is not yet. You choose a country where you pay your taxes that are to be paid in fall. So you guys are to be paid in the us for a certain type of revenues. The burbs is personal. It can tax. We have a, another tax, which is called CSG, which is contributes all sociology uneasy. In fact, it is a social contributions, but it was considered in the, the end of the case that people who have only revenues from the Capitol, they don’t pay any social contributions, but the benefit is if they are sick, they benefit from the hospital. So, and also social security system. So as they are to, to, to help it. And so this tax was established to finance the social security system on the activity of revenues, let’s say wedgies or a business revenues. The rate is nine dot 70%. And on, on your revenues, the rate is 17 dot 20. And as it is quite complicated, you get to refund on next year’s revenues of six dot 8%. This tax is not very well known because first it is complicated and everything is made so that you don’t say it for, in the salaries.
People don’t say it because it is in their pay bill. And they only look at what the get a net after taxes and in the residence. For example, at the beginning, he told me of a, of a tax rate of 30%. And inside this tax rate of 30% is there is a CAG of $17, 20%. So in fact, the tax rate for personal income tax is only of 12 dot 8%. And if you have to pay this, you will get an extra tax notice. Now, if you are, we have also a wealth tax, which is based now only on the real estate you own in France, these taxes, it is called an IFI, a boost, or <inaudible>, it is based on the market value of the real estate. So the value, the basis value for his basis was valued changes every year. It is a value on January the first, and you must include the real estate and the shares you could have in some companies, whereas a real estate is bigger than 50% of the assets. So usually he’s a property companies. And so it is applicable if the, your global real estate in France is, is big as a 1.3 million euros, zero are different rules for residents. And non-residents, if you are a resident in France, even though you are an American, the mod, you have to consider all your real estate worldwide, be it in France, in the US or in other countries, and submitted to the taxation. If you are non-residents, but have some real estate in France, you have only to declare your real estate in France. So you need to have real estate in France for more than 1.3 million years. The rate is a 0.5 to 1.5%. The tire has. I told you, it is based on the, really on the value of the real estate. So it is at least paying yeah, something like 20,000 euros. If you have to pay it, it’s quite sorry. And yes, I think you have a federal Wells tax paid federal wealth stacks in the USA. So if you, as a rule is always avoiding the double taxation. If you have to pay the swell tax in the USA, for some relative statins USA, Zen, you get a tax credit to avoid the double taxation. If you are in France, you have the business, and you want to have some American people coming to your business. There is a scheme, which is quite interesting. It is an impact rate skill. So in the case, you recruit a manager abroad to work in France. It mustn’t have lift. You mustn’t have stayed in France for the five past years, but in the contract in deployment and try to do, you would write as a normal salary for, for the job blond plus an impact tuition premium. And then on, as a personal income tax of off the manager, you have recruited this premium, wouldn’t be taxed wages. Okay. And if, and if the manager you recruit is subject could be subject to release that to the IFI is as well as a wealth tax on real estate, then the rules for non-resident supply. So only the real estate in France would apply. So it is quite an incentive to have do you have managers with higher revenues coming to frost? And of course this is available to any company in fast. That’s not to be too long. That was the main things I wanted to tell you. I hope I entertained you is taxes.
DERREN JOSEPH:
All right. Wonderful. Thank you very much for that comprehensive overview. And thank you for those that have submitted questions. We now have over 20 questions, so we will try our best to get through as many of them as possible. Given the other time constraints for those who just joined us Facebook and YouTube. Thank you for joining us. You can type your questions below and I’ll get to them if we have time. Unfortunately. So the first question and we were given, okay, how is crypto treated from a tax perspective? What I’ll do a comment from a us perspective, because I’m assuming that whoever it is is residing in France and they’re also US exposed, right? So from a US perspective, the guidance that we have from the IRS from, I think it will be notice 20 14, 21 and no 2 20 14, 16. And then in 2019, we got revenue ruling 20 19 24. So essentially your crypto is treated like any other asset in a way it’ll be subject to capital gains, assuming that you are an investor, I’m assuming you’re an investor. Whoever asked that question, if you are a trader, that’s a whole other conversation, but let’s assume that you invest. So just to keep it simple, you, you will be subject to taxes, capital gains taxes, whether short or long term, depending on how long you held it for, and in terms of transactions, that would be considered a taxable event. We’re looking at, obviously if you’re trading crypto to Fiat, right? So that’s kind of obvious, but also when you trading one crypto for another, so crypto, crypto, as well as spending crypto to purchase goods or services or earning crypto as income. So that’s for miners out there that, that there’ll be subject to that that’s considered a taxable event as well. And, you know, I get throw in there, those that some of you, I know, lend crypto and you get interest for, for lending out crypto. So that will be taxable as well. So if it’s interest that there’ll be taxable as interest normally is on your schedule C so it’s either ordinary to summarize is either ordinary income and capital gains. And depending on the nature of the transaction, that’s from a US perspective, Hervie, what about France?
HERVIE BELOUVRE:
First, we have the same distention between traders and, and those who could buy some crypto just for a personal perspective and not doing some many movements. They could be considered as professionals. It is, it will be taxi. In fact, the crypto is considered like any good. So it is taxed when, when you sell it to tax the capital gain and for all the financial matters, it is likely the dividends. So the capital gain you make with a crypto is tax that at a level of 30%, the, it is, can be quite tricky because in fact, what is considered is when you convert a crypto to euros or to any as a currency. So if you sell a crypto to do you make a change, if you change it, if you go, for example, with some Bitcoins you buy or materials or things like that, it is not taxable because, but when you change your Assyrians to Urus, then you use a capital gain should be calculated. Okay. And so it can be after years, et cetera. I’m not sure as a control of the tax office is very, very effective on this. I don’t know at all, I have not had any example. I think there was another question was how can I manage my crypto is our tool to manage it, to, to declare the relevant taxes tax to be paid. And honestly, I have never practiced it, but I would say that there is, there is one which is called the wallet, <inaudible> just write it in. I put it in the written part. And that’s one that I would said to, to manage, to manage it is a capital gains on crypto, or think it is linked to, with several platforms to buy and sell cryptos. But honestly I have never used it. And I get, I can give a real advice about it.
DERREN JOSEPH:
And, and just to kind of follow up on what he just said, it’s the number of commercially available tools as well as services for attracting your transactions, because on whether you’re looking at it from a us perspective or a France perspective, it’s important to track the transaction. So when you sell a coin, when did you purchase it, you need to really have robust bookkeeping, so you can figure out exactly when was that purchased and how much would you, was it purchased for and what was the holding period? So that, that, so however you decide to keep track of that doing so is super important. We have clients that use a commercially available, two parties, services, people use spreadsheets, you know, however you do it. You just need to stay on top of that, just following on the questions, question two and three, I’ll roll that up into one question, just to try and be more efficient. So someone is asking in of a tax planning in terms of tax strategy, is there anything that they can do to, I guess, mitigate or manage the, the gains on crypto? A comment from a us perspective? Obviously I think one of the more popular tools, especially this time of the year, I guess in terms of a planning tool would be loss harvesting. So if it is, you know, you have a portfolio, you have gains in one space and you have losses in another space. So this is the, you know, the losses may not be a realized losses. So the book losses, and you have some gains from some of the elements of your portfolio, you may choose to sell the, some of the coins or the assets that are already experiencing a loss. And so you can book let loss because of the US tax rules. You can offset capital losses against capital gains.So then you get that offset and then you can buy it back, especially where they had an end of the year anyway, and you can, you can buy it back. So I know that they’ll wash rules that applied to stock transactions, so that technically won’t be allowed, but at this point in time, there’s none that applies to crypto. So you can, you can do some loss harvesting with your crypto in terms of any longer term gains that, that you, you may be experiencing. And especially for those that are really experiencing high upside, which many of you are there are, I mean, I think one of the more popular tools that are being discussed right now, we’re in the US specifically will be opportunities zones. So it is a very involved and technical subject area. So you may want to talk to either ourselves, our team or your chosen tax professionals, but it does allow you to defer kind of like a 10 31 exchange with real estate. It may allow you to defer recognizing, and therefore being taxed from a us perspective on gains and me may defer it, or it may eliminated depending on how it’s structured. So, so that’s it from a us perspective, any planning tools or strategies are very, from a French perspective,
HERVIE BELOUVRE:
I would say that this strategy is, is, is to distribute the revenues of those. You have an interest at having quite a linear revenue. For example, if you get, well, if you get a deficit, for example, one year it, as it is textile separately, with a 30% rate, you don’t have, it will not diminish your taxation on other revenues. And with deficit, you have quite a risk. Yes, you will lose it.So you have yes to streamline, I would say, or your revenues and to be able to cover the deficit of the year to come. So I would, I would identify some, some capital gains, maybe transfer them to, I think there are some scriptures that are based on real currencies. I think that’s, <inaudible> sustainable, you know, maybe you could transfer them and then use this kind of is when you have to compensate with some deficits to, to make always quite, quite a benefit. That’s how I would do it. But anyway, crypto’s are risky products anyway.
DERREN JOSEPH:
All right, moving on. Okay. I’m going to, again, I’ll just in the interest of time and efficiency, I’ll combine question four and five into one question. So one of you approached will approach me and asked about setting up, setting up companies offshore. Well, I, I guess by definition, outside of the US and outside of France, as well as setting up bank accounts off shore with the view that that will save you on taxes, and you’re going to be continuing to run the business that you have. So we, we declined to work with you on that. And I thought it would be only fair to explain why there’s a, I guess, because of movies and stuff like that, business perception that Millie establishing a company in another jurisdiction and not receiving money into the jurisdiction in which you reside will automatically save you money because somehow magically, this is not reportable to either France or the U S and that could not be further from the truth. When you a tax resident in France or narrowly tax resident, you are subject to taxes, any worldwide income as a us person, you also subject to taxes when you were lending come, regardless of where you reside. So therefore just merely setting up a company. Doesn’t I know, I know there are lots of movies and stuff, but that, that is not exactly how that works. It is essentially illegal a taxi evasion if you were to do that. So we, we, we really don’t do that. However, they are service providers that would help you with that. And that leads me to the second point within that. So the way the, I won’t comment on the French tax authorities, but I can tell you how the internal revenue service in the US works. And you’ve seen this in loads of movies, right? So if it is that they find a taxpayer that did something wrong, they did something illegal. They intentionally, they were willful and what they were doing, and they have been found guilty of tax evasion, right? So basically they got caught. The first thing the revenue’s going to ask you is who helped you? Because to be honest, they’re not probably interested in you and your five or six figure bank account. They want to know who’s your enabler, because they want to, they want to look off. They want to chase the big fish. So that’s who they’re going to ask, and they will offer it to be lenient. You tell me who helped you do this, set up this company and set up this bank account. No problem. You can walk. And so then you are heavily incentivized to identify the tax professionals that helped you. And once they identify, once your revenue identifies those tax professionals, revenue will then systematically audit all of their clients to look for a pattern of wrongdoing. So I say this to make a point, if you find someone who’s willing to cut corners for you, they’re probably willing to cut corners for other people as well. And once they get caught, all their clients will be subject to scrutiny. So that that’s, that’s a risk that comes with that. So I hope that explains why it’s dangerous for you to it, and why it’s dangerous for tax professionals like us to do it. So I’m sorry that we can work with you, but, you know, yeah. That’s the way it goes. All right. Moving on. Someone was asking about the black list. So obviously at the OSD level, or, you know, at the EU level, there are countries on the black list, meaning that if you’re doing business from France, so you based in front of your French tax resident, you have a company there, or however you’ve structured it. And as part of your structure, your personal structure, your corporate structure, you use companies in certain jurisdictions, fronts, doesn’t like it. So there’s an EU list of countries. They don’t like that you doesn’t like. And France in particular, they have their own list of countries that they don’t like. It was last updated. And around January last year and Panama, the previous list was done in 2016. So the new list was done at the top of 2020. And Panama is the only country that remains on the list. And of course, if you’ve been following the Pandora papers and paradise papers, and, you know, you’d know why Panama is just always on somebodies blacklist, but the other countries that you need to be aware of and you’d need to probably avoid using them in there in your structures, once your French tax resident would be Quilla, The Bahamas, the BVI, or the British Virgin islands, which is a really popular option Seychelles by the Watu Fiji Guam and the us Virgin islands, Oman us some more, some more Trinidad and Tobago. And I already mentioned Panama. So I, I actually have a citizenship to one of those jurisdictions always keep an eye on which blacklists that it ends up on. So, yeah, please bear that in mind. And in terms of the followup question, will, what will be the tax consequences of using one of those, a company incorporated in one of those jurisdictions in your structure? Well, in terms of friends, source interest in dividends paid on a bank account located in one of those years, actions, there’ll be 70 to 75% withholding tax in France, regardless of the beneficiaries tax residence, royalties and other service fees paid by a French debts to beneficiary domiciles established in one of those jurisdictions. Again, 75% withholding the capital gains and the disposal of securities of companies establishing one of those years, addictions excluded from the participation exemption regime. So basically just a to summarize, it will be subject to scrutiny. It will be heavily taxed and whatever treaty benefits or whatever you may, someone may have told you, or you may have hope to get, you won’t get any exemptions. You wouldn’t get any benefits. You won’t get any breaks. So you are penalized essentially for using those jurisdictions. I hope that helps avoid them.
Next question on the list, I am is a pretty simple question. I’m thinking of moving to France from the U S so this is one of those who are still in us. So good afternoon to you. Would I be double taxed? And Irvy, if you were able to join from the beginning, you’d have seen his presentation. If not, this entire thing is being recorded and it will be available on YouTube, on Facebook, on podcast platforms like iTunes, SoundCloud. I think Amazon just like we have them on over 20 podcast platforms. So you can look at it again, but to cut to the chase, no, you should not be subject to double tax, or they did speak about the principle foreign tax credits. Both countries recognize foreign tax credits. So you get credits for taxes paid in the other jurisdiction to offset any taxes due in one jurisdiction. In addition to which is a tax treaty that is, has been signed and executed in between butcher’s dictions, which can also be invoked. Should there be any matter that risks being double taxed? So I noticed this at the beginning. I said, normally you would not be, but unfortunately, yes, one must be honest. There are circumstances when you could be double taxed. And that typically the one that we see most frequently would be state taxes. So of course, within the US you have federal taxes and state taxes. We normally counsel our clients. When they move abroad, they should take certain actions to seven domicile. Would they? In one of the states, one of the many domicile tax states, you must have a tax domiciled with that state. And we recommend setting up DAMA sound in one of the eight states where there is no income tax. So like a Florida and Nevada, Wyoming, Alaska, whatever the case may be, Texas is quite popular. So that because under some circumstances, a domiciles state like California, or especially Virginia, Virginia, is perhaps the most aggressive of them all. Even though you no longer reside, then you do not reside there for years. And you living in France for how many is you can still be subject to state taxes under some circumstances. So w and the principle of tax credits, whichever we went into and explained perfectly when he did his presentation, that applies to the federal level. So the federal level, I E the IRS would give you tax credits or would recognize credits based on what has already been paid in France, but the states do not recognize tax credits. So you may be double tax at the state level. So again, take advice as you plan to make you move to France.
HERVIE BELOUVRE:
Yes. Moving from one country to another is quite, can be quite complex. So it is a time when you did someone for a you.
DERREN JOSEPH:
Absolutely. Okay. And then next one is for you or me, what is the best way of holding investment property, investment real estate in France? And I think you hinted at this in one of your slides, but should I hold it in my own name? Or is there a tax benefit to holding it using a company?
HERVIE BELOUVRE:
Well, I could tell you first that one of the rules in France is equality. So it is not so much important is that a you invest by yourself or you invest with a company for the taxation may be maybe the same zero, zero is quite an interest. If you rent some real estate with furniture, completely equipped, then I consider it is there is a quite specialist team, which is called LM and P. And so I think it is preferable to do real estate by yourself because it’s team is not available. When you rent through a company, however, you don’t set up a company or buy something, but on your name only for tax reasons. For example, I have some examples when 10 people have a birth together, an apartment in Paris to be available when they come to Paris with 10 people, you don’t buy, even though you can be several to buy in your own names, but the rule for making an indecision is unanimity. It is not very practical in a company. Well, you have some people who have different shares who have different level of capital. We have not invested the same, and they don’t have the same power to vote. And there is a manager can make the decision. So, and for example, if you have a company, then you can give some shares to your children. If you wish, and you can use, you can divide the property to get, to keep the user-friendly and give the share to your children. It is not so easy when you in, by yourself. So you have to say it as an investment, there is tax, but not only tax and do have to decide what you’ll do with your investment. What is it for and what you want to do in usually a real estate investment is long term. So seeing the long term and the company maybe is, is a nice choice.
DERREN JOSEPH:
Wonderful. Thanks for that. So, and just to summarize what you’ve just said, the, the motivation should and cannot really be taxed. There’s no definitive tax benefit, but under certain circumstances, there are commercial and practical benefits to holding it in structure. And as always, it’s good to take advice before making
HERVIE BELOUVRE:
Yeah. When you buy your car, you don’t totally look at the price of gasoline.
DERREN JOSEPH:
Absolutely. You have to look at that big picture. Wonderful. Okay. So this is a question that was actually asked three times. So I’ll just, so I’ll just roll that up into one. So basically I’m just going to cut to the chase. Someone is asking, and we get this question every time we do this about the astronauts V how is the astronauts V treated for us tax purposes? And again, it really depends. It really depends on the nature of the investments because the Astros’ visa rapper, an investment product rapids. So when you open it up, depends on what’s inside, but ordinarily speaking, if it can be looked at as a financial assets. So in terms of a US tax perspective, we’re looking at potentially form 89, 38, which is the financial asset decoration form of FATCA form. It may, depending on what’s inside of me, Boone your F boss, your phone back a report, and it may be considered a prefix or passive foreign investment company where it will be subject to very specific tax rules. And, and just to provide context for that, the, the prefix or the passive foreign investment company structure, or it was in, came in under president Reagan in 1980. So essentially it was a response to complaints from US domestic financial institutions that Americans are going abroad and investing in foreign financial products and getting tax advantages to doing so. And of course, stealing robbing US domestic financial institutions from opportunities as well. So Congress responded. And so the IRS created this, these rules around what called prefix. So essentially any sort of investment link product outside of the US take advice, chances are, it may be a FIC and subject to very specific us tax rules. So again, you’d probably need to speak with an advisor and go through the statements. And, but chances are as a pediatric reportable and an 8621. So the income deferral that you would get from a France perspective, so income will grow. Tax-free often enough within that fund from a French perspective, from a us perspective, not necessarily. So it may be subject to the full weight of IRS taxation. So I hope that answers all three of you who asked that question, but don’t worry. We get that every single time we do this.
HERVIE BELOUVRE:
The question, what I see often is that people, for example, I put some money in your life insurance, in the US zone in France, they the money, and then the things they have some special tax teams not to pay tax, et cetera, in France. But in France, we don’t recognize the American life insurance as a life insurance in France. So all these rules are very specific to the temporaries. So for example, if you put some money, if you life insurance in France and a good is a US, I don’t know which will be texted to yes, but there’s are yes, that’s quite specific to any country. And when you change country, life insurance, I think is a bit difficult.
DERREN JOSEPH:
Yeah, absolutely. Like life insurance is defined differently in different jurisdictions and treated from a tax perspective in different ways. So that’s a great point. So I’m going to skip the other two people who asked the same question. I hope you guys are satisfied with the answers provided. So next question. Now, every partly, I think you partly answered this in your presentation, but there’s a twist in this. And so let’s let’s so my spouse and I are living in France since May, 2021, my, okay. So my rental property that’s set up in the us exempt from the wealth taxes in France, as it is held in a trust in my name. So if he didn’t put the trust bit at the end, he, he or she, I don’t know who, if that person didn’t put the trust, but at the end, I’d say, well, Hey, you answered this perfectly well in your presentation over with now, this person is saying, well, hold on, it’s held in a trust. How is it treated from a French perspective?
HERVIE BELOUVRE:
Well, in France, we don’t not trust. So if you have some really stake in a trust, in fact, we have improved. And so first you have to declare your trust in France at any and declares a release state you have in it. And if the real answer is there is a real estate and some revenues, in fact, you have to declare who owns the trust, where, and then you will have to declare the trust for, for your part of the trust. You’d have to declare in your, in your personal income tax or in your IFI. In fact, and there are rules. In fact, France wants to know for all release date zaatar in transit, who are the physical persons who are the owners. So there is an administrative way. In fact, if you want to declare who is a real person who owns a building in France, so then you must pay a 3% tax. It is also, you can do it, but you have to pay a 3% tax on the market value of the building. So it’s quite expensive. So usually people declare, even though you have a series of companies of trust, et cetera, you can, you, you must go to the physical persons who would own more than 10% of a religion.
DERREN JOSEPH:
Okay? So, and so in this case, just to summarize this persons resident in France, since may this year, and they have real estate in the us in a trust. So from Frances perspective, the trust does not exist. It’s transparent. So they see through the trust. Am I correct in saying that
HERVIE BELOUVRE:
May even as a trust is in the US real estate is in the US as soon as you have a contributor or beneficiary, or the administrator raise resident in France, then you must declare the trust to the French authorities. And you must take care every year as the value of the trust, et cetera. So of course you, you can do, there are many types of trust only saying, et cetera, et cetera. And so maybe the property of the trust, should it be considered in Zift, et cetera, but the tax office knows your, you have some properties in the trust and they can tell you why a is no value in your tax return. And then you have to justify yourself.
DERREN JOSEPH:
Understood. Perfect. Okay. Now moving cause this person’s asking like different pots within an, a question. So is my rental property that I have in the US exempt from well taxes in France, if they are set up as a business. So I guess in this, in this scenario, he or she is asking, well, suppose it’s not in a trust, but if it’s in like a company like a US LLC, and then just to follow on from that. So if it’s still subject to the wealth tax and the LLC, the US LLC, what, is there any way of structuring it to avoid the wealth tax in France, which is going to be levied on worldwide real estate over
HERVIE BELOUVRE:
There is no, there is no, in fact, as the rule is you, you, you declare while your less, what is needed to get it. If you have, for example, some debts, if you, if you have a credit running to pays for this real estate, then it will come as a deduction from the value of real estate, et cetera. But if you possess some registered LLC, if this real estate is more than 50% of the value of the LLC, it is completely taxable
DERREN JOSEPH:
Understood. And the person is, I guess, they’re being,
HERVIE BELOUVRE:
But be sure that the French tax office is completely, it cannot have any view of what is the value of this estate. So players are real estate, and I shouldn’t say that be reasonable in the value of the real estate, and they can only get your decoration.
DERREN JOSEPH:
Right. Okay. And, you know, the person asked in the roads a lot, right. So, you know, she’s asking the properties are run as a vacation rental business, I guess, kind of like an Airbnb kind of thing. So again, that, that perhaps would kind of connect with what you just said, right? Because it’s not just a holding company, the, you know, you know, rent is being charged, so there’s cash being accumulated and whatever. So depending on how it’s structured, it may be that the real estate component me be less than 50%, maybe. Yes. So perhaps there may be a planning opportunity there, but of course, this is not advice. You need to follow up with Hervie one-on-one.
HERVIE BELOUVRE:
This is we have to read closely what the legal tax say, and they can change. They can be, their interpretation can change from one year to another.
DERREN JOSEPH:
Absolutely. Okay. Next question. If I have capital gains on the sale of my primary residence back into us, where I lived three years ago, before I moved to France, would it be exempt from capital gains in France? I think every, you answered that in your presentation, but please.
HERVIE BELOUVRE:
Honestly, I think the capital gains you have on an account in the U S ought to be taxed in the U S that that’s a, I don’t know the exact rule, but that’s how I say it because in fact, bend declares the capital gains to the tax office, but an American buying doesn’t declare the capital gains is a French strikes office. So work in practice.
DERREN JOSEPH:
Okay. So from a US perspective, that’s easy. It’s going to be taxed in the US but from a French perspective, then now tax resident in France, and there are solar property back in the US, would that be subjected? I would imagine
HERVIE BELOUVRE:
If it is a capital gain on some real estate than it is to be taxing in first.
DERREN JOSEPH:
Okay. Right. Okay. Clearly. Okay. Right. Okay. So I’m moving from one platform to another, as people are asking them to different platforms. So, and I’m conscious of time. So we probably do just one or two more questions. And I do apologize because I see a whole bunch of questions under that. I’m sorry. We couldn’t get to you as well. We’ve had a lot question. So a dual citizen, French and US, who’s working in south America. So good morning, good afternoon to you in whatever south American country you’re in. If they pay into the CFI in, in France, I guess they social charges, right? Can they claim the totalization agreement with the US so the I’m guessing in this scenario, which they’re in self-employment income, and they’re going to pay voluntarily pay into France, which many ex-pats do French ex-pats do, would they be relieved of having to make the same payment of the social charges? I social security back in the us, self-employment tax to 15.3% to answer from a us perspective, potentially you may get that relief. You may be able to claim on the totalization agreement, but of course, I just seen two lines in your question. We’d really need to sit with you and understand your circumstances inside, out to see whether we can invoke the totalization agreement in your case, but potentially yes, potentially. Okay. And I will do just one more and I do apologize to cause lots of other questions under this, when selling stocks owned in the us there’s of course, a capital gains tax in the US would there also be one applied if you’re living in France by the French tax office, or would that be considered double taxation? I think you mentioned that Tax credits, right? Yeah. Yeah. But so the US will take the stocks of back in the US okay. So states will get into that, but yeah. So from a federal point of view, so with the IRS and France, no, you won’t be double tax because the tax credits. So, unfortunately, I’m sorry. I see so many questions on different platforms. We will do this again in the new year. Thank you. Thank you for joining us this evening or morning, depending on which time zone you’re in. And we also do these live streams every week on different tax topics of interest. Hervie, if someone wants to follow up with you directly, what’s the best way of contacting you?
HERVIE BELOUVRE:
Oh, email is very nice. Email is the most effective. And I should answer it quite quickly. I hope maybe this weekend, but not later, or some other interesting questions and don’t hesitate to copy them in the mail. And I’ll try to answer.
DERREN JOSEPH:
So, what’s your best email address to get you Hervie?
HERVIE BELOUVRE:
<inaudible> my direct mail and maybe another one you have seen in contact maybe.
DERREN JOSEPH:
Yeah. I think on your slide on the last time,
HERVIE BELOUVRE:
I have not such a big company as it can be lost. Everybody speaks English in the firms. No problem.
DERREN JOSEPH:
If you’re watching this, you can, this is being recorded. You can just rewind back to his presentation. At the beginning of his last slide had all his contact details, his email address, the website, phone number, feel free to reach him directly. From a US perspective. We’re htj.tax. So you can reach us at help@htj.tax. Thank you for joining us. Have a good evening.
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