Americans in France and Their US Brokerage: Dividends, 401(k), IRA, Roth

I. The brokerage account

A. Dividends and interest: American tax, and a French credit equal to the French tax

The United States taxes its citizen on his worldwide income, and the treaty does not prevent it: under the saving clause, the United States may tax its citizens as if the treaty did not exist (convention of 31 August 1994, art. 29, para. 2). Dividends and interest from the brokerage account are therefore taxed in the United States at the federal rates, with qualified dividends benefiting from the reduced rates.

France also includes this income in the taxable base of its resident, but the treaty contains a mechanism reserved for American citizens resident in France: for dividends, interest and royalties of US source, France grants a tax credit equal to the French tax when they are paid by the US federal government or its political subdivisions, by a US entity whose principal class of shares is substantially and regularly traded on a regulated stock exchange such as the NYSE or the NASDAQ, by a US company in which the beneficiary holds less than 10% of the voting rights and French residents together less than 50%, or by a US resident of which at most 25% of gross income is of non-US source (convention, art. 24). In practice, dividends from listed American companies and exchange-traded funds, and interest on US Treasury securities, bear no French income tax; non-traded American mutual funds must be checked against the other criteria, fund by fund.

The French administration's official instructions confirm that, for this credit equal to the French tax, French tax means income tax increased by social levies (notice to return n° 2047): the CSG, the CRDS and the other social levies on this income are therefore neutralized as well. Symmetrically, the IRS has recognized since July 2019 that the CSG and the CRDS are creditable against American income tax, a recognition published by the French administration in February 2020.

This mechanism has one condition, which most taxpayers ignore: it applies only if the American citizen resident in France proves that he has complied with his US federal income tax obligations, upon any certification required by the French administration or through a refund claim (convention, art. 24). We have found no official text specifying the document required; the prudent practice is to keep each year's American returns and IRS account transcripts. An American in France who is not compliant with the IRS loses the mechanism.

B. Capital gains: taxed in the United States for American shares, in France for the others

The treaty's general rule reserves gains on shares to the State of residence of the seller, France (convention, art. 13, para. 6), except for interests in American real property, including shares of US companies whose assets consist mainly of real property, which remain taxable in the United States (art. 13, para. 1 and 2). But for an American citizen resident in France, the treaty extends the credit equal to the French tax to gains from the sale of the assets that generate the qualifying dividends and interest, such as shares of listed American companies, and to gains realized on an American options or futures market (art. 24). The gain on Apple shares sold by an American in France is therefore not taxed in France: it is taxed in the United States at the capital gains rates, plus the 3.8% surtax, subject to the same compliance condition. The extension to listed shares of a company that pays no dividend is defensible but not certain, since the text refers to assets generating the qualifying income. For other gains, such as French shares, France taxes and the United States grants a credit for the French tax, the treaty treating the income as French-source for that purpose (art. 24).

C. The residue: the 3.8% surtax, now settled

One American tax escapes all these mechanisms: the 3.8% net investment income tax. It applies to dividends, interest and gains above the income thresholds, and no foreign tax credit may be imputed against it under domestic law. American citizens in France had argued that the treaty itself provided such a credit, and the Court of Federal Claims had agreed with them in 2023. On 31 August 2026, the Court of Appeals for the Federal Circuit reversed that decision, holding that the France-US treaty does not provide a credit against this surtax independent of the limitations of American law (Christensen v. United States, No. 24-1284 (Fed. Cir. 2026)), in a companion ruling to Bruyea under the Canadian treaty, after the Tax Court had reached the same result in 2021 (Toulouse v. Commissioner, 157 T.C. 49). For an American in France, the 3.8% is now a certain cost on investment income above the thresholds.

The result. On American dividends, interest and gains on listed American shares, the compliant American in France pays American tax, including the surtax, but neither French income tax nor French social levies. On French investments, he pays French tax, and the American tax is generally absorbed by the credit, except for the surtax. The American brokerage account is therefore one of the most efficient investment vehicles available to him, on the express condition of being compliant with the IRS. Two practical limits deserve mention: some American brokers restrict accounts of clients domiciled abroad, and access by European residents to certain American funds can be limited by European investor information rules.

II. The 401(k) and the traditional IRA

A. Which plans the treaty covers

Social security benefits and sums paid under a pension plan which come from one State by reason of past employment, to a resident of the other State, whether periodically or as a lump sum, are taxable only in the first State; and sums are considered to come from a State only when paid by a pension plan established in that State (convention, art. 18, para. 1, as drafted by the protocol of 8 December 2004). For a 401(k), the link with past employment is obvious, and it remains traceable for an IRA funded by a rollover from a 401(k). For an IRA funded by personal contributions, the French administration could argue that the payment does not remunerate any past employment. Two arguments weigh strongly the other way. The treaty itself treats individual retirement plans and accounts as corresponding to French retirement schemes (art. 18, para. 2, c). And the French administration has stated that Article 18 applies to all individual retirement savings arrangements benefiting from a tax incentive, such as the French PERP or Madelin contracts (ministerial answer to written question n° 51383, JO AN 4 April 2017, p. 2642): symmetry argues for applying the same reading to American IRAs. No court has yet ruled on the point. If Article 18 were set aside, the distribution would fall under the other income article, taxable only in the State of residence, France, with an American credit (art. 22): the reverse of the expected result.

B. Distributions: taxable only in the United States, but taken into account for the rate

Under Article 18, distributions from a 401(k) or a traditional IRA established in the United States are taxable only in the United States. France may not tax them, but it includes them in the calculation of French tax with a credit equal to the French tax (convention, art. 24, para. 1, a): this is the effective rate rule, under which the American pension raises the rate applicable to the taxpayer's other French income. For a large lump-sum withdrawal, this effect can be significant. The burden of proving that the pension comes from an American plan lies with the taxpayer: the Marseille administrative court of appeal refused the treaty exemption to a retiree who could not establish that her pension came from the United States (CAA Marseille, 16 June 2020, n° 19MA01434). On the American side, distributions from these plans are excluded from the 3.8% surtax (IRC, section 1411(c)(5)): they bear only the ordinary federal income tax.

C. The accumulation phase: a narrow treaty protection

As long as nothing is withdrawn, income accumulated in an American retirement plan is not taxed in the United States. On the French side, the treaty protection is narrow. It applies only to a person who exercises a professional activity in France, does not have French nationality, was a member of the plan before arriving in France, and whose plan has been accepted by the French competent authority; it then makes contributions deductible within French limits, and excludes accumulated income and employer contributions from taxable income only for employees, not for the self-employed (convention, art. 18, para. 2). A retiree who no longer contributes, a self-employed person, a French-American dual national, or anyone without the competent authority's acceptance does not benefit from it. For them, the non-taxation of accumulated income rests on French domestic law alone, and the risk is real for an IRA managed as a brokerage account in the holder's name: the administration could argue that dividends and gains realized in the account are received by the taxpayer, as in an ordinary brokerage account. We have found neither decision nor official doctrine on this point. It must be analyzed before arrival in France, and the account's investments managed accordingly.

D. Early withdrawals, required distributions and transfers

The American rules continue to apply in full. A withdrawal before age 59½ bears, in addition to income tax, a 10% additional tax, subject to the exceptions of section 72(t). Required minimum distributions begin at 73, and at 75 for those born in 1960 or later. A transfer between American plans keeps the American character of the sums; a withdrawal to reinvest in France, on the contrary, triggers the American tax immediately and gives up the benefit of the treaty on future income. In most situations, the right decision for an American in France is to keep the plans in the United States, to keep rollover IRAs separate from IRAs funded by personal contributions, and to organize withdrawals according to the American calendar.

III. The Roth IRA

A. An American exemption the treaty can carry over

The Roth IRA reverses the logic: contributions are not deductible, and qualified distributions, made after a five-year holding period and from age 59½, are exempt from American tax and excluded from the 3.8% surtax. The question for an American in France is whether France will tax what the United States exempts. If the Roth IRA falls within Article 18, its distributions are taxable only in the United States, and France may not tax them. The arguments are those set out above for IRAs funded personally: the treaty's assimilation of individual retirement accounts, and the French administration's own reading applying Article 18 to individual retirement savings benefiting from a tax incentive. The Roth IRA benefits from such an incentive, in the form of tax-free distributions rather than deductible contributions.

B. Not taxed in France does not mean without French effect

Even within Article 18, a Roth IRA distribution is taken into account in calculating French tax under the effective rate rule (art. 24, para. 1, a). It bears no French tax itself, but it raises the rate applicable to the taxpayer's other French income. The formula often heard, that a Roth IRA is "taxed nowhere", is therefore inaccurate for an American in France with other income.

C. The risks and our recommendation

The Roth IRA is the most exposed plan: funded with after-tax contributions, freely invested and unrelated to any employment, it is the easiest for the administration to qualify as savings rather than as a pension plan, which would bring it under the other income article and French taxation, and would also reopen the question of the annual taxation of its accumulated income. No French decision has ruled on it. Our recommendation: keep the Roth IRA in the United States, document its nature and its contributions, take only qualified distributions, and claim the treaty exemption expressly in the French return rather than omitting the income without explanation. A conversion of a traditional IRA into a Roth IRA during French residence is taxable only in the United States if it is treated as a sum paid under Article 18; this is a planning avenue worth examining, but its French treatment has not been settled and it should not be implemented without prior analysis.

IV. Reporting on both sides

A. On the American side: what is not a foreign account

Accounts held with American institutions are not foreign accounts: they appear neither on the FBAR nor on Form 8938, which concern assets held outside the United States. The American reporting burden of an American in France concerns his French accounts and products, which we listed in our FBAR inventory, and the French funds that are PFICs. It also conditions the French treatment of his American income: without proof of compliance with the IRS, the treaty credit equal to the French tax on dividends, interest and gains is not available.

B. On the French side: declaring the American accounts

The reverse is often forgotten. A French tax resident must declare every account opened, held, used or closed abroad (CGI, art. 1649 A), under penalty of 1,500 euros per undeclared account (CGI, art. 1736, IV, 2), and the omission extends the French assessment period to ten years. The obligation clearly covers the American brokerage account, and in our view the IRA and the Roth IRA, which are individual custodial accounts. It is more debatable for a 401(k), in which the participant holds a right in the trust of an employer plan rather than an account opened in his name; declaring it is nonetheless the prudent course. Many Americans in France who scrupulously file their FBAR with the IRS have never filed the French declaration of their American accounts.