US Taxation of France Livret Savings Account (FBAR & FATCA)
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Taxation of France Livret Savings Account (FBAR & FATCA)
In France, there are various types of investments a person can make in order to generate passive income, while two of the more common types of investments include the Assurance Vie and PEA (Pan D’Epargne) – another common type of investment is referred to as a Livret A. This type of investment operates like a traditional savings account — with the key benefit derived from the fact that the income generated can be tax-free in France. It is kind of similar to a Series I Savings Bond “I-bond“ in that it has certain limitations as to the amount of money a person can maintain in the account (but unlike an I-bond, the income is not taxable). Of course, since the Livret is a foreign investment and generates foreign income — if the owner of the investment is a US person there may be US tax implications as well as reporting requirements – let’s go through the basics of the Livret.
What is a Livret Account in France?
There are various types of Livrets, such as a Livret A or B — but in general, a Taxpayer can only have one Livret account. The account generates income — and in the past when the interest rates were higher, it could generate a significant amount of interest –– but as in most countries, the interest rates on saving accounts as of late have been dismal. The key benefit behind the Livret is that the income generated is tax-free from both income tax and social tax. Taxpayers can only have one Livret account, but it is not limited to a per family requirement so that multiple family members can each have an account.
US Taxation of a Livret
The income from a Livret would be taxable in the United States. Just because income may be tax-exempt or otherwise avoid taxation in a foreign country does not mean it is tax-exempt under the US tax law. In general, the United States taxes individuals on their worldwide income and the fact that income is being generated through a Livret in France would presumably be taxable in the United States as well – – unless the person resides overseas and he’s making a treaty election (presuming they qualify).
FBAR and FATCA for Livret
In addition to tax rules, there are also various different reporting requirements on a myriad of different international information reporting forms. Two of the most common forms a person may have to file are the FBAR (FinCEN Form 114) and FATCA (Form 8938). The failure to report these accounts may result in significant fines and penalties, although the Internal Revenue Service has developed various amnesty programs to assist taxpayers with safely getting into compliance.
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