NEW U.S.-FRENCH TREATY PROTOCOLSNEW U.S.-FRENCH TREATY PROTOCOLS
Carolyn DeVore of Pullman & Comley, LLC, in Westport, Conn., reports: The United States and France ratified significant protocols to their income tax and estate tax treaties on Dec. 21, 2006. The income tax protocol allows a U.S. citizen working in France to continue to contribute to his U.S. pension, individual retirement account (IRA) or other retirement plan, then deduct those contributions for
February 1, 2007
Rorie M. Sherman Editor in Chief
Carolyn DeVore of Pullman & Comley, LLC, in Westport, Conn., reports:
The United States and France ratified significant protocols to their income tax and estate tax treaties on Dec. 21, 2006. The income tax protocol allows a U.S. citizen working in France to continue to contribute to his U.S. pension, individual retirement account (IRA) or other retirement plan, then deduct those contributions for income tax purposes in France in the same manner as contributions made to a “generally corresponding” plan (described in the protocol) established in France. Also, benefits accumulated under the plan and contributions made by an employer are excludable from individual income tax and are deductible by the employer, in the same manner as a plan set up in France.
The protocol reverses the existing income tax treatment of pension distributions that now will be taxable only in the country where the plan was established. This means that a French citizen participating in a U.S. 401(k) plan while on work assignment in the United States will continue to pay only U.S. taxes on distribution income, even after he returns to France.
The income tax protocol includes new rules addressing the tax treatment of cross-border investments made through partnerships and other passthrough entities that are aimed at reducing the risk of double taxation for U.S. investors in France.
The gift and estate tax protocol provi...
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