A US 401(k) or IRA when you live in France

The France–US tax treaty (convention fiscale) treats 401(a) plans and individual retirement plans (IRAs) as equivalent to a French pension scheme. For an employee who is not French and joined the plan before moving to France, growth inside the plan is not taxable in France. Payouts to a French resident are taxed only in the US, though France includes them when calculating its own tax.

What the treaty says

Question	Rule	Article	Source
Which plans count as equivalent to a French pension scheme	401(a) plans, individual retirement plans (IRAs), including 408(k) and 408(p), 403(a) and 403(b) plans, US social security	Art. 18(2)(c)(i)	France–US treaty
Income built up inside the plan, and employer contributions	Not included in the employee's taxable income in France	Art. 18(2)(a)(ii)	France–US treaty
The employee's own contributions	Deductible from French taxable income in the same way as contributions to a French plan, within French limits	Art. 18(2)(a)(i)	France–US treaty
Who the rule applies to	A French resident who is not a French national and joined the plan before moving to France	Art. 18(2)(a), (b)(i)	France–US treaty
Payouts from the plan, periodic or as a lump sum	Taxed only in the US	Art. 18(1)	France–US treaty
How France treats a payout	Includes it when calculating French tax and grants a credit equal to the French tax on that income	Art. 24(1)(a)(i)	France–US treaty

Growth inside the plan (Article 18, paragraph 2)

Paragraph 2 deals with someone who works (as an employee or self-employed), is resident in one State without being one of its nationals, and contributes to a pension plan set up and recognised for tax purposes in the other State. For a French resident, the rules are:

• contributions paid by the person, or on their behalf, are deductible from French taxable income in the same way as contributions to a French plan, within the limits set by French law;
• for employees (professions dépendantes), any income built up inside the plan (produit accumulé) and any employer contributions are left out of the employee's French taxable income.

There are two conditions (paragraph 2(b)): the contributions are made to a plan the person already belonged to before moving to France (or to a plan that replaced it), and the French competent authority accepts that the plan broadly corresponds to a French pension scheme. Paragraph 2(c)(i) lists plans that meet this test outright: 401(a) plans, individual retirement plans (including 408(k) plans), individual retirement accounts, individual retirement annuities, 408(p) accounts, 403(a) and 403(b) plans, and US social security legislation. A plan is recognised for tax purposes if contributions to it qualify for tax relief (paragraph 2(c)(iii)).

Payouts (Article 18, paragraph 1)

Payouts from a retirement plan for past employment to a resident of the other State, whether periodic or as a lump sum (somme globale), are taxable only in the State they come from. A payout comes from the US only if the plan paying it was set up in the US. Under the same paragraph, US social security paid to a French resident is also taxable only in the US.

Under Article 24(1)(a), this income is included when the French tax is calculated (pris en compte pour le calcul de l'impôt français). US tax is not deducted from it; instead, the French resident receives a tax credit (crédit d'impôt) equal to the French tax on that income.

French rules for a lump sum from a foreign plan

BOFiP explains how French law taxes a retirement lump sum (prestations de retraite en capital) in cases where France has the right to tax it:

• as a rule, the lump sum is taxed under the rules for pensions (§ 1);
• if the recipient expressly and irrevocably opts for it, a lump sum from a foreign plan can be taxed at 7.5% (§ 230, 240), on the amount less a 10% allowance (§ 440);
• the condition is that contributions made while saving qualified for tax relief under the law of the plan's country (§ 290); for people who have moved between countries, it is enough that contributions made in years with relief account for more than 50% of the total (§ 330);
• the sum is paid all at once, not in partial instalments (§ 350–370);
• the option is claimed on the 2042 return, on the line "pensions de retraite en capital taxables à 7,5 %" (§ 430).

BOI-ANNX-000435 gives an indicative list of foreign plans with deductible contributions. For the US it lists defined-contribution funds, defined-benefit funds and individual retirement savings, "IRAs et Roth IRAs": IRA contributions are deductible if neither the employee nor their spouse is covered by an employer pension plan, while Roth IRA contributions are not deductible. The list itself warns that it is incomplete, only indicative, and based on information from before 2012.

What this article does not cover

• The term 401(k). The treaty refers to section 401(a) plans; the term "401(k)" does not appear in the treaty or anywhere in BOFiP. French texts do not say whether a particular 401(k) plan counts as a 401(a) plan.
• Form 3916. Form 3916-3916 bis is used to report accounts and capitalisation contracts held abroad (BOI-CF-CPF-30-20). No official text says whether a 401(k) or an IRA falls within it, either way.
• How the treaty and the 7.5% rule fit together. The official texts do not specifically explain how the BOFiP rule on lump sums from foreign plans interacts with Article 18(1), which gives the US the right to tax a lump sum from a US plan.
• Plans with non-deductible contributions. For these, BOFiP refers to BOI-RPPM-RCM-10-30-10-10 (§ 490), which is not covered here.

What can change the answer

• US citizenship. Under Article 29(2), the US may tax its citizens as if the treaty did not exist; paragraph 3(a) of the same article preserves Article 18(1) and Article 24.
• French nationality. The Article 18(2) rules apply only to French residents who are not French nationals.
• Joining the plan after the move. Paragraph 2(b)(i) requires a plan the person belonged to before moving to France.

---

This material is for general information and does not replace individual advice.