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For our US exposed clients who are also exposed to the French tax season, things can be complicated as the French system can get confusing at times. We periodically have webinars on the topic and here are some interesting discussion points
Assurance Vie and U.S. Tax Rules: The IRS tax treatment of an assurance vie for U.S persons is complicated. Like the SICAV or UK investment ISA, the assurance vie has many tax-deferred components to it, which do not receive tax-deferred status under U.S. tax law. Outside of the United States, the hybrid life insurance policy/unit-linked investment vehicle is a very common type of investment — sometimes is is referred to as a Unit-Linked Insurance Policy or “ULIP.”
With an assurance vie, the life insurance serves as a wrapper for various different types of investments. It is a common type of foreign investment held by French/U.S. dual-citizens or residents.
One primary benefit of the assurance vie is that it helps to put the owner in control of beneficiary distributions. Income grows tax-free within the wrapper. It can be treated as a PFIC. Speak to an advisor to make sure this is handled correctly. https://www.mooresrowland.tax/2015/08/what-is-pfic.html
CFC – Controlled Foreign Corp / CFC rules in France apply to foreign subsidiaries, branches, or permanent establishments (PE) that are controlled by a French parent company. Indirect and direct control of shares or voting rights are considered to determine the CFC status. CFC income is deemed to be received by the French company. Taxation applies to the pro rata share of income attributed to the French company. Profits of the foreign entity are aggregated to the tax base of the parent company and taxed under the French rules. Also, losses from the parent company are allowed to be used to offset the CFC’s profits, but losses from a CFC cannot be used to offset income from the parent company (in some cases losses can be carried forward to be used in the next years).
GILTI – We have written alot about GILTI for CFCs. https://www.mooresrowland.tax/search/gilti
Fortunately your France entity may be exempt under the high tax exemption. https://www.thetaxadviser.com/issues/2020/nov/final-regulation-gilti-high-tax-exclusion.html
