Hello and welcome to Sherayzen Law Office Video blog. My name is Eugene Sherayzen and I’m an international tax attorney.
Today we’re doing a video from Milwaukee, Wisconsin and I was just walking on the streets and I heard French being spoken by two gentlemen, and it put me to mind about Assurance Vie Accounts.
Assurance Vie Accounts are a very common investment in France. Virtually everyone in the French middle class has them. But whenever a French citizen comes to the United States he runs into various problems with respect to reporting the Assurance Vie Accounts.
For example, a lot of Frenchmen do not know that once they become US Tax Residents they are required to report Assurance Vie Accounts on FBARs and if they meet the Form 8938 threshold, they will also be required to report them on forms 8938.
The second problem which is very common with French people who come to the United States is the issue of reporting income from the Assurance Vie Accounts. As you may already know, the income on the Assurance Vie Accounts is not taxable in France; however, it is taxable in the United States and most of Assurance Vie Accounts consist of two parts.
The first part is the investments; investments, usually in foreign mutual funds. The second part of Assurance Vie Accounts consists of the Euro-fund part and basically this is cash that is sitting in the account and just accumulates interest.
Now the interest is calculated under the specific rules which are associated with these Euro capital, but for US Tax Purposes this is just purely interest income.
So the first part which is the investments is the most complicated one because the second one really if you can figure out the interest income, the fees which are withdrawn by the bank from this interest income as well as social taxes which are being imposed by the French government on that income – then it becomes pretty easy. You just figure out what the gross income is; you convert it to US Dollars and you report it on your US Tax Return.
I will not talk today about the issue of deductibility or accrued ability of French Social Taxes. This is a different issue and a complicated one and an unsettled one as well.
But the first part, the investments is complicated because they’re usually considered to be PFICs for US Tax Purposes. As such, they are required to be disclosed on your US Tax Return on forms 8621 even if you didn’t have any transactions.
PFICs require very complex calculations and the part of PFIC gains or PFIC dividend income which are considered to be acts of distribution is going to be taxed at the highest marginal tax in existence plus the interest rate which is being calculated once you allocate your PFIC income throughout the holding period on a per-share basis.
Sounds very complex? It is; it requires a lot of calculations. Most of the information is not readily available; the French banks are not required by the French government to keep this information on file or more importantly to disclose it to French Taxpayers. Only US Taxpayers who need to report these Assurance Vie Accounts on their US Tax Returns, only they need this information and in order to get it, it’s a pain. It may take anywhere between three to nine months to get this information depending on the French institution, depending on whether you have contact with the French bank. If you don’t, it takes longer; usually it requires either a personal visit to a French bank or it may require actually a letter, a good old-fashioned paper letter being mailed to the French bank which holds the Assurance Vie Investments.
So, in short, there are a lot of issues associated with owning Assurance Vie Accounts by US Taxpayers.
If you would like to learn more about Assurance Vie Accounts and the associated US Tax Compliance requirements or you would like to get help with respect to US Tax Compliance, or if you were or think you may be required to comply with US Tax Requirements and haven’t done that yet and now you’re thinking about possible Voluntary Disclosure Options, contact Sherayzen Law Office.
Our professional team headed by myself, Eugene Sherayzen an International Tax Attorney will review thoroughly all of your documents, prepare all of the tax forms and then I will be drafting all of the legal documents associated with submitting your Voluntary Disclosure.
So call or email me now to further discuss your Assurance Vie Accounts. Thank you for watching and until the next time.