Hi!
Thank you for taking the time to read about my situation
I will seek help from a professional in the near future but I would love to get some external opinions from some of you first!


I currently live in France but will be moving and working in NYC by the end of the year (got married to a US citizen + getting Green Card). I have a full time job starting soon in the US.

I also have a company here in France doing business online (selling software), with clients mainly in Europe (no U.S. clients). I do not technically own the company (no shares) and I am not an employee, so I have been paying myself by charging "management fees" through another French company (good legal way to optimize taxes here).

Now that I am moving to the US, I would like to choose the new best US structure to combine my employee salary and the income I can withdraw from my French company.

What would be your advice on that? Do keep in mind that I am discovering the US legal and tax systems, and that I am not necessarily planning on staying in the US for the rest of my life.

I have explored a bit the following topics:
- US tax rules (especially the fact that here we are taxed on our worldwide incomes)
- the advantages of writing off expenses in the US
- incorporating in Delaware, offshore, or in NYC
- the different corporations you have in the US (C, S, LLC, etc)
- the difference between paying myself in salary or dividend

I tend to think that, since I have a total freedom of place where to incorporate and since I am living in a country where the original company is not doing any business, there might be a clever way to optimize the situation.

I currently see 2 main "overall strategies":
- incorporate in a "tax heaven", and charge French company (transfer intellectual property and transfer royalties? Or just management fees?). The offshore company would pay 0% taxes and I would pay myself dividends. So 15% overall tax rate?
- incorporate in US (NYC, Delaware?) and charge the French company. Write off a max of expenses (portion of rent, utilities, etc.). Pay myself (dividend, salary?). So higher taxes, but less taxable incomes? Would the company pay federal/local taxes since it would not do any business in the US?


Thank you very much in advance for your insights on the matter!

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#1:As a US person, as a US resident, you are subject to US taxes on your US source and world wide income that you earn in France.As long as you pay tax(es) to French taxing authority(ies) on your income that you earn in France, you have a choice as to whether you deduct any foreign taxes paid or accrued during the year as an itemized deduction on your Form 1040 Sch A or as a credit using Form 1116. The choice needs to be made each year that you have foreign taxes and it can change from year to year. While you can choose whether to use a credit or a deduction year to year, you can't use some as a credit and some as a deduction in the same year. The IRS recommends filling out your taxes both ways to see which one provides you with the most benefit. Not all foreign taxes qualify to be used as a credit. Generally, only foreign income taxes can be used as a credit on your U.S. taxes. All other taxes can be used as a deduction. While the general rule is that you can mix and match foreign tax credits and deductions in the same year, there is an exception. If the foreign taxes were incurred in a trade or business or in the production of income, the taxes can be deducted even if you took the tax credit for foreign income taxes. You can change your choice as to whether to take a foreign tax deduction or credit even after you file your return. The IRS allows you to alter your choice at any time within 10 years of the original filing date of the affected return. You simply need to file an amended return, Form 1040X, to make the change. When making a change, you must also check to see if other returns are affected because of carry over amounts due to excess credits.


#2:As mentioned previously. Luckily you are not subject to double taxation in US and France on your world wide income that you earn in France.


#3:I guess it is hard to tell if incorporating in a "tax heaven", and charge French company (transfer intellectual property and transfer royalties? Or just management fees?) is more advantageous than incorporating in Delaware, offshore, or in NYC- the different corporations you have in the US (C, S, LLC, etc) I guess it is not so simple[le issue. As a US resident, as said you are subject to US taxes on your US source and world wide income , your French income, however, you have a choice as to whether you deduct any foreign taxes paid or accrued during the year as an itemized deduction on your Form 1040 Sch A or as a credit using Form 1116. The foreign tax credit is intended to reduce the double tax burden that would otherwise arise when foreign source income is taxed by both the US and France from which the income is derived. Generally, only income taxes paid or accrued to France or taxes paid or accrued to France in lieu of an income tax, will qualify for the foreign tax credit. Qualified foreign taxes do not include taxes that are refundable to you, that are used to provide a subsidy to you or someone related to you, that are not compulsory because you could have avoided paying the taxes to the foreign country, or that are paid or accrued to any country if the income giving rise to the tax is for a period. If you cannot claim a credit for the full amount of qualified foreign income taxes you paid(due to the fact that your tax liability in US is lower that your Foreign tax credit/deduction) or accrued in the year, you are allowed a carryback and/or carryover of the unused foreign income tax. You can carryback for one year or carryover for 10 years the unused foreign tax.
I guess you can talk to an international tax representative at the IRS for more info in detail on your foreign taxation issue/ US taxation on your French income.

Hi Wnhough,
Thank you for your answer, I appreciate it.

It is true that I did not think about just keeping the same structure, pay myself in France, and use the French taxes as a tax credit on my US taxes.

However, I tend to think that this would not be the best scheme, since this works well if the foreign tax rate is low compared to the US tax rate, taking also into account the fact that the tax credit cannot be more than [US tax liability] x [%], where % = Foreign income / (Foreign income + US income). In my case % is about 30%. And French tax rates are equal or higher than US tax rates. Basically I would always pay more taxes in France than I will be able to take as credit on my US taxes. (I am assuming that taking tax credit is more interesting than taking tax deductions, which I think is true unless the foreign tax rate is insanely high compared to the US tax rate).

Also, if I pay myself a salary in France I will have to pay a bunch of things (social security, medicare, pension, etc.) on it that will probably not qualify as income taxes (?). And if I pay myself a dividend it will be taxed between 30% and 60% in France, which is always more than in the US (and ridiculous, yes).


That is why I mentioned that I don't get a French salary and that I do not formally own the French company: I can choose NOT to have any foreign income from France.
I can choose to have foreign income in a more "interesting" country than France. Or to just have dividend paid in the US by a foreign company. Or to incorporate a company in the US and have dividends from a US company. I guess there are other things to take into account then (are they "qualified" dividends or not? How much can I pay myself in dividends compared to my salary? etc.).


Basically, assuming that the tax situation in France is really bad, I doubt that any structure involving paying taxes to France would be optimal. That is why I come back to the 2 structures mentioned at the end of my initial post. Do tell me if you think my reasoning is flawed!

For instance, if I live in NYC and incorporate a company in Delaware, since Delaware does not tax royalties, copyrights, etc and since the company would be only "doing business" with France, wouldn't it enjoy a very low tax rate? And wouldn't its dividends be "qualified"?

Thanks again for your help and advice

#1:Correct as said previously.



#2:In this case, UNLESS you can claim a credit for the full amount of qualified foreign income taxes you paid(due to the fact that your French tax rates are equal or higher than US tax rates as you said) or accrued in the year, then, you are allowed a carryback and/or carryover of the unused foreign income taxes on your US returns. You can carryback for one year or carryover for 10 years the unused foreign taxes.So, you can still claim unused FTC UNLESS French tax rates are lower than US tax rates.

#3: As mentioned above



#4:In this situation, I guess you need some professional taxation help/advice from a French tax adviser/accountant for tax issue(es) between France and other tax heaven countries to learn if yo u(even though you are a US resident/ French citizen) still neeed to pay tax on yur French income that you transfer to tax heaven state to France..I think that basically as long as you earn income in France as a US resident, then you still need to pay tax on it to France then you can transfer it to tax heaven state. For US taxes you still need to pay tax to tax heaven states and also need to claim those taxes that you pay to tax heaven state on your US returns too. For example, you ( as aUS resident/French citizen)need to know if you are still subject to French taxes on your income that you earned in US by incorporating a company in the US and have dividends from a US company; in my opinion, as long as you are a US resident, then you actually do not need to pay tax on your dividend income that you earn in US to France any longer. However, as long as yo are still a French citizen, you need to pay tax to France on your income that you earn in US.


#5:As mentioned above. As long as you ares till a French citizen, then perhaps you must pay tax to France on your French source and world wide income that you earn in US; UNLESS you are a French citizen, then you do not need to pay tax to France on your US income that you earn in US but still need to pay tax on your income that you earn in France.

#6:Evn though as you said, you enjoy a very low tax rate by incorporating an S corp/ a C corp or a LLC or PS or whatever in DE you still need to pay tax to France on your income that you earn in France even if you are a US resident ; this is what I meant.
I guess on your Frech taxation issue on your Frech income, you need profesinla help from a French tax accountant for accurate info on it.

Alright, thanks Wnhough!
I'm going to try to find a profesional to help me with the details
Cheers