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United States, France Agree on Foreign Tax Credits

two hands shaking
By Jyme Mariani, Esq. | 09 Aug 2019
In June, the United States and France reached an understanding that the French Contribution Sociale Generalisee (CSG) and Contribution au Remboursement de la Dette Sociate (CRDS) taxes are not social taxes covered by the totalization agreement between the countries [IRS Totalization Agreements, French Contribution Sociale Generalisee (CSG) and Contribution au Remboursement de la Dette Sociate (CRDS)].

The IRS said it will not challenge foreign tax credits claimed by individual taxpayers, for CSG and CRDS payments on the basis that the totalization agreement applies to those taxes. However, U.S. employers may not file for refunds claiming a foreign tax credit for CSG/CRDS withheld or otherwise paid on behalf of their employees.

Individual taxpayers have 10 years to file a claim for a refund of U.S. tax for a foreign tax credit. The 10-year period begins the day after the regular due date for filing the return (without extensions) for the year to which the foreign taxes relate. In this case, amended returns claiming foreign tax credits for CSG and CRDS payments going back to tax year 2009 may be filed.

The United States and France signed a totalization agreement in 1987. Generally under these agreements, a worker who is sent by an employer in one country to work in the other country for five or fewer years remains covered only by the sending country’s social security program. The agreements include additional rules that eliminate dual coverage in other work situations (e.g., airline and maritime workers). The agreement also helps to eliminate situations where workers suffer a loss of benefit rights because they have divided their careers between the two countries.

Jyme Mariani, Esq., is Managing Editor of Payroll Information Resources for the American Payroll Association.