Efforts by the United States Internal Revenue Services (IRS) to deny foreign tax credits for French social contributions appear to have ended with the filing of a joint status report on June 13, 2019, by the IRS and the petitioning taxpayers of a pending US Tax Court Case. The joint status report follows an agreement between the United States and France on the treatment of French contribution social généralisée (CSG) and contribution pour le remboursement de la dette sociale (CRDS) under the Social Security Totalization Agreement between the United States and France. For US taxpayers resident in France, the CSG and CRDS should now be creditable foreign income taxes and most taxpayers will have good reasons to consider amending their income tax returns to claim these credits on past filed returns.
The CSG and CRDS are mandatory contributions withheld from a French resident's employment and other income (including dividends, interest, etc.) at rates of up to 9.2% for CSG and 0.5% for CRDS in 2019.1
The CSG first started in 1991 as a "temporary" measure at a rate of 1.1% with contributions intended to fund certain social security deficits. Over the years, the rates of CSG on employment income increased to 2.4%, then 3.4%, then 7.5% before increasing to 9.2% in 2018 with 6.8% deductible for...