US Citizens, Long Stay Visa in France - have questions

[tparsons]

All-



We are US citizens, our new catamaran is coming out of the factory end of April in La Rochelle, France. We will have 3+ months of commissioning work to do, then shake down trips to work the bugs out before we depart.



We don't want any of our time in France to count against our 90 day Schengen limit. So, we opted for 1 year Long Stay Visas in France. Just received them!



Question:
Does anyone on this thread have first hand knowledge(meaning you have had or have a France long stay visa) and have entered other Schengen countries with your US Passport and visa attached and the boarder agents HONORED the France Visa and DID NOT STAMP your passports???



We have heard that a France Long stay visa will work in all the Schengen Countries. If this is true we could spend up to 1 year in any of these countries without being subjected to the 90 day rule.....

[Montanan]

An alternative way to look at your situation is that the standard 90 day Schengen short stay visa applies save for being subject to your 1 year long stay visa from France.

Short Answer:

Depends on what specific type of visa you were granted.

Devil is in the detail. Contact the immigration department which issued you your visas for explicit explanation. Go to the source!

Sounds like you have been granted Type D National Long Stay Visa.

A reference link: https://myschengen.com/blog/schengen-visa-types/


Duration of National Visa
National visas are issued for a maximum duration of one year. A foreign national who holds a valid national visa (D) can travel within the territories of the Schengen Area as long as their stay does not exceed 90 days within a 180-day period.

Once you have a National Visa, you may obtain the relevant residence permit to live in a specific Schengen country long-term or permanently. (In contrast, you cannot obtain a residence permit if you enter the Schengen Area with a C Visa.)

Types of National Visas
National (D) Visas are typically issued for the following reasons:

To study in a Schengen country for longer than three months
To work in a Schengen country
To move to a Schengen country for family reunification with an EU national (e.g., your spouse)
For “Work and Travel” programs
For retirement in a Schengen country
For investment or setting up a business in a Schengen country
For working in a Schengen country as a digital nomad
Other.

[tparsons]

Thanks Montanan for your reply!



We have a Multi entry Type D Visa.

[dannc]

Originally Posted by tparsons

...
We are US citizens, our new catamaran is coming out of the factory end of April in La Rochelle, France. We will have 3+ months of commissioning work to do, then shake down trips to work the bugs out before we depart.

We don't want any of our time in France to count against our 90 day Schengen limit. So, we opted for 1 year Long Stay Visas in France. Just received them! ...

Will the year long stay trigger residency in France and thus having to pay French taxes? More concerning, will being a French resident trigger VAT on the boat?

We are thinking about a boat build in the EU which Schengen makes difficult during the build, commissioning and shake down. Paying a country tax due to having 6-12 months of residency is ok but VAT on the boat is a no go.

[tparsons]

VAT is triggered by staying in the country or EU more than 180 contiguous days. Leave for 1 day and the clock starts over again.



Income taxes are similar but easy to avoid as well.

[Montanan]

As to purchase of a vessel in the EU by a non-resident of the EU and flagging of the vessel with a non-EU nation:

Seemingly there could be a relief protocol for temporary use within the EU that would be discharged upon export.

When a non-EU VAT paid vessel is imported into the EU by a non-resident of the EU a temporary admission can be applied for which avails the boat to be within the EU VAT customs territory for up to 18 months and which temporary admission status is discharged by sailing out of the EU to a foreign port or place so as to have accomplished an export of the temporarily imported vessel.

The company that is selling the boat likely has the proper documentation and procedures to avail their non-EU resident purchasing client the means to avoid [not evade] VAT being due upon purchase.

The TA process is common. I don't have specific knowledge of the purchase of a new non-VAT paid vessel in the EU. VAT is a privilege tax which is activated when one utilizes the privilege of procuring goods and services. VAT is a substantial cost, so investigate the available procedures to avoid such. Exporting of the good [a vessel] within a prompt time period should avail a recoupment of any paid VAT, or security deposit of taxation [bonding] made upon the purchase.

Good luck.

Keep careful count of your 90 days in the continuously rolling 180 day period for Schengen territory when leaving the country that provided the national long stay visa.

[Dockhead]

Originally Posted by tparsons

VAT is triggered by staying in the country or EU more than 180 contiguous days. Leave for 1 day and the clock starts over again.

Income taxes are similar but easy to avoid as well.

VAT and income taxes are NOT indeed similar; not in any way. This is not correct. You have 18 months, not 180 days, under the temporary importation regime, before you have to leave the EU to avoid VAT on the boat. It is not correct that VAT is triggered by the owner's presence in the EU -- it is triggered by the BOAT'S presence. The boat has to be taken out of EU waters at least once every 18 months and you need to document that carefully; VAT is one of the things that the authorities really care about and you could get screwed with this.

You can't be a resident to use the temporary importation regime. There are different definitions of residence, so this might not be the only way to run afoul of this, but if you stay more than 180 in one year in France, you become a tax resident and have to pay income taxes.

So this is tricky. You cannot legally spend more than 270 days in the Schengen zone under a one year visa without become a French tax resident. In practice, because of the lack of internal borders, there is little control over how long you spend in other Schengen countries, so you could probably get away with spending 179 days in France and the rest of the year in other Schengen countries but there are new systems of control coming on line and it's not actually legal, so you might want to be careful with that.

The UK is neither EU nor Schengen so that's a great way to clock up time outside of both; likewise Morocco, Channel Islands.

[Dockhead]

Originally Posted by dannc

Will the year long stay trigger residency in France and thus having to pay French taxes? More concerning, will being a French resident trigger VAT on the boat?

We are thinking about a boat build in the EU which Schengen makes difficult during the build, commissioning and shake down. Paying a country tax due to having 6-12 months of residency is ok but VAT on the boat is a no go.

Yes and yes. Don't stay in France more than 178 days, whatever kind of visa you have, and keep meticulous records of your movements.

[dannc]

Originally Posted by Dockhead

Yes and yes. Don't stay in France more than 178 days, whatever kind of visa you have, and keep meticulous records of your movements.

Just had a quick read on French residency. This is not a government website, which I would prefer, but they do seem to know the regulations/law, https://www.cabinet-roche.com/en/fre...183-days-rule/

In terms of french tax residency, there is a lot of divergent information circulating on the criteria for tax domicile in France.

The criterion of 6 months (183 days) minimum presence in France is often misused. Under French law, you are tax domiciled in France if your household is in France.

I do see the 183 day presence used in other countries. Often/sometimes it has to be contiguous days so this is different.

Bolded and red is from the website not mine.

According to the French tax authorities, an individual’s home is his or her habitual and permanent place of residence. They will examine first and foremost the center of family interests. In other words, if your spouse or civil union partner and children are or remain in France, even if you have to stay in another country temporarily or for most of the year due to professional needs, the tax authorities will consider that your tax home is located in France.

French tax residency : How is your residence determined?
If you are unable to determine a household, the tax domicile is defined by your main place of residence. This is the place where the person has stayed the longest. Thus, if a person has stayed in France for more than 183 days during the same year, he or she automatically has his or her tax domicile in France.

Moreover, if the duration of the stay in France, even if it is less than 183 days, is longer than the duration of the stay abroad, the tax authorities will consider that the criterion of tax domicile is met.

My concern has been we would stay in a EU country to build the boat, inadvertently establish residency, and be hit with VAT on the boat.


On Edit:CF was showing me an advertisement while reading this discussion. It was a for US Border Patrol positions and there is up to a $20,000 signing bonus.

[katy415]

Hi - I am both a UK and US citizen living in France. I have several friends who are Americans who have had both 1 year visas and then extended them to 5 and then 10 years. They pay tax in the States and never in France.

My savings in the states that earns interest in the States is not taxed in France, only in the States.

My son, who normally lives in London, also got a long term tourist visa to hang out in France for longer than his normal post-Brexit time allows, and he, too, did not have to pay French taxes.

The French long stay tourist visa does not require you to pay tax. Simple.

The boat can stay for 18 months before VAT is due regardless of where you are resident! But moving it to a non EU place does indeed reset the clock. I am thinking of buying a boat in the UK and sailing her here, so I have been really looking into the rules!

Good luck!!!

Katy

[Montanan]

Of keen issue of your purchase of a vessel in the EU is that it is not being imported and thus not a temporary admission upon entry of a non-EU VAT paid vessel to the EU.

You are purchasing a vessel in the EU, not importing the vessel to the EU.

Hence to avoid VAT, if possible, one needs to have the transaction be stablished as good that is intended to be exported and is in transit of being exported.

The particulars of that special provision I am unclear upon.

One has to look at the sale transaction perspective from which you are the purchaser. The seller has to have reason to not charge and collect VAT upon the sale to you a non-resident. Perhaps some affidavit from the buyer, or a bond registration, ????

When is VAT charged?

For EU-based companies, VAT is chargeable on most sales and purchases of goods within the EU. In such cases, VAT is charged and due in the EU country where the goods are consumed by the final consumer. Likewise, VAT is charged on services at the time they are carried out in each EU country.

VAT isn't charged on exports of goods to countries outside the EU. In these cases, VAT is charged and due in the country of import and you don't need to declare any VAT as an exporter. However, when exporting goods you will need to provide documentation as proof that the goods were transported outside the EU. Such proof could be provided by presenting a copy of an invoice, a transportation document or an import customs record to your tax authorities.

You will need to provide this proof to be able to fully deduct any receivable VAT that you have paid in a previous related transaction leading up to the export. Insufficient documentation may mean you won't have the right to a VAT reimbursement when exporting good

VAT is due upon a chargeable event, unless it is suspended.

Exception – suspensive customs arrangements

The chargeable event is suspended in the following cases, where the goods are not released for free circulation but instead put under customs suspension:

temporary storage pending presentation to customs

a free zone or a free warehouse

customs warehousing arrangements or inward processing arrangements

goods intended for admission into territorial waters to build, repair, maintain, alter or fit out drilling or production platforms, or to link such platforms to the mainland or fuel/provision them

temporary import arrangement with full exemption from import duties This is the TA status

external transit arrangements

goods in free circulation coming from EU territories not covered by EU VAT
rules that are in similar situations as those mentioned above in this list

goods in free circulation coming from EU territories not covered by EU VAT rules and put under the internal transit procedure.

If import VAT is suspended, as in the situations listed above, the chargeable event occurs and VAT becomes chargeable only once the goods cease to be covered by suspensive arrangements.
The chargeable event for suspended goods follows customs legislation. This means that the chargeable event may also occur in other cases, when customs duties would become chargeable if these goods were subject to customs duties – e.g. when customs procedures are breached.



Exemptions on exportation
What is exportation?
An exportation of goods takes place when goods are dispatched or transported from the territory of an EU country to a place outside the EU.

Why is it exempt?
It is a fundamental principle of VAT in the European Union that exports do not bear VAT, so that transactions that involve exportation (or are treated as doing so) are exempt but with the right to deduct, so that EU exporters are not penalised by having to reflect the VAT they have incurred in the price of their export goods.

Reference: https://taxation-customs.ec.europa.eu/exemptions-right-deduct_en#Exemptions%20on%20Exportation

What transactions are exempt under this rule?
The transactions that Member States EU countries must exempt are listed in Article 146 VAT Directive and are:

Reference cases #1 through #5 per link above.

[Montanan]

French tax residency.

Useful guidance: There is more than just the 183 day rule.

https://www.cabinet-roche.com/en/french-tax-residency-the-183-days-rule/

Snipet:

Article 4A of the French General Tax Code establishes an essential division around the notion of tax residence:

Individuals domiciled in France are subject to income tax on all their worldwide income,
Other individuals not domiciled in France are only taxed on their French source income.
It is therefore essential to know if your tax residence is in France or not.


. . .

If you are unable to determine a household, the tax domicile is defined by your main place of residence. This is the place where the person has stayed the longest. Thus, if a person has stayed in France for more than 183 days during the same year, he or she automatically has his or her tax domicile in France.

Moreover, if the duration of the stay in France, even if it is less than 183 days, is longer than the duration of the stay abroad, the tax authorities will consider that the criterion of tax domicile is met.

[dannc]

Originally Posted by katy415

...
The boat can stay for 18 months before VAT is due regardless of where you are resident! But moving it to a non EU place does indeed reset the clock. I am thinking of buying a boat in the UK and sailing her here, so I have been really looking into the rules!

Good luck!!!

Katy

DockHead will be back to correct as needed. My understanding from reading these EU VAT discussions over the years is that VAT is due at the time of purchase by an EU resident of a boat that has not paid VAT OR the VAT has expired. Residency is a key requirement to trigger VAT. One could be an EU citizen, but as long as the person was not a resident, VAT was not due.

This website is saying what I have read over the years, https://www.yachtworld.com/research/...s-an-overview/

All privately owned vessels used by EU residents within the EU are required to pay a Value Added Tax (VAT), which can add a hefty 20 percent to your sales price. And that’s just the beginning of all the details to consider.

The VAT is more than 20% in most EU countries.

If you’re not resident in an EU country, you can temporarily import the vessel without paying VAT, for instance to cruise in the EU, for a period of usually up to 18 months.

If the permanent importation of the boat coincides with transferring your residence from outside the EU, it may qualify for VAT relief. Similarly, a VAT paid boat exported from the EU (such as when long-term cruising) may also qualify for relief on its return if it’s returned to the EU within three years of export, imported by the person who exported it from the EU, and has not undergone significant repairs that increased its value.

The last point, about VAT relief when importing a boat when establishing residency, is interesting but my reading of Irish regulations says one has to own the boat six months or more prior to importation. Which, for the OP, could be away to avoid VAT depending on when his ownership of the boat begins and how that ownership coincides with his French residency, if any.

[Montanan]

fyi


Taxation U.S. citizens and resident US aliens abroad


https://www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad

If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. You are subject to tax on worldwide income from all sources and must report all taxable income and pay taxes according to the Internal Revenue Code.

Many Americans living abroad qualify for special tax benefits, such as the foreign earned income exclusion and foreign tax credit, but they can only get them by filing a U.S. return. For further details, see Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.

U.S. taxpayers who own foreign financial accounts must report those accounts to the U.S. Treasury Department, even if the accounts don't generate any taxable income. Taxpayers should file a Report of Foreign Bank and Financial Accounts (FBAR) electronically by April 18, 2022, using the BSA e-filing system. For further details see report of Foreign Bank and Financial Accounts (FBAR).

Be careful to not become FUBAR by FBAR,

Taxpayers must also report virtual currency transactions to the IRS on their tax returns; these transactions are taxable by law just like any other property transaction. For more information see virtual currencies.

[dannc]

Originally Posted by Montanan

e
Be careful to not become FUBAR by FBAR, ...

FBAR is very dangerous. Unless the law has changed, if one does comply with FBAR, the penalty can be 50% of the highest amount one had in an overseas account not what is currently in the account. The Wall Street Journal had a story on this years ago. I don't think the law has changed but the Fed's said they would not enforce the law to that extant...

Another tax issue to investigate if establishing residency overseas is inheritance, either what one might inherit or what one might want to leave to others.