Certificate of Coverage — Social Security cost protection for overseas transferees

April 22, 2009

Many companies who transfer their employees to their French affiliate for a limited period (up to five years), obtain from the U.S. Social Security Administration, a “Certificate of Coverage”, which is issued pursuant to the US-France Social Security Teaty.  The Certificate of Coverage allows the employee to remain in the U.S. Social Security system for up to five years of his overseas assignment.  This results in substantial cost saving for the employer as well as for the employee.  In such case the employee would not benefit from the French health system; hence, proof must be funished to the Social Security Administration that the employee is covered by a private or company health plan. 

N.B.  The Certificate of Coverage exempts employer and employee from contributons to French medical, maternity, famiy allowance and retirement contributions during the applicable period, but NOT from unemployment insurance contributions (ASSEDIC).         

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Advantage of Irrevocable Discretionary Trusts

April 22, 2009

If you are the beneficiiary of an irrevocable trust that contains a specific or broad discretionary feature, you may be able to exclude the assets of that trust from  your French ISF.  Ideally, the trust would have been created by a third party, such as a parent or other relative, but such proximilty is not necessary.   The terms of the trust would grant discretion to an independent trustee to make capital and/or income distributions to the French-based beneficiary.    A case based on facts similar to these was decided in 2005 by A French tribunal, in response to the attempt by the French Tax Authorities (“fisc”) to include the trust assets in ISF base of the French resident beneficiary.  The court held against the fisc, saying that the French resident beneficiary did not have sufficient control over the trust assets to consider the asset as “owned” for purposes of the wealth tax.  The fisc did not appeal this case, so, at least for the time being, it is considered established precedent.   

Needless to say,  the principle of this case has formed the basis for much ISF tax planning in a variety of factual settings. 

Another point to keep in mind is that a distribution of trust principal from such a trust may result in French gift tax being imposed on the beneficiary in the year received.  So, one result for ISF purposes and another for gift purposes.


Interest payments

April 16, 2009

Did you know that the IRS is now requiring payments (made with tax returns or estimated tax payments) to be received by the IRS on or before the due date.  The fact that it is postmarked on the due date is no longer sufficient to avoid interest and possible penalties.