French Income Tax on Military Retired Pay and Social Security

The 1994 U.S.-France income tax convention has been rewritten twice where it matters here, and copies of the original text are misleading. The 2004 Protocol replaced Article 18 (Pensions) and deleted the paragraph of Article 19 that dealt with government pensions, and the 2009 Protocol rewrote the first sentence of Article 18(1). The rule now. Article 18(1) says payments under the social security or similar legislation of one country to a resident of the other, or to a U.S. citizen, and pension distributions and other similar remuneration arising in one country in consideration of past employment and paid to a resident of the other, "shall be taxable only in the first-mentioned State". A pension arises in a country if it is paid by a pension or other retirement arrangement established there. U.S. military retired pay is paid by a U.S. retirement arrangement in consideration of past service, and U.S. Social Security is paid under U.S. social security legislation, so both are taxable only in the United States when paid to a resident of France. Why nationality does not matter on the French side. The saving clause in Article 29(2), as replaced in 2009, lets the United States tax its residents and citizens as if there were no treaty; it gives France no matching power over individuals. Article 29(3)(a) also keeps Article 18(1) in force against the United States' own saving clause. A U.S. retiree living in France, a French national, and a dual citizen are all in the same position: France does not tax the retired pay or the Social Security, and the United States does. This entry does not work through how France's relief article, Article 24, lets France reflect this income when it computes tax on other income; ask a French tax adviser about that before filing. VA disability compensation is not named in the treaty, and France's treatment of it was not researched for this entry. It is exempt from U.S. tax under 38 U.S.C. 5301.