Prélèvement Forfaitaire Unique (PFU)
Since 2018, France has applied a flat 30% tax (12.8% income tax + 17.2% social charges) on most investment income. For US citizens, this 12.8% portion is a creditable foreign tax. However, you have the option to opt-out of the PFU and use the progressive income tax scale instead. If your overall French income is low, the progressive scale might result in a lower French tax rate. But beware: if you reduce your French tax too much, you may end up owing more to the IRS. Consult impots.gouv.fr for the current brackets.
Dividends and Interest
The PFU applies automatically to dividends and interest unless you explicitly check box '2OP' on your French tax return.
The 2026 'Box 2OP' Decision
Choosing the progressive scale (Box 2OP) applies to ALL your investment income for the year; you cannot pick and choose. The comparison is: $$Tax_{PFU} = 30\% \\ vs \\ Tax_{Progressive} = f(Income) + 17.2\%$$. LSI keywords include 'Flat Tax,' 'Revenus de capitaux mobiliers,' 'Form 1116 Passive Category,' 'Net Investment Income Tax (NIIT),' and 'Social Charges.' Refer to IRS Topic No. 409 (Capital Gains and Losses). In 2026, if the 12.8% French income tax portion is lower than your US capital gains rate (15% or 20%), the IRS will take the difference. For high earners, the PFU is usually the simpler and more efficient choice, as it caps the French liability. Always ensure your French brokerage has your US tax info to avoid incorrect withholding.