Since July 1st, 2014, the Foreign Account Tax Compliance Act (referred later as FATCA) has imposed obligations on foreign financial institutions in terms of registration, implementation of operational procedures, source deductions and reporting. So what are the consequences for US buyers and French banks?

What makes it so difficult?

For US citizens and US residents affected by FATCA, accessing a mortgage in France has been considerably restricted since 2019 when one of the biggest lenders in the market, Credit Foncier, stopped lending. The vast majority of European banks now refuse credit requests from US persons, and this is the case no matter the income or assets of the borrowers. To minimize the risk of non-compliance, many banks are now refusing to get in touch with potential borrowers linked to the US.

What risks FATCA can have on the banks and their clients? (put a link to the source)

A letter from the European Banking Federation puts in evidence the risk for lending institutions: “The penalty for non-compliance with the Fatca is a 30% withholding tax on all income flows, given their scale, this can lead to serious financial difficulties (including bankruptcy) for the banks”. 

In countries where there is a double taxation agreement with the United States, those affected are likely to pay higher tax than in their country of residence, if the US tax rate is higher. To avoid double taxation, France and the United States have signed a bilateral agreement according to tax deductions on the amount due to the Internal Revenue Service (IRS) . However, the American tax administration retains a limited definition of the concept of “tax”. The generalized social contribution (CSG) and the contribution to the repayment of the social debt (CRDS), which are taxes under French law (decision of the Constitutional Council dated December 19, 2000), are not considered by the USA as falling within the scope of this tax treaty.

What solutions then?

For US buyers, we have seen fewer offers available on the French mortgage market but that does not mean that we have nothing for you. Every US citizen or US resident will have its mortgage application reviewed on a case by case basis. 

Depending on the region you are buying in, we have solutions with about 30% – 35% deposit required. It could be either a vanilla mortgage (where the 30% deposit is placed in the property – what we call the ‘’classic mortgage’’) or it could be more of an investment mortgage where you could get a 90% LTV with a collateral (read ‘’Assets Under Management’’ of 25% of the mortgage amount. The collateral is blocked for the duration of the loan and can be used to repay your mortgage early for example.

Is the process different?

All in all, the process is the same as for every other resident / nationalities except that the bank may ask for more questions to understand the financial situation a bit more (French banks are less used to the US tax returns for example).

The only notable difference is that some lenders will check first if they can open a bank account for you first, at the beginning of the process rather than at the end, as it is generally what makes or breaks the deal with the lender.