Can a US Citizen in France Invest in a PER Without Triggering PFIC Rules?

1. Why PFIC Rules Matter So Much

The US taxes its citizens on worldwide income, regardless of residence. That alone creates complexity.

But the real trap is the PFIC regime.

A PFIC (Passive Foreign Investment Company) is defined under US tax law as a foreign corporation that earns primarily passive income (dividends, interest, capital gains).

Most non-US investment funds fall into this category.

That includes:

• French mutual funds (FCP, SICAV)

• European UCITS ETFs

• Most unit-linked insurance funds

• Non-US pooled investment vehicles

PFIC taxation is punitive:

• Complex annual reporting (Form 8621)

• Harsh “excess distribution” rules

• Potentially confiscatory effective tax rates

• No favorable US capital gains treatment

For US expats, PFIC exposure is often the single biggest investment mistake.

2. What Exactly Is a PER?

The French Plan d'Épargne Retraite (PER) is France’s modern retirement savings vehicle, created under the PACTE law.

There are three main versions:

• PER individuel (PERin)

• PER d’entreprise collectif (PERCOL)

• PER obligatoire (PERO)

A PER is a wrapper. It is not itself an investment fund, just like "Assurance vie" by the way.

Inside the wrapper, you typically hold:

• Mutual funds

• Target-date funds

• Balanced UCITS portfolios

• A “fonds en euros”

• Occasionally ETFs or securities

The PFIC question depends entirely on what is held inside the PER.

3. Is the PER Itself a PFIC?

Generally, no.

The PER is not usually structured as a foreign corporation owned by the investor. It is:

• Either an insurance contract issued by an insurer such as Suravenir, AXA or Generali

• Or a securities account held at a financial institution

However, the IRS does not stop at the wrapper.

It looks through to the underlying investments.

If your PER holds French or European funds, those funds are almost certainly PFICs.

4. When Does a PER Trigger PFIC Reporting?

In practice, a PER will create PFIC issues if it invests in:

• French FCPs

• French SICAVs

• European UCITS ETFs

• Most target-date retirement funds

• Multi-asset allocation funds

And that is exactly what most PERs invest in by default.

This means that most standard PER allocations create PFIC reporting obligations.

Each fund may require:

• A separate Form 8621

• Complex annual calculations

• Specialist tax software or advisory support

For many US citizens, compliance costs exceed the benefit of the investment.

5. Can You Structure a PER to Avoid PFICs?

Yes — but it requires discipline and the right provider.

A PER may avoid PFIC exposure if it holds only:

• Individual stocks

• US-domiciled ETFs

• Direct bonds

• Cash

In short: technically possible, operationally difficult.

6. What About the “Fonds en Euros”?

The “fonds en euros” deserves special attention.

Unlike UCITS funds, it is:

• Part of the insurer’s general account

• Not a separate corporation

• Structured as an insurance reserve pool

Some cross-border tax advisors argue that a fonds en euros is not a PFIC because it is not a foreign corporation owned by the investor.

However:

• There is no clear IRS guidance

• No explicit safe harbor

• Interpretations vary

It is often viewed as lower PFIC risk than UCITS funds, but not risk-free.

7. The Bigger Problem: Is a PER Recognized as a Pension by the US?

Even if you avoid PFICs, another issue arises.

The US–France tax treaty does recognize certain pension arrangements.

However:

• The PER is relatively new

• There is no explicit IRS confirmation treating it like a US 401(k)

• Contributions are generally not deductible for US tax purposes

• Growth inside the PER may be taxable annually for US purposes

This means you may lose:

• The French deduction benefit (for US purposes)

• The US tax deferral benefit

In other words, you could face taxation mismatch.

8. PER vs. US Brokerage Account: The Practical Trade-Off

Many US citizens in France choose to:

• Invest through US brokerage accounts

• Hold US-domiciled ETFs

• Avoid French mutual funds entirely

• Skip PER contributions unless employer-matched

Why?

Because PFIC compliance and cross-border tax complexity often outweigh the French tax advantages.

That said, employer matching in a PERCOL may still justify participation.

9. So — Can You Invest in a PER Without PFIC Issues?

Theoretical answer:

Yes, if structured carefully with non-PFIC underlying investments.

Practical answer:

Most retail PERs will generate PFIC reporting.

Strategic answer:

It depends on:

• Your income level

• Your US tax bracket

• Whether you receive employer contributions

• Your long-term residency plans

• Your retirement country

There is no universal answer, please check with a specialized financial experts on that question.