Assurance Vie - Tax Efficient Investment for French Residents
As an expat moving to or settled in France, understanding a new tax system can be daunting. With the same financial priorities and goals to meet, the need to save and grow your capital still exists. So today we look at one of the most popular, tax-efficient solutions available as a French resident.
With an estimated 30 million Assurance Vie policies in France, this tax-efficient ‘wrapper’ benefits from preferential tax treatment through its classification as a life assurance policy. This can allow the policy holder to benefit from a lower rate of tax on gains made when the policy is held for 8 years. A special rate of 7.5% applies up to the threshold amount of 150,000 EUR (spread across all Assurance Vie policies held) plus social charges when policies are held for the full 8 years. There is also an income tax allowance of 4,600 EUR applicable to single applicants, which doubles to 9,200 EUR for couples who are jointly taxed. This can provide a significant tax saving in the year that a withdrawal is made.
Any tax payable is also deferred, meaning that is not payable until funds are withdrawn from the policy, as opposed to any growth being taxable each year. This is comparable to certain investment-based, life assurance policies, like an investment bond in the UK.
It is important to seek local, independent tax advice in France based on your own personal circumstances.
French inheritance rules differ from the U.K. by having prescriptive heirs, without the same level of freedom to choose who benefits from your estate. An Assurance Vie policy can provide a legitimate route around these prescriptive requirements, giving you the flexibility to ensure your estate passes to your chosen beneficiaries in the manner you wish.
Many of our clients work in Switzerland, while living in France. We therefore understand the potential issues with being paid in one currency, while living in a country that uses another.
As an expat, you may hold assets in multiple currencies and there are Assurance Vie solutions available with different currency options. Certain platforms allow you to hold different currencies within the same account. We help our clients to manage and eliminate currency risk when we review their changing personal circumstances over time.
Certain Assurance Vie options may have limited investment choice so at Forth Capital we ensure that we only recommend solutions with a wide range of regulated investments to ensure our clients’ funds grow in line with their appetite for investment risk.
France is generally viewed as a highly taxed environment when compared to Switzerland. Certain taxes are also higher compared to the U.K. It is therefore important to maximise the tax-efficient solutions available to you as a resident of France.
Is Assurance Vie right for you?
Everyone’s circumstances are different, with varying needs and financial goals. At Forth Capital, we understand the need to make personal recommendations that match our clients’ needs, taking the time to understand which solution will help our clients meet their long-term aspirations.
Forth Capital specialises in expat financial planning, wealth management and pension solutions. If you would like to learn more about Assurance Vie or benefit from a financial review, contact us today for a complimentary consultation. Call us on +44 (0)131 600 0625 or contact us online.