The Best Assurance Vie providers in France offer international products
suitable for expatriates. These tax-efficient products help
your saving grow more effectively.
The starting point for your financial planning in France should be French tax and investment legislation. Only by applying solutions that have been tried and tested in accordance with French regulations can you be sure that the desired result will be achieved. Furthermore, as a French resident, you should begin assessing your tax position on the basis that all of your worldwide assets and sources of income are eligible for taxation in France.
The French system offers many incentives for investors in that there are numerous ways to mitigate tax exposure. These include the joint taxation of couples, various family allowances, exemptions, and deductions for different types of income. In addition, tax planning techniques are used to reduce capital gains, wealth tax, and inheritance tax in France.
One of the most important aspects of living abroad is understanding which domestic products are appropriate for financial planning. To this end, several banking and insurance products have been developed to help French residents structure their finances efficiently. For expats, the most effective of these is the Assurance Vie contract.
French life insurance products are structured as tax-efficient savings vehicles for medium to long-term investment. Regular and single premium investors in France can benefit from capital gains and income tax concessions should they invest in an Assurance Vie policy.
This section examines three major taxes that impact expats in France and considers the use of Assurance Vie products to help protect assets:
Assurance Vie products offer several incentives to savers:
As you can see, there are clear benefits when investing in a Spanish compliant investment bond. On the one hand, if you don’t take money from your account, there will be no tax to pay; on the other, if you make withdrawals, the tax payable amount will be significantly reduced.
In conclusion, you should consider the level of tax in a country in light of available investment structures and the opportunities they offer investors. Indeed, one could argue that Spain is almost a ‘tax haven’ for retirees who use or intend to use personal investments to provide income!
For additional information on the Spanish compliant investment bond, please get in touch with us below:
It is important to note that every time a withdrawal is made, the growth of the overall wrapper is calculated. Each withdrawal is considered part capital and gain, using the same overall growth factor. Ultimately, the ‘gain element’ of the withdrawal is subject to tax and not the whole withdrawal itself.
The tax treatment of French life insurance products is as follows:
It is still necessary to declare the withdrawal in your annual tax return. There is normally no further tax to be paid after that.
There is an annual tax-free allowance for withdrawals from policies after an 8-year investment term. This currently amounts to €4,600 for a single person and €9,200 for a couple; there is, however, a 17.2% social tax charge (to which the tax-free allowance does not apply).
*Note: During the first 8 years, the proportion of the “gain” relating to new capital added since 27/9/17 (as a percentage of total capital) would be taxed at 12.8%. There is also the 17.2% social tax charge.
From the 27th September 2017, taxpayers who invest new premiums with an Assurance Vie provider will be taxed on gains in respect of withdrawals as follows:
If the policy value is more than 150,000 €, there is a flat tax of 30% (12.8% tax plus 17.2% social charges) on any gain realized.
Once again, there is an annual tax-free allowance for withdrawals from policies after an 8-year investment term. This amounts to €4,600 for a single person and €9,200 for a couple; there is also the 17.2% social tax charge (to which the tax-free allowance does not apply).
If you declare your gains from your policy on your annual income tax return in France, you pay tax on them at your highest applicable rate; social taxes are also levied. This may be the best choice if you have a limited annual income.
*Note: If you do not use an Assurance Vie, you will pay either your top band rate income tax – or the new fixed-rate tax of 12.8% – plus 17.2% social taxes – on all gains, dividends & interest credited to your portfolio each year. These charges are levied even if you make no withdrawals. If your objective is to have a long-term investment, using an Assurance Vie wrapper is generally in your interest.
Residents of France are subject to wealth tax on their worldwide property assets and investments in real estate. This would include the primary residence, second homes, and rented properties. Non-residents are also liable for wealth tax, but only on the net value of assets in France, such as second homes.
There are several ways to reduce the level of wealth tax in France. Various items, such as unpaid taxes, outstanding bank loans, and other debts, can be deducted from the calculation. In addition, there is an allowance for the value of the main residence.
Assurance Vie contracts can also be used to reduce potential wealth tax liability. As of 2013, a wealth tax ceiling limits French and foreign taxes to 75% of income. This encourages wealthy individuals to live off the proceeds of capital, leaving income and gains to build up inside the Assurance Vie providers contract as a way of reducing potential wealth tax liability.
The best Assurance Vie providers also offer contracts that can be used as estate planning tools to protect assets when living in France.
Being aware of your rights on lifetime gifting and understanding the legal options available regarding the ownership of assets enables you to reduce the burden of French inheritance tax. Assurance Vie contracts offer individuals certain inheritance tax planning incentives
French inheritance tax and succession planning go hand in hand. Succession laws apply to the worldwide assets held by anyone domiciled in France. The tax liability falls on the beneficiary and is applied to all the bequests and inherited rights of the deceased’s estate. Succession law specifically protects children from being disenfranchised from their inheritance. However, since the surviving spouse is not regarded as a “protected heir”, estate planning can become an extremely challenging exercise for many expatriate residents. Fortunately, a solution is at hand for the preservation and development of capital through French life assurance vehicles.
The best Assurance Vie providers design products that offer shelter from the rules of “forced heirship”, making it a useful tool for spouses to transfer assets between one another and provide protection to the surviving partner in the event of death. The proceeds paid out from Assurance Vie policies are largely beyond the reach of French succession law. In the event of death, the proceeds of an Assurance Vie are distributed to the beneficiaries (net of social taxes). It is, however, potentially subject to French inheritance taxes. The following rules apply:
*Note: As of July 2011, beneficiaries of Assurance Vie contracts are no longer exempt from the 20% tax if the policyholder was non-resident in France at the date of subscription. There are also significant tax benefits when bequeathing legacies to unrelated beneficiaries such as friends or step-children, provided such distributions have been made before the 70th birthday of the bequeather. After this age, the tax advantage is restricted to €30,500 for all beneficiaries combined.
Whatever your marital situation, it is important to consider succession planning to secure greater control over your estate, plan an orderly inheritance, and reduce the potential inheritance tax liability of inheritors.
If you want further information on the best Assurance Vie providers in France, please download our guide by completing the form below.
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