Offshore Bond to Assurance Vie Transfer
An Offshore Bond to Assurance Vie Transfer may allow you to bring your existing assets in line with your position as a French resident. Many British expats hold Offshore Bonds having been a UK resident upon relocating to France. As they do not offer the same benefits you should consider alternative options. Within this article, we look at the options available and the advantages of utilising them.
Offshore Bonds for a UK resident
Offshore Bonds, International Bonds or Investment Bonds are well known in the UK as a tax-efficient way to invest your money and for portfolio management. Specifically over the medium to long term for a minimum of five years. The Offshore bond allows you to invest a lump sum or regular payments.
They are usually held in places like the IOM, Channel Islands or locations like Dublin. The money invested can potentially grow tax-efficiently as no tax is due on the investment growth.
As a UK resident, you can then withdraw 5% per year of the capital originally invested without paying any tax immediately. Other benefits include:
- Gross roll-up
- Gift assignment
- Time apportionment relief
- Top-slicing and the option to place the bond within a trust
Offshore Bonds as a French resident
An Offshore Bond will lose all of the benefits detailed once you become a French resident. This is because the French market already has its own form of compliant Bond, an Assurance Vie. These are located both in France and internationally such as Ireland and Luxembourg.
As such, a number of UK expats get caught out believing their existing portfolio is tax-efficient and are subsequently penalised when reporting their investments to the French authorities. Instead, you should be taking out an Assurance Vie Contract.
An Assurance Vie is a long term investment product that gives you access to a wide range of funds in a tax-efficient wrapper. They are specifically created for the french market and those residents in France. As such the Assurance Vie provider reports directly to the French Government on your investments.
You have the choice of numerous insurance companies and life insurance products. ‘Local’ products that are located in France are more basic but cost less, whilst international products located in Luxembourg or Ireland cost more but offer additional benefits. These include multi-currency, greater investment options and portability. You will need to work with a financial adviser to utilise an international Assurance Vie.
Tax Advantages of an Assurance Vie
The tax advantages of an Assurance Vie are the following:
- All funds grow free of French income and capital gains tax (gross roll up) until withdrawn.
- Tax-free allowance after 8 years – €4600 (€9200 per married couple) reducing income tax.
- Reduces tax in France, specifically – It reduces Capital Gains Tax and social charges / social tax after 8 years to a fixed rate.
- Succession Tax savings for your chosen beneficiaries – Leave up to €152,500 tax-free per beneficiary.
- Inheritance Tax benefits/Estate Planning.
Offshore Bond to Assurance Vie Transfer
You can transfer directly from your offshore Bond to an Assurance Vie should it be deemed the most suitable option. However, you would need the funds to be held in cash. If utilising a non-French investment product then should your position change you can switch bank into an Offshore Bond. Thus offering flexibility for those you may return to the UK in the future.
What type of product is an Assurance Vie?
It is an individual life assurance policy qualified as a whole of life insurance contract with a death benefit guarantee, issued under French Law.
What is the minimum investment amount?
Provider varies however the minimum value we can assist with is €100,000.
What is the maximum amount I can invest?
There is no maximum.
What happens if I withdraw the funds before 8 years?
You would receive none of the tax benefits. Subject to being a french tax resident you would incur a 30% tax on any growth.
What happens in the event of death?
Because this product is a life assurance product, in the event of the death of the relevant life assured, it gives the policyholder the benefit of life assurance cover of 101% of the Portfolio Fund.
What does it cost to set up?
Setup costs vary depending on the provider and adviser you work with. The most important factor is whether the advice is fee-based or commission-based. Further information on this can be found here