The French Assurance Vie
Moving to France has many benefits for British Expats – the culture, the cuisine, the weather and the pace of living among them. However, becoming a French Resident or retiring in France can have it’s drawbacks – the complex and overbearing tax system is one of them.
Income tax and social charges for French residents are some of the highest in Europe, and these can quickly reduce the appeal of bringing assets over to the country. Therefore, it’s no surprise that thousands of British Expats and retirees are on the lookout for the most tax-friendly ways of investing and ultimately generating an income.
Taking an Assurance Vie in France has unfortunately become a bit of a minefield, with banks and offshore advisers mainly only using commission paying products, with paper-based applications and no option for online accounts for tracking performances, costs and ongoing management.
As one of the few entirely fee-based and Independent Expat advice firms based here in France, our goal is to make the whole process as simple and as easy to understand as possible.
What is an Assurance Vie?
An Assurance Vie is best viewed as a very tax-efficient investment wrapper that protects your wealth and growth in France from a certain amount of income and succession tax. The concept at its base is similar to that of an ISA or a Life Assurance product that is found in the UK. It can be used to house your cash in a very preferable environment, and as long as it is held for a certain number of years and offer great benefits to Expats.
Within the tax-efficient wrapper, you can hold various underlying investments from various fund managers and providers. It’s important to note, that traditional French Banks will only offer their own funds within their Assurance Vie’s, such as BNP Paribas etc. This not only restricts your investment options to one manager, but they will also almost always be set up on a commission basis, meaning regular commissions coming out of your investment growth.
Tax Benefits of an Assurance Vie
The main thing to understand is that all funds and investments held within an Assurance Vie grow free of income and capital gains tax. That means that your investments can benefit from ‘gross roll-up’, meaning they are unhindered by taxation within the wrapper. This can have a drastic impact on long-term growth.
For any Assurance Vie withdrawal, you receive a tax-free allowance of €4,600 per annum (€9,200 for married couples). For the first 8 years of the Assurance Vie account, gains over the allowance are taxed at a flat rate of 30%. This comprises of 12.8% income tax and 17.2% social charges.
After holding the investments for 8 years, the main benefits begin to kick in. From now, tax on the gains drop to 7.5%.
Taking An Assurance Vie – What are the Options?
France is a notoriously commission based area, with opaque charging structures and confusing fees. This is especially the case when dealing with local Banks. At Harrison Brook, we are whole of market advisers, meaning we have the ability and terms to recommend any product available on the market.
We also never accept any commission payments, meaning you can be sure that the product we recommend is the best for your circumstances.
Contact us today for an initial consultation to discuss your situation here in France & find out more about the Assurance Vie products available.
The information contained herein is for informational purposes only which is subject to change and should not be relied upon. You should seek advice from a professional adviser before embarking on any financial planning activity.