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ASSURANCE VIE FOR EXPATS – GUIDE TO SMART SAVING

Assurance Vie for Expats

If you have recently settled in France and are looking for a tax-efficient way to invest, you should consider an Assurance Vie with Harrison Brook.

What is an Assurance Vie?

In a nutshell, an Assurance Vie is a French-compliant life insurance bond (similar to an ISA in the UK) that allows you to hold multiple investments tailored to your long-term goals. It’s a tax-efficient wrapper for underlying investments and primarily geared towards long-term investors (8-years) – after which the tax due on those gains drops significantly. For example, if someone investments and withdraws after 8-years, the income tax due would drop from 12.8% to 7.5%.

For contracts taken out prior to 27 September 2017, the tax rate will look like this:

Contract lengthIncome taxSocial chargesTotal charges
0 – 4 years35%17.20%52%
4 – 8 years15%17.20%32%
8 + years7.50%17.20%24.70%

For any contracts taken out after 27 September 2017, the rates will be as follows:

Contract lengthIncome taxSocial chargesTotal charges
0 – 8 years12.8%17.20%30%
8 + years7.5%17.20%24.7%

You have the option to elect for the capital gain to be added to your income for the tax year instead and be taxed according to your marginal rate, regardless of which category you fall under.

So, why an Assurance Vie for Expats ?

An Assurance Vie is a fantastic option for anyone planning to retire in France – it has that rare combination of tax-efficiency, capital growth potential and inheritance tax benefits that investors seek but rarely find. Assurance Vie’s offer an incredibly tax-efficient and flexible way to grow your money with numerous benefits, some of which are:

  • Tax-free growth – The Assurance Vie benefits from something called gross roll-up where whilst still invested it can grow in essentially a tax-free environment, ultimately improving your returns in the long run
  • Reduced tax rate – for example, after holding the Assurance Vie for 8+ years, income tax on the gains withdrawn reduces from 12.8% to 7.5%
  • Portability – if your plans change and you want to move country and/or move your funds to another provider then this process is easy and stress-free
  • Unlimited protection of funds
  • Secure online digital application for ease of use
  • Paperwork in English AND French
  • Multi-currency options available to help mitigate risks posed by fluctuating currencies
  • No exit penalties within the first 8 years
  • Easy and straightforward administration – the provider looks after tax reports and withholding taxes

The Assurance Vie for Expats offers many advantages, especially if you understand and utilise it effectively. For example, a couple can get €9,200 per year tax-free (€4,600 each) after the initial 8 year period – over ten years this can add up to €46,000 of tax-free income. Also, you can elect for the gains you have crystallised to be taxed according to your marginal rate under the ‘prelevement forfaitaire’ (single flat-rate levy).

Remember – if you’re worried about the application process, or if there’s something you’re not quite sure of, or if something looks too difficult to get to grips with, Harrison Brook can help you navigate any complexities and take full advantage of the benefits.

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What about Inheritance Tax?

Assurance Vie’s offer convenience and advantages to clients who want to pass down some of their wealth. For instance, if you establish the policy before your 70th birthday, you can pass up to €152,500 to each of your beneficiaries – completely exempt from French inheritance tax.

What about French Assurance Vie’s ?

Are these not better suited to someone who is retired in France?

Many high street banks across France today would allow you to start an application for an Assurance VIE. However, there are numerous issues that expats will face if they enter into a French Assurance VIE:

  • Commissions – most French banks work on a commission-based model – that means their fees can be quite high and it also poses the obvious question of whether the products being recommended to you are being done so in a way that is impartial and of benefit to you
  • Investments are restricted to the funds offered by the bank – these limitations can often stifle the ambitions of investors who want to be more adventurous or simply want the freedom of choice
  • Paperwork in french-only, and often there are no digital signature options – this can make both the application and ongoing management processes unnecessarily difficult
  • Not portable
  • Not protected by the bank over 100k

The only other tangible benefit of having a French Assurance Vie is that you can open an account with a lower amount – but when weighed against the above information, it would make more sense to open an expat Assurance Vie with Harrison Brook. 

Where does Harrison Brook come in?

Harrison Brook is ideal for expats living around the world looking to grow their money. Our advisers provide impartial advice and a quality service that is accessible no matter where you are in the world. If you have recently settled in France, you can find some additional guidance for UK citizens on tax, pensions and a number of other issues here.

Our online-based low-fee set-up is perfect for any investor concerned about high fees or hidden costs. Harrison Brook is a fee-based rather than a commission-based service, so our advisers are not incentivised to sell products, but instead motivated by advising clients and guiding them to the best solutions. 

Our initial consultation is free for anyone seeking advice on their situation, so please get in touch with me here if you would like to discuss any of the above further.

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