What is an Assurance Vie in France?
Today I will address the benefits of Assurance Vie for French Resident expats. Many countries in Europe have Assurance Vie policies that have significant tax benefits for their local residents. Assurance Vie is regulated at the Country level regarding taxation and it is important to know the rules in place so you can make the best-informed decision when investing your funds.
In France, income tax, gift tax, and social charges are some of the highest in the world. This investment strategy is designed to reduce the tax burden for beneficiaries and also to provide tax-deferred growth on the funds invested. Later in the article, I will dive deeper into the tax benefits.
Assurance Vie is an investment vehicle that can hold different funds and is similar to an ISA in the UK. There are a few companies that offer Assurance Vie in France with policies in English. This is one of the reasons why the expat community does not really know well Assurance Vie.
Assurance Vie in France is available to all French residents except US-connected individuals. You don’t have to be a citizen to benefit from owning Assurance Vie.
Tax Benefits in France of an Assurance Vie
Assurance Vie or Life Assurance has tax benefits during the accumulation stage and at the time of death. First, let’s review the benefits while it is growing. There is a tax deferral on the growth and interest accumulated. That means you do not pay taxes on any gains each year unless the gains are withdrawn from the policy.
There is also a tax-free allowance on the growth of 4,600 single – 9,200 for a couple, each year after the policy is owned for 8 years. This doesn’t apply to social charges but it is still a great benefit.
Depending on how long you keep the policy in place will affect the tax you will have to pay. For example, if you surrender the policy before 8 years the tax rate is 12.8%. After 8 years it goes down to 7.5%. You would have to add 17.2% social charges on top of that.
Another great tax benefit is a lower succession tax liability than if you held your funds in another investment vehicle or cash. If a policy is established with the lives assured under age 70, each individual beneficiary will receive a €152,500 exemption, and then pay a flat tax rate of 20% of the taxable part of the Assurance Vie under €700,000 and 31.25% above this figure. If the policy is purchased when the life assured is over 70 years old, the exemption for each beneficiary goes down to €30,500.
French Assurance Vie VS Expat Assurance Vie?
The main difference between the French Assurance Vie and the Expat Assurance Vie is the Country where the policy is located. Countries like Luxembourg and Ireland offer great alternatives to the French Assurance Vie.
French Assurance Vie Facts
- Usually sold with high commissions
- Investment options are restricted to the Funds offered by the Bank offering the Assurance Vie
- Paperwork in French only and no digital signature options
- Easily accessible at local banks
- In France, the bank only protects the first €100,000.
- Not portable to another country
- Lower opening amounts
Expat Assurance Vie Facts
- Flexible and larger investment options are available
- Tax neutrality
- Portability of the product if the client moves to another country
- Unlimited protection on the funds
- Secure online digital applications for clients
- Paperwork in French and English
- Lower cost and available without commissions
- Multi-currency options for the investment (EURO, GBP, USD)
- Initial Investments minimum is generally €100,000
In conclusion
As you can see, there are great benefits of using Expat Assurance Vie in France. High Net Worth Individuals should review their estate plan and talk to a cross-border financial advisor that can understand their financial situation and present the best solution available that meets their needs. At Harrison Brook, we give personalized holistic financial advice that meets your specific needs. If you would like to know more about Expat Assurance Vie don’t hesitate to get in touch.
