Wondering how are assurance vie withdrawals taxed? Assurance vie is one of the most popular investment vehicles in France, offering tax advantages, estate planning benefits, and flexible investment options. However, understanding Assurance Vie taxation and how assurance vie withdrawals are taxed can be complex, especially for expats navigating different financial systems. In this guide, we break down the taxation of assurance vie policies and explain why working with a financial adviser like Harrison Brook can help you optimize your investment strategy.

How is an Assurance Vie Policy Taxed?

1. Income Taxation on Withdrawals (Surrenders)

One of the main advantages of an assurance vie is that taxation only applies when you make a withdrawal (full or partial surrender). For a full surrender, working out the taxable gain in usually quite simple: Taxable Gain = Surrender Value – Total Premium Paid

For a partial surrender it’s a little more complicated. Fortunately, the assurance vie provider calculates the tax for you. If you’re curious about the calculation, they would usually use the following formula:

Taxable Gain = (Partial Surrender Value – (Total Premium Paid × Partial Surrender Value / Total Surrender Value))

• Policies under 8 years: Gains are subject to the Prélèvement Forfaitaire Unique (Flat Tax) of 12.8% plus 17.2% social security contributions, resulting in a total tax of 30%.
• Policies over 8 years: Gains benefit from a reduced tax rate of 7.5% (instead of 12.8%) on amounts up to €150,000 in premiums, plus 17.2% social security contributions, resulting in a total tax of 24.7%.
• Additionally, a tax-free allowance applies for policies over eight years: €4,600 per individual or €9,200 per couple per year.

2. Capital Gains Tax Advantages

Unlike traditional investment portfolios, where capital gains are taxed upon each sale or switch of assets, assurance vie policies allow tax-free internal fund switches. This means that you can actively manage your portfolio within the policy without triggering capital gains tax.

3. Wealth Tax (IFI) Considerations

Real estate assets held within an assurance vie policy are subject to the French Impôt sur la Fortune Immobilière (IFI) if they exceed €1.3 million in net taxable assets. However, unit-linked policies are included only for the portion of their cash surrender value representing real estate investments.

4. Inheritance Tax Benefits

Assurance vie offers significant advantages for estate planning:

• Policies funded before age 70: Beneficiaries receive a €152,500 tax-free allowance per beneficiary, with any excess taxed at 20% up to €700,000 and 31.25% beyond that.
• Policies funded after age 70: A total tax-free allowance of €30,500 applies across all beneficiaries, after which standard inheritance tax rates apply.
• Spouses and PACS partners inherit assurance vie funds tax-free, making it an effective estate planning tool.

Get Expert Guidance from Harrison Brook 

Navigating assurance vie taxation can be complex, especially for expats managing assets across multiple jurisdictions. At Harrison Brook, we offer transparent, fee-based financial advice tailored to your needs. Unlike many firms that operate on commissions, we prioritise your financial well-being by providing objective guidance with clear pricing. Our expertise in expat financial planning ensures that you make the most of tax-efficient investment strategies, retirement planning and wealth management solutions.

If you’re considering an assurance vie policy or need help optimising your investment strategy, speak with one of our expert advisers at Harrison Brook. Contact us today for a free consultation and take control of your financial future.

FAQs

1. Is an assurance vie only for French residents? Yes, assurance vie is primarily designed for French residents. However, some non-residents with financial ties to France may still be eligible, depending on their circumstances and the issuing institution.

2. Can I withdraw money from my assurance vie at any time? Yes, you can withdraw funds at any time, but taxation may apply.

3. What happens to my assurance vie if I move abroad? Your policy remains valid, but tax implications may change based on your new country of residence.

4. Can I include multiple beneficiaries in my assurance vie? Yes, you can name multiple beneficiaries, and each may receive a tax-free allowance under French inheritance tax rules.

5. What makes assurance vie different from a traditional investment portfolio? The key differences are tax advantages, estate planning benefits, and the ability to switch funds within the policy without triggering immediate taxation.

6. What happens to my assurance vie if I die? The proceeds of an assurance vie are distributed according to your designated beneficiaries, often with significant inheritance tax advantages.