Are your assets optimised as a French resident?
Do your current investments match your long-term plans?
This page gives a very brief outline of the key investments to consider - including
- bank deposits,
- assurance vie ,
- offshore bonds & life insurance
- French rental property.
Investments should be tax efficient yet must provide the required returns in line with your current financial situation and long-term plans, including flexibility on where you might live, estimated future income and expenditure, appetite for risk, etc.
Financial investments in France
The Livret A is an instant access tax-free account, earning 3.0% pa (at 1 February 2023). Each family member can open one - with up to 22950€. In addition, the Livret de Developpement Durable enables a further 12000€ per person - providing the same tax-free interest as the livret A. These accounts are ideal for short-term cash requirements.
It is still possible to find savings accounts (Compte sur Livret or Compte d’Epargne) offering rates up to 2% pa for a few months - but the rate rapidly falls back to 1% pa or less (and this interest is fully taxable).
Fixed length deposits are known as Comptes à Terme but rates are still very low and, after tax, they’re simply not worth the effort. However, rates should improve later in 2023.
The French government guarantees up to 100k€ per person (across ALL accounts of the person at that bank). Above 100k€, consider spreading across more than one bank.
France offers various vehicles for low tax financial investments. The most popular are the Assurance Vie and the Plan d’Epargne en Actions (PEA). These are financial wrappers allowing most income & gains to roll up without tax until withdrawn. Inside the wrapper, you buy & sell your investments - the better wrappers offer a list of several hundred funds to choose from. You can take funds out at any time and any tax due on withdrawal is usually reduced if the wrapper has been held a minimum number of years.
Most banks will enable you to open a PEA - though these are only really suitable if you enjoy buying and selling individual shares. If you prefer to invest in managed funds, I would suggest choosing a PEA from one of the insurance companies since the fees will normally be much lower. Each person is limited to one PEA with a maximum investment of 150000€ (ie 300000€ for a couple). In addition, you can open a PEA-PME limited to smaller companies in which you can invest a further 75000€ (each).
If you are looking for security, you may wish to consider the guaranteed Euro Funds available within French Assurance Vie. However, few such funds provide returns above 1.5% (net of fees and Social Charges) - so take your time to choose your contract carefully.
Offshore bonds, life insurance and other financial investments are not appreciated by the French authorities and French residents must take care to respect the rules. They should not be confused with Assurance Vie - even though the principles are similar.
If you have such investments or are wondering what to do with funds outside France, you should take specific steps - preferably well before arriving in France. The use of investment bonds and life insurance policies is to be avoided if moving to France - especially those in non-EU countries (such as Isle of Man, Jersey and Guernsey).
The use of offshore trusts by French residents is complex, and only appropriate in very exceptional circumstances.
Rental property in France
French rental property can be an excellent investment.
- It could provide a holiday home for you and your family that covers its own costs.
- It could provide long term income suitable as a “pension top-up” in France.
- If carefully chosen and maintained, the capital value should rise - at least in line with European inflation.
You must not only plan for possible up-front renovation, but also appropriate management & maintenance. The rules for evicting tenants are also very strict - even if they are no longer paying any rent.
All income from rental property in France must be declared each year and will be subject to French income tax. French property is also subject to French Capital Gains, Wealth, Inheritance and Gift taxes.
Given the current low rates of interest, you may wish to consider a French mortgage which can be offset against rental income for tax purposes.
Be careful to understand the differences between furnished and unfurnished rentals - the rules and tax treatment are very different in France.
Many clients ask if they should use a Société Civile Immobilière (SCI) or a foreign company to own property. This is a complex question and requires legal advice - especially if you are thinking of renting the property at any stage.
If you pay higher levels of French taxes, you might consider investing in special property schemes such as Malraux or Monument Historique. For both of these schemes, a large part of the investment cost is tax-deductible against your income.
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