Expat Finances - an introduction to life insurance

Section kindly contributed by Steven Grover - see contact details at the bottom of this page if you would like further information.

What is Assurance Vie, and what are the advantages ?

Assurance Vie is a type of Life Insurance scheme where you can invest in a huge range of different managed funds, enabling you to invest very tax efficiently in France.

From an inheritance tax point of view a policy is of greater benefit if it is started before becoming tax resident in France, because it will then be completely free from French succession tax. Unless the life assured is over the age of 70 at the time the policy was set up, or at the time any top-ups are made.

But even if the Assurance Vie is arranged after you have become French resident, for any named beneficiaries to the policy payments in the event of death there’s a succession tax exemption of €152,500 per beneficiary, after which a flat-rate tax of just 20% normally applies.

Assurance Vie can also help with Wealth tax as you may be eligible to not pay wealth tax (depending on your nationality) on the fund for up to 5 years, if the policy is French tax approved but remains outside of France.

French capital gains and income tax does not apply if the income and gains are made within the policy and no withdrawals are made. Even where an amount is withdrawn only the growth element is taxable, for example if your portfolio of assets held within the policy has grown by 5% only this percentage of the withdrawal would be taxable, the remaining 95% would be tax-free.

Any gains are liable to 'social charges' of 11% when they are drawn down, plus taxation on a sliding scale depending on how long the policy has been in force, 35% for a policy less than 4 years old, 15% for policies between 4 & 8 years old and then 7.5% for all policies over 8 years old.

Then you have the choice of having the applicable tax deducted 'at source', or being paid gross and declaring the gains on your tax return. This is obviously advantageous if you are paying less than this rate of tax.

Also after 8 years, there is an annual tax-free allowance of 4,600 euros (single person) or 9,200 euros (married couple) of GAINS. So the 7.5% tax would not apply if you staggered the withdrawals (e.g. to supplement your pension).

If you have a question, want to arrange for a free financial review or just want further information I can be contacted on +33 (0)325461631 or at Steve@financialexpat.com

Each individual case is different and you are strongly advised to seek the help of a specialist in this field. At Spectrum IFA Group, our advisors are trained in this area and will be able to provide you with free, impartial advice, relevant to your particular case.

Financial Expat is registered and licensed in France under the European wide “umbrella group” of TSG insurance Services (The Spectrum IFA Group).

 

TSG Insurance Services S.A.R.L. Siège Social: 34 Bd des Italiens, 75009 Paris
« Société de Courtage d'assurances » R.C.S. Paris B 447 609 108 (2003B04384)
Numéro d'immatriculation 07 025 332 - www.orias.fr

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