Fortunately, there is a perfectly good solution for this in France – Assurance Vie. Many of my clients have heard the name but do not necessarily know how it works. Similar in make-up to a UK Equity ISA an Assurance Vie allows you to save your money in a tax-efficient ‘wrapper’.
Assurance Vie, Working for You
What are the principles of an Assurance Vie and how can it help you with your tax planning?
- Your investment is allowed to grow tax free.
- Should you wish to withdraw funds only the part of the withdrawal that is subject to a ‘gain’ will be subject to tax and social charges, as the majority of your withdrawal is classed as return of capital.
- For higher rate taxpayers you can choose to be taxed at the lower rates attributed through the Assurance Vie regime (12.8% in years 1 – 8, plus 17.2% social charges. After year 8 if your net premiums are below €150,000 then you can benefit from a reduced rate of tax at 7.5%) or your nominal rate, so if you are a nil-rate taxpayer then you will have no tax to pay.
- After your 8th year there is a tax-free withdrawal allowance of €4,600 per annum (€9,200 for a joint policy), after which additional withdrawals are taxed as above.
- You can nominate anyone to be a beneficiary of your Assurance Vie and unlike other aspects of inheritance the recipient is entitled to receive the equivalent of €152,500 tax free, with anything over this taxed at a rate of 20%. This means that anyone who is not a blood relative or spouse (step-children, cohabiting partners or friends) will not be subject to the usual 60% Inheritance tax. (Different amounts apply if initial investment is made when you are over the age of 70.)
- Savings can be kept in sterling, or be made in Euros or US dollars and can be ported back to the UK should you return in the future.
- You can have a choice of investment options to suit your specific requirements and level of risk, which can be altered as your needs change.
- Assurance Vie policies are exempt from Wealth Tax.
However, this is only one aspect of your tax planning and it is extremely important to take full advice from the outset to ensure that your hard-earned cash, whether in savings, pensions or investments, keeps working hard for you.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
The structure of your wealth and your tax affairs should always depend on the particular laws and regulations of where you reside in the world as well as the nature of your long-term goals. The expat financial services market has evolved in order to help cater to these considerations and in some cases this includes helping ensure clients meet the demands of wealth tax.
At the moment, politicians across the world – especially, it seems, in the UK – are in the spotlight regarding their tax affairs. Banks, however, will also soon be in the spotlight, as by Friday 15th April they have been told to hand any information regarding their dealings with the law firm at the centre of the Panama Papers over to the UK’s Financial Conduct Authority.