Who needs an Assurance Vie?
When moving abroad as an expat, it is surprising how often tax-efficient investments in your home country can become a tax burden in your new location. Expats who move to France are often met with this same dilemma where the income and gains from ISAs and other such investment arrangements are fully taxable, incurring hefty payments which often counteract the potential growth these vehicles offer. Luckily, the Assurance Vie is a convenient and effective way around this as you are not required to pay tax on any investments within it until you make a withdrawal. As one of France’s most tax-efficient structures, this tax wrapper is one of the most popular ways to save for retirement or later life while growing wealth and minimising tax liabilities.
What is an Assurance Vie?
The Assurance Vie is a life insurance wrapper that holds your investments and offers tax relief on them that improves the longer you hold the policy. If you withdraw a sum from the Assurance Vie, you will only pay tax on the gain element of the withdrawal and not the original capital. Once you have held an Assurance Vie policy for 8 years or more you will be entitled to an annual tax-free allowance of €4,600 or €9.200 for married couples.
What are the benefits?
- No tax is paid on investments until withdrawals are made.
- Tax is paid only on the growth element of a withdrawal.
- Annual tax-free withdrawal allowance after 8 years.
- Reduced inheritance tax for beneficiaries (for premiums invested under the age of 70)
- An effective way to consolidate assets.
There are also Assurance Vie policies based outside of France known as International Assurance Vies. These offer their own distinct set of benefits such as greater flexibility for those moving throughout the EU, documentation written in English, for easier comprehension and the option of investing assets that are in different currencies.
How flexible is an Assurance-Vie
An Assurance Vie can be tailored in several ways to suit your needs and requirements. Firstly, you can choose the risk level of your investment portfolio to suit your own personal tolerance and select the products that your savings are invested in. Secondly opting for an international Assurance Vie, as opposed to a French Assurance Vie, you can invest assets that are in currencies other than euros, like sterling or US dollars, for example. Finally, an Assurance Vie is not locked, meaning that should you want to, you can access and withdraw your investments at any time, although the tax implications of such a decision would obviously differ depending on the point at which the withdrawal is made.
How can an Assurance Vie benefit my beneficiaries?
An Assurance Vie is not only tax-efficient when it comes to withdrawals and saving, but it is also an effective way to minimize the often hefty taxation imposed by French success laws when passing on your estate after your death. With an Assurance Vie policy, you can leave up to €152,500 per beneficiary, tax-free, whether they are a blood relative or not. Without an Assurance Vie, the tax-free allowance for non-relatives is only €1594. There will be a 20% tax imposed on the next €700,000 and a further 31.25% on anything above that.
How are Assurance Vies taxed?
Since 2017, a new flat rate of 30% has been brought in on withdrawals from Assurance Vies; this is made up of 17.2% social charges and 12.8% income tax. The exception to this is Fond en Euros investments which are taxed slightly differently due to the security they offer.
Due to the varying efficiency of different investment vehicles depending on your location, the chances are that you will need to reevaluate your investment strategy when moving to France from another country. Whilst the Assurance Vie is often the best solution for retired and working expats looking to stay in the country long term, the type of policy that is right for you will differ depending on your personal circumstance and financial objectives. In order to ensure that you are making the right decision when it comes to securing your financial future it is always best to seek the advice of a financial adviser. This is especially relevant when it comes to arranging your finances in a country where the processes and regulations might differ from those you are used to back home. At Blacktower, we have a team of experienced advisers based in France and across the EU who can offer sound, face-to-face advice on how best to take advantage of the Assurance Vie and all its benefits.
To discuss whether an Assurance Vie might be right for you, get in touch today using the details below to arrange a no-obligation, complimentary consultation with one of our advisers.
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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. Some of the information herein is the opinion of Blacktower. 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 in this communication is correct, we are not responsible for any errors or omissions.