Tax efficient saving in France with Livret A & Assurance Vie
By Amanda Johnson
This article is published on: 17th October 2014
When I was a UK resident I was able to take advantage of tax free savings schemes. Are there French products that will allow me to save, tax free, now I live in France?
There are two main tax efficient saving products you can take advantage of as a French resident, Livret A & Assurance Vie.
Livret A is a deposit based account which all banks and the post office offer. It gives you instant access however this is balanced by a modest rate of interest of around 1% p.a. There is also a maximum amount of 22,950 Euros per person you can hold within a Livret A.
An Assurance Vie is an investment which again all banks and financial institutions here in France offer.
I have written about this before yet I think a reminder of the important aspects of the mechanism of “assurance vie” is probably in order here:
- An Assurance Vie (“AV”) is a type of insurance however unlike a life insurance policy you may have experienced in the UK, these policies shield any investments from virtually all forms of tax while the funds remain inside the AV. (some funds receive dividend income that has had withholding tax deducted).
- AV’s become more tax efficient over time. After 8 years funds can be withdrawn from the AV and taxed at just 7.5% on the gain element only. Funds can be accessed at any time before that, with the gain declared on your annual tax return. Standard social tax remains payable on all gain, but only when drawn.
- After eight years your gain is not only tax efficient, but it can be offset against a tax free allowance of (currently) €4,600 per person (€9,200 per couple) per annum. I would be happy to run through this with you as part of a free financial health check.
- AV policies are not subject to succession law. Proceeds from an AV policy can be shared amongst any number of beneficiaries. Although the succession tax benefit is reduced when the subscribers are aged over 70, there are still worthwhile benefits to be gained in this area.
What should I ask for in an Assurance Vie?
- Portability – Can I take it with me if I move back to England or to another country?
- Regulation – Is the company advising me on an Assurance Vie regulated in France?
- Fees – No up front entrance fees apart from the money I use to establish the policy?
- Social Charges – If & how are Social Charges applied to my AV ?
- Currency – Can I invest in Sterling? Euros?
Whether you want to register for our newsletter, attend one of our road shows or speak to me directly, please call or email me on the contacts below & I will be glad to help you. We do not charge for reviews, reports or recommendations we provide.
Le Tour de Finance – France, October 2014
By Spectrum IFA
This article is published on: 14th October 2014
The Spectrum IFA Group took part in the recent legs of Le Tour de Finance covering 3 separate events in the South of France – Domaine de Saint Endreol (the Var), Chateau la Coste (Aix en Provence) and Domaine Gayda (nr. Carcassonne).
More than 150 expatriates attended the events to hear from a panel of financial services professionals (pictured) on a broad range of financial issues relevant to those of us living and/or working in France. Topics covered included Investments, Pensions advice (QROPs), Wills, Inheritance planning and Taxation.
The seminar was followed by a Q&A session along with a buffet where attendees had an opportunity to mingle and speak directly to the experts in order to ask specific questions relevant to their personal circumstances.
The companies represented were: Currencies Direct, SEB Life International, Standard Bank, Prudential International and Hent Artwell Avocats (Tax Lawyers). Feedback from those attending has been very positive and plans are already in an advance stage for Le Tour events during 2015.
Planning to retire to France?
By Spectrum IFA
This article is published on: 13th October 2014
Retiring to France can be dream come true for many people. The thought of that ‘place in the sun’ motivates us to save as much as we can whilst we are working. If we can retire early – so much the better!
In the excitement of finding ‘la belle maison’ in ‘le beau village’, we really don’t want to think about some of the nasty things in life. I am referring to death and taxes. We can’t avoid these and so better to plan for the inevitable. Sadly, some people do not plan in advance and only realise this mistake when it is too late to turn the clock back. For example:
- Investments that are tax-free in your home country will not usually be tax-free in France. For example, UK cash ISAs and National Savings Investments, including premium bond winnings would be taxable in France. So too would dividends, even if held within a structure that is tax-efficient elsewhere. All of these will be subject to French income tax at your marginal rate (ranging from 0% to 45%) plus social contributions of 15.5%.
- Gains arising from the sale of shares and investment funds will be liable to capital gains tax. The taxable gain, after any applicable taper relief, will be added to other taxable income and taxed at your marginal rate plus social contributions.
- If you receive any cash sum from your retirement funds, for example, the Pension Commencement Lump Sum from UK pension funds, this would be taxed in France. The amount will be added to your other taxable income or under certain conditions, it can be taxed at a fixed rate of 7.5%. Furthermore, if France is responsible for the cost of your healthcare, you will also pay social contributions of 7.1%.
- Distributions that you receive from a trust would also be taxed in France and there is no distinction made between capital and income – even if you are the settlor of the trust.
As a resident in another country, it would be natural for you to take advantage of any tax-efficiency being offered in that jurisdiction, as far as you can reasonably afford. So it is logical that you would do the same in France.
Happily, France has its own range of tax-efficient savings and investments. However, some planning and realisation of existing investments is likely to be needed before you become French resident, if you wish to avoid paying unnecessary taxes after becoming French resident.
I mentioned death above and as part of tax-efficient planning for retirement, inheritance planning should not be overlooked. France believes that assets should pass down the bloodline and children are ‘protected heirs’ and so are treated more favourably than surviving spouses. Therefore, action is needed to protect the survivor, but this could come at a cost to the children – particularly step-children – in terms of the potential inheritance tax bill for them.
Whilst there might be a certain amount of ‘freedom of choice’ for some expatriate French residents from August 2015, as a result of the introduction of the EU Succession Rules, this only concerns the possibility of being able to decide who you wish to leave your estate to and so will not get around the potential French inheritance tax bill, which for step-children would still be 60%. Therefore, inheritance planning is still needed and a good notaire can advise you on the options open to you relating to property.
For financial assets, fortunately there are easier solutions already existing and investing in assurance vie is the most popular choice for this purpose. Conveniently, this is also the solution for providing personal tax-efficiency for you. There is a range of French products available, as well as international versions. In the main, the international products are generally more suited to expatriates as a much wider choice of investment options is available (compared to the French equivalent), as well as a range of currency options (including Sterling, Euros and USDs).
Exchange rates should not be overlooked. Currently, we are living in an environment whereby, for example, the Sterling Euro exchange rate is strong and so people are feeling fairly relaxed about this. However, it does not seem to be so long ago since the rate was close to parity. Unless you transfer your pension benefits to a Qualifying Recognised Overseas Pension Scheme (QROPS) – which is too broad a subject to cover here – your pension income is always likely to be subject to exchange rate risk.
It is possible to have a UK State pension or US Social Security paid direct to your French bank account (and the exchange rate is usually very good), but this may not be the case for other pensions that you receive. Therefore, you should consider using a forex company, since these companies will usually give a better rate than banks.
It is very important to seek independent financial planning advice before making the move to France. A good adviser will be able to carry out a full financial review and identify any potential issues. This will give you the opportunity to take whatever action is necessary to avoid having to pay large amounts of tax to the French government, after becoming resident.
The above outline is provided for information purposes only and does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action on the subject of investment of financial assets or on the mitigation of taxes.
The Paris Business Lunch
By Spectrum IFA
This article is published on: 11th October 2014
Hosted by Jon Cooper from The Spectrum IFA Group, October’s business lunch was held on Wednesday 8th October at O’Sullivan’s Bar & resturant, Ave Franklin D Roosevelt.
The event was a huge success with 28 attendees from a broad range of Paris based organisations.
The lunch is a monthly networking event for English speaking business professionals and a great opportunity to promote your business and grow your network in a relaxed and friendly environment.
Our guest speaker, Charles Hamilton-Jones from KPMG gave a short talk on “Cross-border M&A – Opportunities and Challenges in the current economic climate”.
Feedback from the attendees was all extremely positive, with a constant flurry of business cards being exchanged. The food was superb and excellent value at only 35 euros per head for entrée, main course, café gourmand and 2 x glasses of wine.
The next Paris Business Lunch is scheduled for Wednesday 12th November. Email andrea@thebizlunch.com to reserve your place.
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Cogs4Cancer Tribute Ride
By Spectrum IFA
This article is published on: 9th October 2014
The epic charity ride from Ancona in Italy to Antibes in France is getting close to the finish line.
The riders set off on Sunday in Ancona on their 850km ride to arrive in Antibes on Friday 10th October. The final leg of this ride starts in San Remo on Friday morning, stopping for a well earned break at Stars’N’Bars in Monaco, and then pushes on to the finish line arriving in Antibes at the IYCA.
The Tribute Ride is a chance for other riders to join the main group on this last 80km stretch and help raise even more funds for the cancer charities supported by Cogs4Cancer. The welcome champagne party is sponsored by FREEDOM MARITIME together with a wonderful array of hand crafted beers on offer from Colgans Brewery and The Spectrum IFA Group will be there to welcome all the riders home.
The riders are expected to arrive in Antibes at 16.00 and we encourage anyone in there area to come and support these heroic guys and girls on their final day.
The Spectrum IFA Group are the proud sponsors of Lee Mutch.
Below is a selection of photos from the ride.
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Health Insurance for superyacht crew
By Peter Brooke
This article is published on: 7th October 2014
In a previous article I spoke about the list of 10 rules by which we believe you should live your yachting careers. To expand on these rules I have written a series of articles to show the details behind each rule.
RULE #5 – Check the medical cover available to you from the yacht.
YACHT COVERAGE
If the yacht offers (and pays for) your health insurance as part of your employment package be sure that you’re fully covered at work and off the boat. A crew friend of mine got knocked off his scooter and was taken to hospital near Antibes. Because he was not covered by the French state system (he worked on a foreign-flagged boat), the boat’s health insurance provider was liable for the entire amount…or so he thought. As it turned out, he was not covered by the “group scheme” when he was not on board and had to raid his savings for the money. It’s vital to check if the cover provided is as comprehensive as you think it is.
This is also something to check when you are having an interview for the job; make sure you are getting either membership of a group scheme or additional income to fund your own policy.
STATE COVER
Depending upon your nationality and the vessel’s flag, you may be eligible to receive social security cover from the flag state; check with your captain or purser when joining the boat.
JOB SECURITY
Job security in the yachting industry is not one of the great benefits; investigate whether it’s better to opt out of your employer’s cover and have them fund a personal policy that can be taken with you should you move job/yacht. You could build up significant no-claims bonuses.
When researching a policy and the policyholder, consider the following:
GEOGRAPHICAL COVERAGE
Normally divided into Europe, Worldwide, excluding North America (N.A.), or Worldwide including N.A. Think about where you’re likely to be most of the time. Some policies allow trips to N.A. for up to 90 days.
COVERAGE LEVEL
The most important issue – do you want to be fully reimbursed for every eventuality or just “the big stuff”? All insurance companies will produce benefit tables for their different levels of cover, though it’s difficult to fairly compare all plans. It’s about finding the best compromise for your situation.
EXISTING CONDITIONS
If you have an existing chronic condition, it may not be covered although different underwriting forms exist to decide this with different insurers. This is important to raise when choosing a scheme.
EXCESS
You can reduce your premium by taking a larger excess. This is the amount you pay first before the coverage from the insurance company kicks in.
NO CLAIMS BONUS
If you don’t make a claim in a given year, then you’ll receive a reduction on the premiums the following year (just like car insurance). Some insurers don’t offer this.
MATERNITY
If you’re planning a family and want to ensure the costs of the treatment and delivery, you’ll probably need to take out maternity coverage from the beginning. Most insurers will demand that you’re a member (with added maternity cover) for at least 12 months BEFORE getting pregnant.
This article is for information only and should not be considered as advice.
With care YOU prosper
By Spectrum IFA
This article is published on: 3rd October 2014
I’m getting an increasing number of calls from expats based here in France who are very worried and sometimes completely dismayed by the financial advice they have received elsewhere. Worried by the fact that their investments have decreased in value, and dismayed when they realise that they cannot even withdraw their money or cancel their polices, as parts of the investment are now in funds that have been suspended (that is no-one can either buy them or sell them).
Now I’m not looking to get into any legal wrangle with the company concerned, and it is only one company, but I think this is a suitable time to flag up what is happening in the hope that some of you will avoid falling into this situation in future. I will also add that I am prepared to ‘adopt’ clients in this situation, in order to ensure as fruitful an outcome for the client as possible.
What is happening is not illegal, but it could certainly be regarded as unethical. The clients concerned have either unwittingly or deliberately chosen to put their faith in an adviser who is not regulated in France. This is not illegal, because we are all part of the wonderful organisation that is Europe, and that frees Europeans to ply their trade in other countries within the Euro block. That freedom of trade is not, however, backed up by a freedom of regulation. If you live in France and have cause to complain about advice you have received, the French regulator will show no interest in your case if the adviser is not in his jurisdiction. You will be guided to seek help from the regulator in the country where the adviser is based, and hopefully regulated. Good luck.
There are two main problems that I am seeing at present. The first relates to the quality of funds in which the clients are invested. At The Spectrum IFA Group we have an investment team that spend many hours evaluating hundreds, if not thousands, of funds and produce a recommended list for clients to invest in. There are of course hundreds of thousands of funds available, and we can’t look at them all, so we do allow our clients to choose their own investments if they wish, thereby ignoring our recommendations. All we ask, in this instance, is that you sign a form to accept that the investment was your choice. There are many good funds out there, but there are also some bad ones. All of the (now) clients who have suffered in this way have been put into a single asset class which has had a disastrous time in the past eighteen months. Needless to say, none of the funds involved are on our recommended list.
The second issue centres on a specific type of investment called a structured note. These are often complex derivative products, and the type of note that I am now seeing regularly, certainly falls into that category. So much so, that the product notes that accompany the investment clearly state that this is only for seasoned professional investors, who are willing to accept the potential for serious loss of capital. None of the people I’m taking to fall into that category. The structured note is an interesting concept, and not all of them are overly complicated. You may have seen me write about such a note in the past, and you may have seen such a product at our seminars, offering an excellent 12 month fixed deposit rate alongside a five year deposit where the reward is linked to the performance of the stock exchange index. Not exactly ‘Janet and John’ stuff, but I like to think that I can explain it completely to my clients. And I don’t use it unless I’m completely sure that the client also understands it. I don’t understand the notes I’m seeing recently, and I’m sure the client doesn’t either.
So why sell them? Simply because the companies that make up these products factor in an element of commission to the brokerage that sells the note to the end user, the client. Now I don’t know how closely you look at small print when you read articles from me or Daphne, but if you look at the bottom of this article you will see reference to our client charter at spectrum-ifa.com/spectrum-ifa-client-charter
If you have read the charter, or are just about to do so, you will see or have seen this:
Some investment funds or products within an Insurance policy may generate an additional initial commission. If this is the case, we undertake to rebate this commission to you (in full) by way of increased allocation.
Strangely (not), none of the new clients I’m speaking to seem to have benefitted from this principle. It seems clear to me that funds are being pedalled for the advisers benefit, not the clients. This is a very dangerous practice.
I must stress that no laws have been broken here, and no fraud has taken place. I sell a simple structured note, but I pass on the commission. I even have clients who are invested in the struggling asset class that we have been talking about, but only by their own choice, and for many months now that has been contra to our advice.
Be safe – use locally produced goods, and that includes financial advice.
If you have any questions on this, or any other subject, please don’t hesitate to contact me.
Investments and investment risk
By Spectrum IFA
This article is published on: 16th September 2014
As I am writing this article, the hot topic of the moment is of course the Scottish Referendum on Independence. The polls are swinging from one direction to the other, but only by a small margin between the ‘yes’ and the ‘no’ camps. The final result will most likely be very close.
Even the Queen has uncharacteristically got a little involved in the politics, by expressing her hope to a well-wisher in Scotland that people will think very carefully about the future. Whatever the result of the referendum, it is clear that the United Kingdom will change.
What will happen to investment markets if Scotland votes yes? Well the wider world outside of Scotland seems to have woken up to what is actually happening in Scotland. Sterling has weakened amidst the uncertainty of the outcome, but beyond this, I am not bold enough to forecast any further effect on markets. Like any other investment risk, it needs to be managed.
On this subject, The Spectrum IFA Group has produced a Guide to Investment Risk. This has been written in plain, no nonsense, down-to-earth English and covers a range of assets classes and strategies. The individual articles included in the Guide can be found on our website at: spectrum-ifa.com/spectrums-guide-to-investment-risk/
Alternatively, if you would like to receive a full copy of this Guide, please contact me.
We are also taking bookings for our Autumn client seminar – “Le Tour de Finance – Bringing Experts to Expats”. Our industry experts will be presenting updates and outlooks on a broad range of subjects, including:
- Financial Markets
- Assurance Vie
- Pensions/QROPS
- Structured Investments
- French Tax issues
- Currency Exchange
Places for our seminars are limited and must be reserved, in advance. So if you would like to attend the event, please contact me as soon as possible. The date for the local seminar is
Friday, 10th October 2014 at the Domaine Gayda, 11300 Brugairolles.
Alternatively, if you are reading this further afield, you may be interested in attending one of our other events:
- Wednesday, 8th October – St Endréol, 83920, La Motte, the Var.
- Thursday, 9th October – Chateau La Coste, 13610, Le Puy-Sainte-Réparade.
For full details of all venues can be found on our website at spectrum-ifa.com/seminars
If you cannot attend one of our seminars and you would anyway like to have a confidential discussion about any aspect of financial and/or inheritance planning, please contact me either by e-mail at daphne.foulkes@spectrum-ifa.com or by telephone on 04 68 20 30 17.
The above outline is provided for information purposes only and does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action on the subject of investment of financial assets or on the mitigation of taxes.
The Spectrum IFA Group advisers do not charge any fees directly to clients for their time or for advice given, as can be seen from our Client Charter at spectrum-ifa.com/spectrum-ifa-client-charter
CGT and social charges applied to rental income and investments in France
By Amanda Johnson
This article is published on: 14th September 2014
I often get asked to explain how French Capital Gains Tax is applied and when & if they can expect social charges to be levied on their investments. These are two very interesting areas for expats:
Capital Gains tax
A capital gain arises when an asset has been sold for more than it was originally bought for. For example if you originally invested £50,000 in a unit trust and now sell it for £75,000. Your gain is £25,000 and therefore has a potential liability for Capital Gains Tax. Different levels of relief apply depending on how long you have held this investment, so not all of the gain is subject to tax.
Capital Gains Tax is also due is when a house is sold for profit which isn’t your primary residence. You may live in France permanently in rental property however, if you have sold your UK home and made a profit, this profit is subject to Capital Gains Tax in France. This applies even if it is the only property you own. Again there are different levels of tax relief depending on how long you have owned the property.
There are tax efficient investments and savings for expats that shelter your liability to capital gains and now you are living in France you should be taking advantage of them.
Social Charges
Social Charges are applied to all income, irrespective of where it is earned. There are as several exceptions to this, namely Government & UK State Pensions. If you rent out property in the UK, although you may pay your income tax in the UK you will have to pay Social Charges on the income in France. Social Charges also apply if you receive an income from savings, investments or a private pension.
There is a double taxation treaty in place which means you won’t pay income tax twice when you complete your tax return here in France but income tax should not be confused with Social Charges.
Social Charges can also be charged on certain Assurance Vies’ and this depends on the type of fund that you are invested in. If your Assurance Vie is invested in a Fonds en Euros, where growth is physically applied periodically, social charges will be due. This is not the case on several other Assurance Vie options, where social charges are only levied once a withdrawal is made & only apply to the gain proportion of the withdrawn amount.
If you have existing investments whether in France or in the UK it is worth contacting me to chat about the most tax efficient way to hold your savings and keep the tax you pay to a minimum.
Whether you want to register for our newsletter, attend one of our road shows or speak to me directly, please contact me below and & I will be glad to help you. We do not charge for reviews, reports or recommendations we provide.
Buying property – the alternative options
By Peter Brooke
This article is published on: 10th September 2014
Having a real estate investment is often an excellent decision for any investor, but many don’t have the ability to own a complete house or apartment. They may not have enough capital to buy the property outright, fund a deposit or receive enough income to be able to afford a loan.
For crew, it also can be difficult to get a mortgage due to the offshore nature of their income, though it is possible in some countries. So what other options might there be for having invested capital in the various property markets around the world?
Collective Investment Schemes:
There are many mutual funds that invest into bricks and mortar. Most of these buy into commercial property in developed markets, such as the UK or Europe. They are managed by professional managers and diversify across several commercial sectors, such as office buildings, retail stores (split between “out-of-town” and “high street”) and industrial complexes. They also always hold a portion of the portfolio in cash and property equities, i.e., the quoted shares of building contractors and the like. The cash and shares are to maintain liquidity so funds are available to investors who need to make a withdrawal without selling huge office blocks. The legal structure of property funds is very important to watch. During the financial crisis, several offshore funds (domiciled in the likes of the BVI and Cayman Islands) suspended and have since begun to liquidate, losing many investors their money; some are still suspended. At the same time, there were no UK authorized property funds that suspended.
Fractional ownership:
Although this term has broadened in the last decade, it basically means owning parts of a property. It tends to be most popular in the residential sector and can cover the entire range of property, from distressed sales and repossessions to luxury property clubs. You’re the legal owner of a share in the property; therefore, your name will appear on the deed and you share in the property’s costs and profits and are legally liable. One unique system available is to own “bricks” of property. This is when a company buys real estate at a discount, renovates if necessary and then sells “bricks” for a proportional price. This system allows an investor to own many bricks in many different properties, thereby hugely diversifying their property exposure. Their share of the rent is paid to them (after any management costs), and they can sell their bricks on a specially designed marketplace. An example of a market maker in this sector would be ownbrix.com.
When buying real estate, it’s wise to understand all the legal and tax implications of owning it, as it’s physically located in a jurisdiction and liable to the taxes in that location. If in any doubt, get advice.