Viewing posts categorised under: Saving

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 After 8 years funds can be withdrawn from the AV and taxed at just 7.5% on the gain element only.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.

ARE YOU PAYING TOO MUCH TAX ON YOUR SAVINGS?

By John Hayward
This article is published on: 12th October 2013

12.10.13

Offshore Spanish-tax-compliant investments

All financial planning advice provided by us is done so using and within insurance contracts that are highly tax efficient in Spain.

For residents of Spain, there is an opportunity to save thousands in tax by structuring investments in the right way. These investments need not, and through us will not, be based in Spain. However, they are recognised by the Spanish as being legitimate for Spanish tax purposes.

Under normal circumstances, if you have a bank deposit, tax will be deducted at source. This is irrespective of whether it is an onshore account, where the local savings tax will be applied, or if it is offshore, and undeclared, where the EU Savings Directive tax kicks in. However, whereas you might be paying 20% tax on the onshore account, you could be having 35% tax deducted from an undeclared offshore account.

Within a Spanish tax compliant investment, you only get taxed when you make a withdrawal. This means that you can defer paying tax for as long as you live. In addition, the rate of tax applied is capital gains tax, currently at a base of 21%.
Also, the amount of the withdrawal which is taxable is very small, especially in the early years, as it is deemed that the majority of the money you are withdrawing is your original capital.

Here is an example:

Mr & Mrs Investor put €100,000 in a Spanish compliant bond and another €100,000 is already on deposit in a bank on the Isle of Man.

One year later, both accounts have made 5%

The tax payable on the bank account is 35%, so the tax payable will be €5,000 x 35% = €1,750

The tax payable on the bond is more complicated to calculate but worth doing so, as you will see.

Same gain of €5,000. The tax is calculated based on how much the gain is relative to its new value.

i.e. (5,000 ÷ 105,000) x 5,000 = €238.09

This is then taxed at 21% which gives a tax bill of €50 compared to €1,750. Quite a saving.

Unlike capital gains tax in the UK, no further tax will be payable if you are a higher rate tax payer. The tax payable is based on the gain, not on your overall income.

These calculations are based on our understanding of Spanish tax law which is subject to alteration.

For more information contact your local adviser or use the contact form below.