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Saving money in France: What’s the best option?

Ever wondered what's the best thing to do with your savings in France? As part of our "Ask The Experts" series we've invited expat financial adviser Jonathan Cooper to tell you what to do with your hard-earned euros.

Saving money in France: What's the best option?
What's the best thing to do with your savings in France? Photo: Shutterstock

With the interest rates on Livret A Savings Accounts dropping as low as one percent in August and set to go even lower in the coming months, the prospects of making your savings pay, do not appear rosy. At least at first glance.

But there are other options for where to invest your hard-earned euros.

We asked Jonathan Cooper from the Paris office of independent financial advisers, The Spectrum IFA Group, to tell us, in his opinion, what the best option is.

Cooper: “If you have anywhere from €20,000 to multi-millions in savings then you should think about opening a life insurance policy (Assurance Vie).

"Around €3.2 trillion is invested in Assurance Vie and every French bank will offer it, as well as international providers like Prudential and SEB Life, who provide French compliant Assurance Vie’s with English written contracts.

"For English speakers, I would recommend going through an international insurance company rather than a French bank or French insurance company.

“It is basically a long term savings plan which allows you to invest in funds of your choice. 

“You are able to withdraw your money at will and, although some policies have early redemption penalties, most have set limits where no penalty is incurred – usually between 5 and 75% for the first 5 years and then no penalty at all. However, why would you set up a lump sum policy and then withdraw it a few months later?

“The French Assurance Vie is like having a UK unlimited ISA (interest free savings account). It grows tax-free from day one and you will only pay tax on the gain element of what you withdraw, when you withdraw it.

"There is a part of the French tax return which asks if you have set up any Assurance Vie policies during the year, and if you have received any income from the policies.

“Personally, I am not a fan of monthly savings plans, they tend to be expensive and inflexible. Signing up to a plan for between 10 and 20 years where you are committing to a monthly amount which, while affordable now, may not be in 5 years time, is not a wise decision.

"I would urge you to build up your savings in a Livret A.  When you have between €20,000 and €30,000, invest it as a lump sum in an Assurance Vie and then top up when you have sums of around €7,000 to €10,000.

 “Assurance Vie policies are also a great way of Estate Planning.

“In short, Assurance Vie is the most tax efficient, flexible, client-friendly investment model available in France.

It is, however, just a model. What makes the money grow is the choice of underlying investments, which we take very seriously. Every client is given a full financial review and evaluated on their attitude to risk – because funds, like property and all types of investment, can go down as well as up.

"Every client is different and we, as a group, work with our clients on the investment strategy that suits them.”

Jonathan Cooper is with The Spectrum IFA Group, which specialises in assisting expatriates moving to France or already living here with tax efficient solutions for savings, investments and pensions. For more information visit their website by CLICKING HERE. If you are living in or around the Ile-de-France or northern France you can email Jon direct on [email protected] or call on 07 50 87 59 69.

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TAXES

Explained: France’s exit tax

Planning on leaving France? You may, depending on your circumstances, be charged the 'exit tax'.

Explained: France's exit tax

Like some other European countries, France does have an exit tax for those (French or foreign) who are leaving the country. It’s known by the English name l’Exit tax.

However, it won’t affect most people.

Only those who have been tax resident for a minimum six years of the 10 years immediately before they permanently move out of the country are liable to pay an exit tax – if, that is, they own property, titles or rights worth a minimum of €800,000, or that represent 50 percent of a company’s social profits.

If that affects you, the best advice is to seek expert individual financial advice before moving out of France for good. The relevant page on the French government’s impot.gouv.fr website says it is possible to defer payments, and some relief is available.

Because of the relatively high figures involved, this tax is irrelevant for most people. That said, however, you will still have to inform tax authorities that you are moving out of the country because you may still have income, property and capital gains taxes to pay.

Income tax

You must inform the tax office that you are moving and give them your new address so that your tax declarations can be transferred to your new address.

You are liable for tax on everything you earned in France prior to your departure as well as on any French earnings that are taxable in France under international tax treaties that you earned after your departure.

The year of your departure, you declare your previous year’s earnings as normal – declarations in spring 2024 are for earnings in 2023.

A year later, you will have to declare any earnings taxable in France from January 1st up to the date of your departure, and any French-sourced income taxable source until December 31st of the year of your departure.

If you continue to have any French-sourced income – such as from renting out a French property – you will have to declare that income annually, using the non-residents declaration form.

Property taxes

You will have property taxes to pay if you own a French property on January 1st of any given year – whether it is occupied or not. 

Property tax bills come out in the autumn, but they refer to the situation on January 1st of that year, so even if you sell your property you will usually have the pay a final property tax bill the following year.

Moreover, if you receive income from property in France or have rights related to that property (such as shared ownership or stock in property companies), as well as any additional revenue connected to the property, during the year you leave France, you will be required to pay taxes on these earnings.

If any property assets in France exceed €1.3 million on January 1st of a given year, you may also have to pay the wealth tax (IFI).

READ ALSO What is France’s wealth tax and who pays it?

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Capital gains tax 

If you sell your French property or share of a French property, you may be liable for capital gains tax at a rate of 19 percent. It will also be subject to social security contributions at the overall rate of 17.2 percent.

Capital gains tax varies depending on how long you have owned the property and whether it was a second home or your main residence.

READ ALSO How much capital gains tax will I have to pay if I sell my French property?

The good news is, if you move to another EU country, or any country that has a specific tax agreement with France, you may be exempt from capital gains tax for non-resident sellers on the sale of a property that was your principal residence in France.

If you move elsewhere, you may be able to claim exemption on capital gains tax up to €150,000. As always, you should seek expert financial advice.

Tell Social Security

Inform social security that you are leaving France permanently – and return your carte vitale if you have one. If you do not, you may be liable for any benefits you receive to which you are no longer entitled.

More mundane tasks involve informing utility and water companies, your internet provider, if you have one, the phone company, your insurance companies, banks – and La Poste, who will be able to forward your mail for up to 12 months, for a fee…

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