If you are an expatriate currently living in France, you should review your finances with a suitably qualified financial adviser and /or tax adviser who is either authorised directly by the French regulator, or is based in another EU market and recognised by the French regulator following prior notification by the adviser under the Insurance Mediation Directive.
Also, if you are planning a move to France, you should review your finances with a suitably qualified and experienced financial adviser who is familiar with French tax matters before making the move.
Typically a good many investors in France invest in an “Assurance Vie” and this looks like an offshore bond if held in the UK. Expatriates resident in an EU Member State investing in an offshore bond will generally find it beneficial to obtain a tax compliant policy issued by a life insurance company operating under EU Freedom of Establishment rules rather than a non-tax compliant policy or a ‘foreign’ policy issued by a life insurance company located in a third country.
There are significant tax benefits by using a tax compliant EU policy. Information can be provided.
Expatriates resident in an EU Member State taking out an offshore bond while outside this country, for example in the UK before becoming an expatriate or on a subsequent visit to the UK, are not restricted to the bonds of EU-based life companies. Such bonds, for example from an Isle of Man or Guernsey life company, can be held while resident in EU Member States and enjoy tax control and mitigation benefits. On partial or full surrender, the proceeds will be paid gross and it is the responsibility of the policyholder to declare the policy gain or income to the tax authority in their country of residence. Please note that tax treatment varies by country and you should seek advice from an adviser familiar with tax rules in your country of residence.
However, insurance policies which qualify in France as ‘Assurance Vie’ policies by meeting specific requirements can offer favourable tax treatment over an equivalent investment in mutual funds, on both the capital gains rolling-up within the policy and the inheritance taxes due on death.
Death benefits paid to beneficiaries of life insurance policies are subject to a withholding tax (exclusive of inheritance tax) on the portion of premiums paid before the 70th birthday of the insured person. Death benefits up to €902,838 are subject to 20% withholding tax and benefits above this level are taxed at 25%. The Projet de loi de finances rectificative 2013 proposes to increase the upper rate from 25% to 31.25% and lower the threshold from €902,838 to €691,770 with effect from July 2014.
There can also be considerable advantages to the sale of Assurance Vie qualifying policies made outside France to individuals who subsequently become French resident as these policies can enjoy some exemptions from French wealth tax and no inheritance tax liability on death as the contract was concluded outside France. However, the availability of an exemption from the 20% or 25% (2013-14; 20% or 31.25% from July 2014) withholding tax charge on the death of the last life assured, previously available when the policyholder was non-French resident at inception, was restricted by the French tax authorities in 2011. This exemption is no longer available if the beneficiary is a French tax resident at the time of death and has been a French tax resident during 6 of the last 10 years, or if the insured person is a French tax resident at the time of death, even if the contract was originally taken out by a non-French resident.