What is Assurance Vie, and what are the advantages ?

Assurance Vie is a type of Life Insurance scheme where you can invest in a huge range of different managed funds, enabling you to invest very tax efficiently in France.

From an inheritance tax point of view a policy is of greater benefit if it is started before becoming tax resident in France, because it will then be completely free from French succession tax. Unless the life assured is over the age of 70 at the time the policy was set up, or at the time any top-ups are made. But even if the Assurance Vie is arranged after you have become French resident, for any named beneficiaries to the policy payments in the event of death there’s a succession tax exemption of €152,500 per beneficiary, after which a flat-rate tax of just 20% normally applies.

Assurance Vie can also help with Wealth tax as you may be eligible to not pay wealth tax (depending on your nationality) on the fund for up to 5 years, if the policy is French tax approved but remains outside of France.

French capital gains and income tax does not apply if the income and gains are made within the policy and no withdrawals are made. Even where an amount is withdrawn only the growth element is taxable, for example if your portfolio of assets held within the policy has grown by 5% only this percentage of the withdrawal would be taxable, the remaining 95% would be tax-free. Any gains are liable to 'social charges' of 11% when they are drawn down, plus taxation on a sliding scale depending on how long the policy has been in force, 35% for a policy less than 4 years old, 15% for policies between 4 & 8 years old and then 7.5% for all policies over 8 years old. Then you have the choice of having the applicable tax deducted 'at source', or being paid gross and declaring the gains on your tax return. This is obviously advantageous if you are paying less than this rate of tax. Also after 8 years, there is an annual tax-free allowance of 4,600 euros (single person) or 9,200 euros (married couple) of GAINS. So the 7.5% tax would not apply if you staggered the withdrawals (e.g. to supplement your pension).

Steve Grover
http://www.financialexpat.com/
Phone: +33 (0)325461631
Mobile: +33 (0)687980941
Fax: +33 (0)351983124

Steven Grover is a consultant for The Spectrum IFA Group

Living in France : The Sarkozy effect

At 8pm local time Nicolas Sarkozy was elected the new president of the fifth republic of France after a highly charged campaign from both candidates. While the two candidates offered very different ideas on the future of the country, many of the French hesitated on their choice right up to the last minute. Perhaps the most important result was the enormous turn out for the vote.

The French are definitely ready for a change and with less than 15% abstentions they have made it known. Nicolas Sarkozy gained a comfortable lead from the French electorate, one that expresses a national desire to inject some dynamism into a traditionally institutionalised country.

While Madame Royale promised a review of the welfare state without loosing the social protection that so many French rely on, Mr Sarkozy presents a more radical view of France’s future. One driven by the unchaining of the economy from the traditional institutions that Ségolène Royale wishes to maintain, with a manifesto which he believes will promote a new pride in the national identity and strong economic growth.

The number of young voters was unprecedented in this election. With France’s recent history of riots and demonstrations among this demographic, often fueled by right wing policies, this marks quite a turn around in attitude.

It is maybe the charisma of Mr Sarkozy that has swung the voters to his camp. It is true that his public addresses over the campaign have been, on the face of it, heartfelt and inspiring. He has taken many risks and has stood firm, which while building his credibility, has helped fire up the French in both camps.

Madame Royale offered a new break from the right with no compromise on the traditional values of the French, but her program for change, it seems, wasn’t enough.

So what does this mean for the future of France?

On the national level there is great deal of uncertainty about how far Mr Sarkozy is going to go to revamp France. Many French are concerned about the impact of the new president on their civil liberties and more generally the French still hold their traditions and institutions close to their hearts.

It cannot be denied that such traditions have maintained a sense of national pride and provided a unique culture that is recognised and celebrated by nations across the world (France still remains the most visited country with around 75 million visitors a year).

France, economically speaking though, is slowly chocking on these protectionist institutions and is loosing its image as a great nation. Its voice in the global arena is in danger of becoming weak.

Instead of snubbing global policies it must strive to embrace and influence them. France has consistently offered a strong check and balance on various global issues and has historicly good relations with many emerging economies and world cultures that many of its western friends envy.

Certainly, with Mr Sarkozy at the helm, new interest in France will be generated among the western world. However, while foreign investment is likely to be forthcoming, many European member states, who saw the French economy as a flagstone of Europe, may be hedging their bets on Mr Sarkozy due to his commitment to a new Franco-American alliance.

The French legislative elections later this year will heavily influence Mr Sarkozy’s game plan. A swing to the left will certainly balance his ambitions; another step to the right may provide him with a ‘carte blanche’.

Only time will tell but France is now standing up and is being counted.

Living in Paris: French Red Tape

France is known for its red tape in all aspects of life. (It must play a huge role in controlling the country's unemployment figures ;)

The following consumer site (in French) will help you with some of the many official procedures you are likely to encounter. It has a databank of letter templates for a host of everyday problems.

Ideal for those of you who's French is not quite up to scratch yet.


Help with the Red Tape