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Updated 2 October 2017

Assurance-vie policies do provide many tax advantages in France. It is true you lose some of the succession tax benefits if you set one up after the age of 70, but in most cases your heirs will still pay less tax than they would have done otherwise. And the tax benefits you receive yourself are not dependent on age.

Your tax benefits

All income and growth rolled up within an assurance-vie policy is tax-free. So if you do not take any withdrawals, you do not pay any tax. Withdrawals are taxed very favourably – you only pay tax on the growth element, not on the whole amount you take out. So let’s say the investments within your policy have grown by 7% and you take a withdrawal of €25,000. You will only pay tax on €1,750 and €23,250 is tax free.

Under current rules, provided your policy is approved in France, you can choose whether to pay tax at the income tax scale rates or a special withholding tax rate, whichever is more beneficial. The fixed rate is 35% for the first four years, then 15% for the next four, then 7.5%. In all cases 15.5% social charges are also payable. From the ninth year onwards you also receive a tax-free allowance of €4,600 per policyholder. Note that these special rates are only available for EU policies.

Note that under the proposed budget for 2018, income from investment policies over €150,000, including assurance-vie, will be subject to a fixed rate of 30% (income tax and social charges combined). The €4,600 allowance from the ninth year remains in place.

If your policy is outside France, it will escape wealth tax for your first five years of residence. Under the 2018 budget proposals, investments like assurance-vie will no longer be subject to wealth tax.

Read more about the 2018 tax reforms.

Tax benefits for your heirs

For those who can set up a policy before they turn 70, each beneficiary can receive €152,500 tax free. The excess is charged at 20%, unless it exceeds €700,000 in which case anything above €152,500 is taxed at 31.25%.

If you are over 70, your heirs unfortunately do not receive the above allowances, but the first €30,500 will be tax free.

But note that only the amount you put into the policy is taxed; all the growth made within the policy is tax free. So there are still benefits to be had for your heirs compared to alternative methods of holding your savings.

And don’t forget that the normal succession tax allowances still apply. So each of your children receive €100,000 tax free. Brothers and sisters get €15,932 (it can be higher in a couple of very specific circumstances) and nephews and nieces €7,967. The succession tax rates for children are also more favourable than for other heirs.

If both the life assured is non-French resident at the date of death, and the beneficiary is non-French resident and has been so for more than four years, no succession tax is due on policy. This is regardless of your age when you set it up.

Estate planning

An assurance-vie policy can also be a very useful tool for estate planning, as it does more than save tax. Depending on the type of policy you can name beneficiaries, so the funds within the policy can easily be passed to your chosen heirs, saving them time, money and hassle.

Importantly, the value of assurance-vie contracts falls outside French succession law. It therefore provides an excellent vehicle to enable you to leave assets to the beneficiaries of your choice, including step-children and grandchildren.

The 2018 budget does not include any changes to the succession tax and estate planning treatment of assurance-vie.

There are various types of assurance-vie policies available, based in different jurisdictions. It is important to take personalised specialist advice to ensure the policy you use is suitable for you and will achieve the benefits you are looking for.

Read more about French vs Luxembourg bonds


Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.