Assurance Vie Life Insurance Bonds for Expats in France

Assurance Vie policies are often a key financial product for French residents. They effectively improve tax efficiency, reduce future inheritance tax obligations, and act as a tax wrapper for life insurance coverage and other investments.

Whether you’d like to explore opportunities to maximise your portfolio’s growth without attracting a heavy tax burden or safeguard your right to leave your wealth and assets to your chosen beneficiaries, Assurance Vie is one of the most used solutions.

Let’s clarify what Assurance Vie is and how it works, as well as the respective tax benefits depending on how long you leave funds and products within the tax wrapper until you decide to make a withdrawal.

French Assurance Vie Investment Products Explained

If you’re new to the French taxation system, you may not have heard of Assurance Vie. The easiest way to explain this is as a compliant life insurance bond or investment product. You can hold as many products, funds, and investments within the tax wrapper as you wish and structure this according to your circumstances and plans.

The biggest advantage of Assurance Vie as an efficient investment product is that withdrawals attract preferable tax rates, depending on the length of time your funds have remained invested. It also offers limit-free thresholds, meaning you can invest as much as you would like without any annual tax obligation.

Assurance Vie provides compelling advantages over alternative investment and saving structures, which have ongoing tax payable against interest earnings or returns, caps on maximum investment amounts, and potentially steep tax burdens on a withdrawal event.

Although Assurance Vie is often seen as a life insurance product, it is commonly used as a place to deposit savings and investments, with billions of Euros and other currencies like USD and Sterling held in this way.

The Taxes Payable on Assurance Vie French Tax Wrappers

Assurance Vie is generally seen as far more beneficial if you leave your investments in situ for at least eight years because, at this point, the tax obligation applied to the gains made when you make a withdrawal becomes significantly less.

As a quick run-through:

• The standard flat-rate tax on withdrawals made is 30% if the policy is worth over €150,000 for an individual or €300,000 for a couple—comprising 12.8% tax and 17.2% social charges.
• After eight years, you have an annual withdrawal allowance of €4,600 per person, or €9,200 for a couple, which is tax-free, although social charges remain payable.
• Following the same eight-year period, the tax applied against gains drops from 12.8% to 7.5%, up to a €150,000 threshold.
• If you pay French income tax at a low marginal rate, you can opt for gains made to be crystallised and taxed at the prevailing rate, where this would be beneficial.
• The eight-year point is determined as eight years after the policy was opened, which means reduced taxation can apply to future withdrawals from that point, even if a proportion of your funds were invested some time afterwards.

The benefits are considerable and, as long as your funds remain invested, there is no income or capital gains tax to pay.

When you do make a withdrawal, only the gain element made on your original funds is taxable. Therefore, if your funds have grown by 50%, when you make a withdrawal, only 50% of that amount is subject to taxation, based on the above rates and not taking into account the annual tax-free withdrawal threshold.

If you decide to access your funds before the eight-year point, and are aware of the tax obligation arising, you are free to do so and will not attract any form of exit penalty.

Using French Assurance Vie as a Succession Planning Strategy

Further benefits apply to French residents looking to mitigate the taxation payable by their beneficiaries when they pass away—although Assurance Vie is a life insurance tax wrapper, it isn’t subject to the taxation or rules that would apply to the rest of their estate.

The structure of an Assurance Vie enables you to leave your wealth and assets to any heir you choose, without the complexities of the French regulations that can dictate which relatives are entitled to certain proportions of your estate, as a tool for effective estate planning.

Setting up an Assurance Vie policy before the age of 70 enables you to:

• Name any beneficiaries you choose, without any limitation on how many beneficiaries you might have.
• Leave up to €152,500 to each individual beneficiary tax-free, with the balance of any larger inheritances taxed at a low 20% rate.

Those over 70 can still utilise an Assurance Vie, although a lower tax-free allowance of €30,500 will apply before your beneficiaries become liable for taxation.

Consulting an Independent Adviser When Setting Up an Assurance Vie Policy

As always, we advise you to consult an independent, experienced professional to ensure that Assurance Vie is the right product for you and to verify that the tax allowances, exemptions, and lower rates correspond with your plans and wishes.

While these products are commonly sold through insurance providers and French banks, there are common stumbling blocks around the advisory support they can offer, and the contrasts between selecting an Assurance Vie with impartial guidance from a third-party professional and choosing between the products sold by that one bank or institution.

Charging structures should also be evaluated. There is the potential for conflict of interest when Assurance Vie sales are linked to commissions, and limited fund ranges in some Assurance Vie policies might enable you to deposit only into the select funds provided.

Our accomplished wealth managers at Chase Buchanan can advise on the pros and cons of paying in regular premiums vs single lump sums, the comparisons between equity or bond funds, and ensure your policy represents a secure, tax-efficient and stable way to grow your wealth over time.

Please contact our French team in Bordeaux for more details or book an online consultation, and one of our advisers will provide more personalised information.

All investments carry risk, including the potential loss of capital. You should carefully consider whether investing is suitable for you, taking into account your personal circumstances, financial situation, and risk tolerance.

*Information correct as at April 2025