Assurance Vie For US Expats In France
This article is intended for US expats resident in France who are considering their investment options.
If you are a US expat living in France, you may have heard of the local Assurance Vie and the benefits it can offer as a way to manage your investments and grow your wealth.
However, the strict PFIC (Passive Foreign Investment Company) rules imposed on American expats have significantly limited the choices available, which can feel frustrating.
Despite these restrictions, there are still solutions that can work for US expats. Our guide will help you navigate the complexities and find the right investment strategy for your needs.
What Is An Assurance Vie?
The Assurance Vie is a popular investment account offered by banks and financial firms in France, combining life insurance coverage with a wide range of investment opportunities. Favored by expats, it provides significant tax advantages, especially for those who keep the account for more than eight years.
Acting as a tax-efficient “wrapper,” it allows you to consolidate all your investments into a single, streamlined account whilst benefiting from low rates on capital gains. Any growth within the policy is tax-deferred, meaning you won’t have to pay capital gains or income tax on earnings as long as they remain inside the account, allowing for compounding growth.
Beyond tax efficiency, the Assurance Vie is also a valuable tool for estate planning and bypassing the stringent French inheritance tax. investors can give up to €152,000 to named beneficiaries within the scheme free of French Succession Tax.
The Wealth Genesis | Assurance vie
PFIC Passive Foreign Investment Companies | IRS Reporting
Despite all the benefits promised by the French assurance vie, For US expats living in France, opening one of these accounts could ultimately be a costly mistake. Whilst this financial product is widely promoted for its tax benefits, American expats must consider strict cross-border tax rules to remain compliant.
Unfortunately, the IRS classify most Assurance Vie investments as Passive Foreign Investment Companies (PFICs). These types of investments are subject to the highest US tax rates on capital gains, sometimes up to 40%, effectively eliminating the tax advantages that make Assurance Vie so appealing.
Since these accounts typically hold European funds, they fall under the IRS’s PFIC rules, making them far less tax-efficient for US taxpayers than they are for other expats.
Unlike most countries, the US imposes strict tax filing laws on its citizens - even if they become tax residents elsewhere, they must report on their worldwide income. The complex reporting requirements for PFICs (Form 8621), coupled with the harsh tax treatment, makes this an implication most US expats will aim to avoid.
Investment Options For US Citizens In France | US Compliant Solutions
Despite this, there are safe and compliant ways for US expats to invest in France whilst avoiding PFIC status. Alternative investment options may include single stocks, bonds, and US-compliant Exchange Traded Funds (ETFs), which the IRS does not classify as PFICs.
Finding the right investment platform is key, as many French banks and providers are unaware of US tax regulations and may unknowingly offer financial products that trigger the hefty capital gains taxes imposed by the IRS.
The Wealth Genesis works with trusted partners and providers that support US investors and provide access to a range of compliant funds tailored for American expats in France. By working with a specialist financial adviser, you can build a diversified portfolio which aligns with both US and French tax regulations, ensuring you remain compliant in both jurisdictions.
Investing in US ETFs and stocks can be a more tax-efficient and cost-effective alternative to an Assurance Vie, which often carries hidden fees and tax implications for American expats. With professional guidance, you can avoid unnecessary tax burdens while structuring your investments in a way that works for you.
Cross Border US/France Specialist Advice
Due to the complexity of navigating cross-border investments and tax obligations between the US and France, professional advice is invaluable for expats.
At The Wealth Genesis, we specialise in providing bespoke financial guidance, with US and French-qualified investment advisers who understand the unique challenges American expats face.
