In France, as in the UK, there are various options for places to keep your savings. Choosing the right investment for you can sometimes seem a little confusing – and you should always seek advice from a qualified professional before committing yourself and your money to any investment to ensure it is the right one for you.
However, listed below are some of the more common French investments available:
1) Your current account is named the Compte Courant and an instant access savings account is a Compte sur Livret. Banks can also offer fixed term deposits, for over one month, which offer better interest rates; these are called Comptes à Terme. For large amounts a Certificat de Dépôt Négotiable can offer slightly improved interest and a shorter term if necessary. Bank deposit interest is taxable, for income tax and social taxes.
2) In addition there are also various tax-free bank deposit accounts, for which the interest rates are fixed by the Government and for which the amount invested is capped. The most common are the: Livret A (maximum €15,300 per person plus accrued interest) and the Livret de Développement Durable, maximum €6,000 per person plus accrued interest.
The conditions of these accounts are the same and are regulated by the government: The interest rate is normally modified twice a year, but can be modified more often, in the case of major movements in the money market. Interest is earned for every 15 day period on the balance of your account, but is only applied once a year – either at the beginning of the following year or on closure of the account if you take out your money during the year.
Access is instant but you may lose up to 15 days interest if you take out your money during an interest period.
The ideal is to take out money on either the 2nd or the 16th of each month. Interest is totally tax free to French tax residents and should not be included on any income tax declaration made in France.
3) For low-taxpayers there is a further account called the Livret d’Epargne Populaire (LEP). Offered by all banks, this account offers a more favourable interest rate for savings limited to €7,700 each. You have to prove, via a tax certificate, that you pay less than a specific amount of income tax in France, in order to qualify.
4) Another deposit account is the Plan d’Epargne Logement, a widely-used four year savings plan, aimed at saving for house purchase and home improvement. There is no tax payable on the interest while you are saving. If the sum is then used for the above purpose and has been blocked for 4 years, it can be withdrawn free of income tax (but not ‘social taxes’ or “contributions sociales”).
5) You can hold a share dealing account at your bank, a stockbroker, or on the internet. The normal safe custody account is called a Compte Titres. In French a share is an action and a Government or Corporate Bond is an obligation. Most people deal in shares through a specific form of investment called a Plan d’Epargne en Actions or PEA. This account allows you to hold and deal in French and European shares and provides considerable tax advantages ON CONDITION THAT no withdrawals are made for the first five years.
In that case, no tax is payable on dividends nor gains, during the five year period of saving, and the withdrawal of the sum is then free of Capital Gains Tax, with only the inevitable ‘social taxes’ being payable of the total gain. Withdrawals between five and eight years must be made in one lump and the account closed. However, if the account is not touched for eight years, it can then be left open and partial withdrawals can be made indefinitely.
6) The ‘Personal Pension’ in the British sense has only recently been invented in France and is called a Plan d’Epargne Retraite Populaire or PERP. Up to annual limits, tax relief is available on savings into these schemes. The amount that can be deducted from taxable income is calculated each year, on your annual tax demand and is based on your taxable income.
You do not have to be working to qualify. These are therefore a major step forward for France, but remain very restrictive, since the eventual fund accumulated must all be used to purchase a pension annuity at your official state retirement age.
If you are working for a company, the company may have a more flexible collective scheme called a PERCO and similar schemes are available to the self-employed, under the tax regime of the Loi Madelin.
7) For longer-term regular savings and ‘lump sum’ investments, the most common form of investment in France are French based Life Assurance Investment Bonds or Contrats d’Assurance vie. These investments basically ensure that there is no tax on any income or growth that you do not need and that part of all withdrawals is considered to be a withdrawal of capital, keeping your taxable income, and therefore your tax bills, to a minimum.
There is no limit as to the amount you can invest in these investments. They offer various funds in which you can place your capital, ranging from funds which guarantee your capital and pay an annual interest rate through to ‘equity funds’ where your capital is placed on the stock market.
Clearly it is the primary aim for all investments that your capital should grow over time ideally tax efficiently; however, and particularly in France, some investments can also help with inheritance tax and estate planning which many people also find very useful.