Reader question: I have heard that there is a 5% tax-free savings account available in France. I am a second-home owner, am I eligible for this?
There is a savings account with a current tax-free interest rate of 5% available to some with moderate incomes. There are also other accounts with attractive tax-free rates.
The tax-free account which currently offers a 5% interest is called the Livret d’Epargne Populaire (LEP).
It is intended to help those with lower incomes to save without having a large impact on their purchasing power.
The interest rate of an LEP is state-regulated, based on inflation and changes every six months (in February and August). On February 1, the interest rate changed to 5%, so it will stay at that rate until August 2024.
The maximum amount depositable into such an account is €10,000, although with interest the account total may exceed €10,000.
Most traditional banks offer an LEP (online-only banks do not) but they may not advertise it prominently as the account is less profitable to them than some others.
Deposits and withdrawals can be made without any constraints, as long as the balance remains positive. Each person may only have one LEP.
Note that it may be possible to find ordinary taxable French savings accounts with rates of up to 5% advertised, but they are subject to tax and social charges for French residents, plus such high rates are often only a special introductory offer and valid for a limited period.
Other French investments, such as an assurance vie policy can also offer good rates, but, depending on how the money is invested, may be a higher investment risk.
Are second homeowners eligible for a Livret d’Epargne Populaire savings account?
To be eligible for an LEP, you must be over 18, not part of your parent’s tax household, and have income below a certain income threshold.
You also have to be a tax resident of France, so in your case, as a second-home owner in France, you are not eligible for this specific account.
Otherwise, the income ceiling to benefit varies depending on whether you are in a couple, whether you have children in your care and whether you are in metropolitan France.
The maximum annual income in metropolitan France is €22,419 for a single person or €34,393 for a couple.
In 2024, this will be checked against your revenu fiscal de référence (net taxable income) in 2022 as shown on your 2023 avis d’impôt, or your income for 2023 which will be shown on your avis issued in summer 2024.
For each dependent child in your tax household, the maximum threshold increases. For example, with one child, the threshold increases to €40,380.
The thresholds are higher in the French overseas departments.
A full list can be found here.
To be considered French tax resident several different tests are applied, firstly, whether or not your main ‘home’ (foyer) is in France; this will often be, for example, where your partner and any children also live.
If in doubt, further tests include whether you spend more time in a given calendar year in France than anywhere else, whether you run a business from France or have the ‘centre of your economic interests’ here.
Therefore this excludes second-home owners unless your main home is also in France.
For more information about LEPs, see below, but note this article was recent before the interest rate fell to 5% in 2024.
Note that non-residents in many countries, including the UK and USA, may not in any case have French income tax or social charges to pay on any French bank interest.
Are there any alternatives for second-home owners?
For those who are not tax resident in France there is a state-regulated tax-free savings account which is widely available: the Livret A.
This can be opened at all French banks regardless of age, income or tax residency and it works in much the same way as an LEP, with a maximum account allowed of one per person.
The Livret A interest rate is also set by the government.
Currently it is 3%. The Bank of France decided to freeze this rate until January 31, 2025 after which it will be revised every six months.
The maximum amount depositable on a Livret A is €22,950. As with the LEP, interest payments, when added to your capital on December 31 each year, can bring the balance in the account to above that deposit ceiling.
It is free to open and use and although you cannot have a specific debit or credit card for a Livret A account you can request a carte de retrait (withdrawal card) to take out cash easily.
It is also possible to make transfers from a Livret A to a current account in your name, whether the account is with the same bank or not.
Are there any other similar savings accounts?
Other tax-free regulated savings accounts available to residents include the Livret Jeune and Livret de développement durable et solidaire (LDDS).
These operate in a similar manner to the two previous accounts, with rates set by the government and a maximum of one account per individual.
The Livret Jeune is for 12 to 25 year olds and the deposit ceiling is €1,600. The interest rate can be set by banks, but it must not be below 3%.
The LDDS is available for anyone who is tax resident in France. The current rate is set at 3% by the government and is frozen until the end of January 2025, after which it will be re-evaluated every six months similar to the LEP and the Livret A.