French and international investment bond withdrawals

Taxation of profits from French assurance vie contracts used to occur in only two ways: either by adding the gain to your gross income for taxation according to the ordinary bands, or by opting for fixed forfait rates of tax specific to AV (known in full as prélèvement forfaitaire libératoire, PFL).

The latter (which still applies to French and comparable withdrawals relating to premiums paid in before September 27, 2017) should usually be requested at the time of making the gain and the tax (and any French social charges that are due) is deducted by a French bank before you receive the gains.

As a result, some financial advisers state that it can be difficult to obtain the same rates for similar foreign investments unless they are specialised ‘French-compliant’ investments with a French fiscal representative who manages the tax and charges.

PFU ‘flat tax’ now applies instead in certain cases to assurance vie gains and the correct declaration and taxation of gains made through an assurance vie is date-specific.

See chapter 7, on ways to avoid high tax on one-off sums for more about taxation of AV gains and chapter 3 (about impacts of Brexit) if you have any comparable UK gains.

Gains from French policies may already appear on your form but you should still check they are declared correctly.

You should also check that any social charges that have already been taken off are accounted for on your declaration.

You may wish to refer to documentation supplied by your bank or other AV provider.

French providers will send details of declarable figures in around March. This will clarify the ‘gain’ element of your withdrawal to be declared.

This revenu imposable will not include parts deemed a return of your capital.

If forfait tax has been taken off, you do still need to declare the gain but only for it to be taken into account, not for it to be taxed twice.

The following section gives a general guide to this area but declaring AV and other investment bond gains from overseas is complex.

If in doubt, you may wish to seek clarification from your tax office or take regulated financial advice before taking the gains, as correct taxation in some cases involves completion of special forms and payment of tax and charges by the 15th of the month following the month of reception. 

French AV gains

If you invested money in the AV before September 27, 2017, you should declare gains relating to such investments as follows:

2042 section 2

If the forfait rate applies, use box 2DH for AV policies more than eight years old, or 2XX for policies less than eight years old.

On the other hand, if the ordinary income tax bands should apply, use box 2CH for policies more than eight years old or 2YY for policies less than eight years old.

Note that an allowance (reduction of the taxable gain) is applied by the tax office to gains from policies more than eight years old.

You do not need to calculate this, the tax authorities will take care of it.

If you invested sums of money in the AV after September 27, 2017:

In the specific case that you invested money into an AV after September 27, 2017 and took money out of the policy in 2025, there are special rules for declaring the part of your profit that is proportional to these later investments.

This profit is usually subject to the flat tax (however a low 7.5% income tax rate - plus social charges - is applied for AVs that are more than eight years old, unless certain rules for those with more than €150,000 invested in AVs apply; see chapter 5).

Alternatively, the ordinary income tax bands may apply if you take up the option to have all of your investment income subject to the bands – this choice is made by selecting 2042 box 2OP.

Documentation from your bank or other provider should clarify what amounts should be declared where, however:

•  If the policy is more than eight years old the gains go in 2VV (or in 2WW for sums to which the rule on investments over €150,000 applies).

• If the policy is less than eight years old the gains go in 2ZZ.

Foreign life assurance / investment bond gains

The treatment of foreign income/gains comparable to the categories France defines as Produits des bons et contrats de capitalisation et d’assurance-vie can be complex depending on where the structures and their underlying investments are located and the way they are set up. 

Some EU/EEA schemes (and pre-Brexit UK schemes) qualify to be treated as comparable to French AV gains. 

The treatment of US-source gains comparable in French tax law to produits des bons et contrats de capitalisation et d’assurance-vie can be complex and may depend on the exact legal and fiscal nature of the product. Where such gains fall under article 22 (“Other income”) of the France–US treaty, they are in principle taxable only in the US but may need to be declared in France with a tax credit equal to the corresponding French tax. However, some products may instead fall to be analysed under other treaty articles, so specialist advice may be advisable. 

Note: As concerns UK contracts, there is a 5% annual allowance against the profit element included in a withdrawal, to account for the partial return of capital. This mechanism is not recognised in France, where tax is applied to the gain element of each withdrawal regardless of the UK allowance.

Foreign gains should be declared in the 2047, line 260 under Produits et gains des bons et contrats de capitalisation et assurance vie.

They should also be declared in 2042, section 2.

For profits related to money invested before September 27, 2017:

• For gains from ‘AV’ type contracts from the EU / EEA: Enter as appropriate in box 2CH for contracts more than eight years old or in box 2DH if you opted to have tax taken off at the forfait rate when money was paid out.

• For EU / EEA gains from policies less than eight years old and other foreign gains enter in: 2YY (or in 2XX for EU / EEA gains already subject to forfait tax).

Note that certain advantages related to AV gains only apply in the case of French and EU / EEA gains.

See chapter 3 for the effects of Brexit regarding UK gains.

For profits related to money invested after September 27, 2017:

• For EU / EEA gains from AV policies more than eight years old, enter in 2VV (or in 2WW where the rule on investments over €150,000 applies).

• For EU / EEA gains from AV policies less than eight years old and other foreign gains, insert in 2ZZ

Note the possibility of selecting box 2OP for all section 2, 2042 (investment) income to be subject to the ordinary income tax bands.

If selected this also applies to gains declared in section 3, 2042C (capital gains from shares).

If you hold an AV, or similar investment schemes, outside France, then you should tick box 8TT (on the paper form it is at the bottom of page 4 on the 2042) and provide details of the contracts.

You should do this on the 3916 - 3916 bis form also used for foreign bank accounts.

If this is not suggested for you automatically then you need to choose to add this form.