The U.S has an estimated 200,000 living in France and remains one of the top destinations for U.S citizens to retire or move, this goes alongside Portugal.
This article will go over some aspects of investments for U.S expats when they are moving to France, such as, income tax, wealth tax, and death tax. Finally, some options I have recently completed for a number U.S expats living in France by setting up a number of accounts.
If you have any questions before you carry on and read the article, you can email me at info@investmentsforexpats.com.
Articles similar to this for US expats are:
Before I carry on, this is not personal financial advice, if you need to speak to a qualified person, please do so. When investing, you can get less capital back than what you originally invested and you must understand the products you are investing in.
Income Tax
France has been deemed as a high tax jurisdiction. Although, aspects of this can be true, however, for Americans in France it can be a tax haven if you choose to reside in the country. Due to the Double Taxation Agreement (DTA), the USA-France treaty exclude most of their U.S sourced retirement and investment income from tax French taxation. This is beneficial for retirees that are residing in French taxation meaning that a lot of retirees can only pay U.S taxes but live in France.
Wealth Tax
France has been known for its wealth tax along with other European countries such as Spain. This has been a prominent factor in American’s decision when moving to France. France no longer has a wealth tax and this changed in 2018 when Macron completed a tax reform.
This has been replaced by “Impôt sur la Fortune Immobilière” (IFI), which is taxed imposed purely on real estate, thus acting in many ways like a national property tax. This can still have a factor if you are invested in French real estate. However, this is likley not to be too significant for the vast majority of retirees.
Inheritance tax (IHT)
This is one of the main factors from a tax perspective that need to be considered when moving to France. In the U.S the current IHT rate is $12.06 million and doubles up if you are married to a U.S citizen.
Frances “droits de successions”, France’s inheritance tax only gets 100,000 Euros for direct relatives. IHT rates can go up to 60%.
Assurance Vie
Assurance Vie is a tax-advantaged retirement account. In most cases, these products are not suitable for Americans, so be very careful. A French Assurance Vie will often involve underlying investment in non-US registered mutual funds, which may be taxed punitively in the US (see IRS rules on Passive Foreign Investment Companies, or PFICs, for more information).
Trusts
France has a public register of trusts, which includes names of settlor, trustee and beneficiary, and was publicly available through the French tax administration website, all in the name of transparency.
In 2016, the French constitutional court ruled that the public nature of the trust register violated fundamental rights to privacy and public access to the register was suspended. American’s moving to France with a U.S trust will be required to make certain disclosures to French fiscal authorities, or face hefty fines for non-compliance. The required disclosures include a recurring annual filing, as well as an event-based filing to disclose any changes made to the trust.
What platforms could US expats invest in?
Some platforms, allow U.S expats, IBKR can allow you depending on where you are living in the world, also some Brokers might let you invest as a U.S connected person abroad such as TD Ameritrade.
These platforms are some of the best around in terms of price, and trading and are widely used and reputable both in and out of the U.S.
If you can’t open these as they might only let you in you are transferring a 401k into an IRA or in certain locations.
The other platforms, you have open are more British or Australian, Praemium, I will not go into too much detail on the platforms, but have written individual reviews on them, in summary, the platform’s cost is 0.3%-0.5% with dealing costs $10-$35 depending on the type of securities you are trading, in term of range all have a range of 3000+ funds and stocks in USD and GBP and are based in locations such as the Isle of Man. For more information on these please read my individual reviews on the platform, or go to their website:
- https://www.praemium.com/uk/
- https://www.platform1online.com/
- https://novia-global.com/
- https://platform.ardan-international.com/Auth/Login?returnUrl=~/retail
However, one way to invest as a U.S expat with PFICs is setting it up through a UAP group that will then allow investing in these platforms.
The UAP group identifies as
“It was identified that there was a gap within the market for a modern dynamic trust and pension company utilising the most current applications, and so The UAP Group of companies was created to develop a suite of products that would meet the needs of people of any nationality wherever they reside.”
Source UAP Group
https://theuapgroup.com/about-us/embed/#?secret=hy8GXbjAij
What is offered to U.S expats?
This is defined under Guernsey as a defined “Define contribution retirement benefit plan” that is approved by the Guernsey Income Tax authority.
I will put a link to all the technicalities of offerings below. However, I will try and sum it up in a simple fashion.
It offers a contractual base Guernsey contract. The contract is written by Bourse pension trustees Ltd and is paid by the member and investors from instructions from the member or the member’s financial advisor.
The value is based on the value of the investments and in the drawdown of the pension at age 55 or over (this can be deferred till 75) will continue to give an income for life. The drawdown is based on GAD rates and allows a flexi drawdown with 30% PCLS at the age of 55.
Simply put its works a lot like a Roth IRA with after-tax dollars (Pounds or Euros), with different factors being the age that you can drawdown on and income levels requirement, that with Roth IRA is set at $140,000 for single filers or $208,000 for married couples, and no contributions limits ($6000 for under 50s in Roth IRA and $7000 for over 50s).
You have investment options in what you invest in and the tax is taxed on the gains on withdrawal and the structure doesn’t include PFICs.
A full link can be seen on the link below
https://theuapgroup.com/wp-content/uploads/2021/06/UAP-US-Brochure-Final-VI.pdf
Why it might be useful to U.S expats?
Simply, put you don’t have many options, unlike British citizens or many other citizens living abroad. They don’t have the complication of tax filing on investments offshore and many offshore companies are open to dealing with them.
As a U.S expat, many investments are not feasible for many options as many platforms don’t want the obligation of dealing with the IRS and as a result, they don’t accept U.S expats.
The UAP contract act’s in a number of ways like a pension plan that you would have back in the U.S, with an after dollars IRA or Roth IRA.
The fact that it is portable with you as an expat, easy to file your taxes without the complications of dealing with PFICs and is not taxed every year are some of the prime reasons to review it as an option.
Instead, you are taxed on the gains on withdrawal. This can make a big difference as if you wanted to go into an actively managed fund such as Blackrock an accountant filing your taxes will need to know what they sold within the tax year within the fund plus the dividends that were distributed. This can be a pain, to say the least, and can potentially cost more on accountant fees for complications.
Furthermore, if you are a U.S expat in the U.K or Europe (which are around 1-2 million according to U.S diaspora) you might want to invest in GBP or EUR and invest in an active European or U.K fund, which would not be feasible. With UAP, you do have wider options to invest in and potentially more investing options with only getting taxed on the gains, which for a younger investor or those with a larger investment amount can add up and allow more time to compound.
Some of the key advantages are
- IHT planning for high net worth individuals over $11.7 million
- No contribution limits
- Investment flexibility
- Simple tax reporting
- Investments grow tax-free
Who is this for and who is it not for?
As I have described earlier in the article, the key points are that it works as a pension that you can withdraw at the age of 55. This inadvertently means it is not for anyone needing or wanting liquidity in their investments prior to 55. One way I would use it is like an IRA where you contribute and can’t take it out till a set age (IRA 59.5 and UAP 55).
Other than that it can be used in a number of ways U.S expats that are looking to set up a pension plan or those with surplus wealth that want to invest in PFICs companies and funds, with the ability to grow tax-deferred.
This is designed for U.S citizens who are offshore.
Is it safe?
In terms of the set-up, it is safe as it is set up by contractual law and this is one that is accepted in many locations as a sound frame of law.
In terms of the companies involved I will put a link below:
For me, I see the two main factors in terms of safety, the jurisdiction, and Guernsey. This is deemed appropriate here is an overview of the jurisdiction.
Guernsey is a well regulated British Crown Dependency and remains a jurisdiction of choice for companies and individuals seeking trust, corporate and pension products and services.
Guernsey has long been considered a centre of excellence for the provision of offshore financial services. The Island is renowned for its robust yet pragmatic regulatory environment and is on the G20 ‘white list’ as having substantially implemented internationally agreed tax standards.
Guernsey is not part of the United Kingdom and has the autonomy of internal government, including taxation. The legal system is derived in part from the customary laws of Normandy but has been strongly influenced by English law. In addition, Guernsey is not part of the European Union and therefore EU directives on fiscal harmonisation, financial services and company law do not have effect in Guernsey. In this respect, Guernsey enjoys significant advantages over other jurisdictions.
All aspects of the Island’s financial services industry are carefully regulated by the Guernsey Financial Services Commission (“GFSC”). Financial services businesses such as Bourse are licensed by the GFSC according to their activities.
The other considerable factors as where and whom it is invested with this can be a range of investment options platforms and would speak to IFA about this in more detail.
US Expat Investment Advice – Who can help and Why?
Investments for Expats is the leading international online broker of expatriate financial services, products, and expat financial advice. We allow U.S expats, to invest in funds that are easier to fill on tax and not subject to PFICs as well as only being taxed on withdrawal on the gains.
If you have any questions, please email me at info@investmentsforexpats.com
Finally, please note this is not personal financial advice, this blog is written for general consumption and that if you invest your capital is at risk. If you need a personal report on your financial circumstances, please email me or find a competently qualified financial advisor.
