9. French Bank Savings Accounts
The term most generally used for a bank savings account in France is compte d'épargne.
It may also be called compte sur livret, although, this is just an interest earning deposit account, rather than a savings scheme.
We do not review investment based savings schemes here, but we hope to be able to do so in the future. These schemes generally require that you tie up your cash for a specific period, and their returns are related to the performance of the stock market.
Nevertheless, take a look at our short review of life insurance policies, as they can operate as tax efficient savings schemes in France. Particularly useful for those arriving in France with a lump sum to invest.
- 9.1. European Savings Tax Directive
9.2. Regulated Savings Accounts
9.3. Standard Savings Accounts
9.4. Home Buyers Savings Accounts
9.1. European Savings Tax Directive
In July 2005 the European Savings Tax Directive came into force, under which the 39 signatories have agreed to exchange information about customers who earn interest in one country, but live in another.
All countries within the EU are signatories to the agreement, as well as Andorra, Anguilla, Aruba, British Virgin Islands, Cayman Islands, Gibraltar, Guernsey, Isle of Man, Jersey, Liechtenstein, Monaco, Montserrat, Netherlands Antilles, San Marino, Switzerland, Turks & Caicos.
This means that if you are resident in France, interest earned on a bank account in a signatory country will be reported to the French tax authorities or, in a small number of cases, be subject to a withholding tax. In the latter case individual confidentiality is preserved.
Likewise, if you are non-resident, and you hold savings in a bank account in France, the amount of interest earned on the account will be reported to the tax authority of your home country if they are a signatory to the agreement.
There are legitimate steps you can take to get around these reporting procedures, either by moving funds outside of the area of jurisdiction, or the creation of certain types of trust or company structures in places such as Jersey, about which your financial advisors should be able to provide more information. The tax directive only applies to individuals.
Some banks also offer the option of a 'deferred interest' account, so that, whilst interest is still accrued on your capital, it is not paid into your account until you elect to do so. However, you may still be liable for payment of a withholding or 'retention' tax when, ultimately, you do credit the funds to the account.
Another option is to have an EU account held jointly with someone who lives outside the area of jurisdiction of the rules, and choose for the other account holder to receive the benefit of the interest. In these circumstances, the account is outside of the scope of the tax directive.
There are also certain types of financial instruments that are exempt from the regulations, notably certain types of securities, equities and life insurance products.
Finally, if you are exempt from paying income tax in France, then you can seek exemption from the directive. You should discuss with your bank, who may require an appropriate certificate from the tax authority.
Whichever option you choose, you should take professional advise before you make a final decison. Be aware also that accountants, lawyers and other professional dealing with client funds are all subject to EU regulations on money laundering, which makes it a requirment to maintain proper records, and report suspicious transactions!
Neither should you assume that, even if you are able to circumvent the rules of the European Tax Directive, this will necessarily grant you the privacy you seek concerning your financial affairs.
With the growth in Tax Information Exchange Agreements between France and some tax havens, if you are subject to a tax investigation in France, there are limits as to how much you will be able to protect your privacy. There are increasingly 'no hiding places'.
These bilateral Tax Information Exchange Agreements (TIEAs) are becoming a much more common, and France is taking determined action to cut down on the level of tax evasion that it believes occurs through offshore accounts.
As you are legally required by the French tax authority to declare all foreign bank accounts on your tax return (you only need do it once) you face the prospect of a heavy fine if you do not comply with disclosure procedures. These fines are notably higher for offshore tax haven accounts.
In short, if you want to sleep at night, you really need to be open and honest with the authorities about your financial affairs!
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Finance & Taxation