8. Investment Income in France

Broadly speaking, we can distinguish between those investments with a fixed level of return and those with a variable level of return.

Some of these investments are taxable in the normal manner, whilst there are others with tax breaks.

We can only provide the briefest of summaries here, but we hope to develop the information and advice in due course.

In relation to fixed interest taxable investments, such as government bonds and bank savings accounts, you can either be taxed at source (called the Prélèvement Forfaitaire Libératoire - PFL ) at the rate of 24% (2012), or declare the interest as part of your annual tax return.

In either case you will be liable for social charges (prélèvement sociaux) at the rate of 15.5% (2012), which are deducted at source.

There are some regulated bank savings accounts that offer tax breaks, which you can read more about in our Banking in France pages. Broadly speaking, the accounts are free from income tax and social charges.

There are various deposit limits and rules of eligibility on these accounts, so you are not going to get rich quickly on them!

As far as variable rate taxable investments (such as shares) are concerned, as a general rule they are taxed through the system of capital gains, that is to say taxed at source at the rate of 34.5% (2012), including the social charges (prélèvement sociaux) at the rate of 15.5% (2012).

In relation to dividends there is a general income tax allowance of 40% on gains, although you lose this and other allowances if you opt for the prélèvement forfaitaire libératoire). The rate of the PFL for dividends is 21% (2012). So it is normally best to opt to pay tax through the income tax system. You also pay the usual social charges (15.5% for 2012). You can read more about the taxation of dividends in our pages on Starting a Business in France.

There are also variable rate tax savings schemes, notably assurance vie, Fonds Communs Placement, Plan d’Epargne Populaire, Plan d’Epargne d’Entreprise, and Plan d’Epargne en Actions.

There are minimum investment periods with these schemes, so if you withdraw before the expiry date, you lose the benefit of the tax concession.

You also need to have regard to the entrance and exit fees that are payable.