9. French Bank Savings Accounts
- European Tax Directive
- Regulated Savings Accounts
- Standard Savings Accounts
- Home Buyers Savings Accounts
9.4. Home Buyers French Bank Savings Accounts
A Compte Epargne Logement (CEL) or Plan Epargne Logement (PEL) are interest-earning bank accounts, which give access to a subsidised mortgage.
The accounts are available to non-residents.
Both accounts have historically been of greatest interest to those not in a rush to obtain a mortgage and to residents who seek an income tax shelter.
They are also vehicles to assist family members with house purchase.
Whilst the level of the mortgage you can obtain through one of theses schemes is low, it is common practice in France for first time buyers, in particular, to use more than one mortgage to acquire a property.
In effect, the subsidised mortgage acts as a top-up to a mainstream mortgage.
The terms of the accounts are broadly similar although, as there are some important differences, each one will be considered separately.
Since January 2018, with the change in taxation of the accounts, they are of very little interest to savers.
9.4.1. Compte Epargne Logement (CEL)
A CEL can be held by children and adults alike, and all members of the household can hold an account in their own name.
There is a maximum balance of €15,300 in each account.
Cash can be withdrawn at any time, subject to retaining a minimum €300 balance.
The rates of interest are lower than can be found in a regular account, with a current rate of interest of 0.5%.
However, a government lump sum payment, is granted to the borrower when a loan is taken out. This lump sum payment is capped at a maximum of €1,144. This is no longer available to accounts opened since January 2018.
The account is also is exempt from income tax, but only provided it was opened before 1st January 2018, and only up to the 12th anniversary opening date of the account. Social charges CSG/CRDS are payable, at the rate of 17.2% on earned interest.
For accounts opened since 2018 you are liable to both income tax and social charges on interest earned.
A single rate tax applies, called the Prélèvement Forfaitaire Unique – PFU.
Imposition of the tax is a uniform and fixed rate of 30%, whatever the level of your income. So, unlike income tax, it is not progressive.
The tax is actually made made up of two components:
Income tax at the rate of 12.8% Social charges at the rate of 17.2%.
There is a deduction at source (prélèvement fiscal) made by your bank.
However, if your net taxable income in the previous tax year was no greater than €25,000 for a single person or €50,000 for a couple you can request exemption from the 12.8% income tax element of the prélèvement fiscal. You need to do so before 30th Nov of the year preceding payment of the interest. So a request for income due in 2020 needs to be made by 30th Nov 2019.
If you do not consider you benefit from the 30% fixed rate, you have the possibility to later opt to be taxed using the standard income tax bands, on the basis of your marginal rate of tax. The option for using the income tax scale rates applies at the time you make your income tax declaration.
In order to qualify for a mortgage the account must have been open for at least 18 months, and the applicant must meet the lenders normal income criteria.
The mortgage can be used to buy main home, a home for family member, a home for normal letting or a second home but, in this case, only if it is a new property.
The mortgage can also be used to fund improvement works to the main or a second home.
One of the weaknesses of the CEL is that the maximum amount available is €23,000, although this mortgage can then be used with others. This rule applies even though a couple or a household may hold multiple accounts.
To open an account contact local bank, credit mutual or post office.
9.4.2. Plan Epargne Logement (PEL)
The PEL operates on very similar basis as that of a CEL and the account can be opened alongside a CEL within the same bank, which will ultimately gain access to two or more subsidised mortgages.
The maximum balance is €61,200 (excluding interest) and the minimum deposit period is four years.
At the end of four years if you have no need for the mortgage you can continue to hold account for up to ten years without the need for continued regular payments.
You can also transfer to a family member the right to a mortgage earned through the account, as is often the practice with French families who open such accounts.
Interest is 1.00%. Since 2018 for new accounts there is no longer a state contribution.
You are liable for income tax and social charges on the same basis as for the CEL above.
If you decided to close the account before the expiry of the four year period your account can be converted to a CEL if held for more than 18 months; if held between three and four years you retain the advantages of the account but the lump sum payment is halved.
The mortgage loan can be used for construction or purchase of main home, the purchase of second home if new or the purchase a property for normal letting.
The maximum loan is €92,000 for a ten to fifteen year term. It can be used with a CEL up to the €92,000 total limit.
To open an account contact local bank, Crédit Mutuel or post office.
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