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Where to stash your cash


billy10
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I will be  a resident of France in Jan 2008, part of my income will come from interest earned from savings which at present are in a high interest account UK based , the problem is as soon as I become a French resident I have to close the account as it is only available to UK residents.

I have looked around and found one or two banks that will allow you to be a  French resident and maintain a high interest account paid monthly gross provided you set up the account before you go ,have been resident in the uk for at least one year and have a UK current account to link to their high interest account.

Probably the  best I have looked at is ICICI bank which is a major Indian financial institution who will allow all I said previously, everything I have read about the bank is good and they seem to be very well respected, I have asked Indian friends and it is indeed one of the biggest banks in India, What surprises me is that I cannot find a thread on the forum that covers this subject because after all as ex pats in France we all want to get the best out of our money.

My question to the forum is have I missed something closer to home in order to get a good rate of interest or does anyone out there use ICICI or similar.

 

Thanks

 

Billy10

 

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Are you sure that you cannot continue to have your UK  based account?  Many of us still have our UK based savings accounts, but could not open another account with our Financial institution or any others in the UK as we are no longer  UK residents, that does not however, disqualify us from continuing to have accounts opened whilst living in the UK.  Might be worth a check.  You will certainly not get the same rates of interest in France that are available in the UK.

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It does seem that some UK based banks/BSs do have their own interpretations of the regulations with regard to overseas clients retaining accounts. We have been able to keep a couple of accounts open but others have had to be closed. A worthwhile option, from an interest point of view, are BBi [Bradford and Bingley International] based in the Isle of Man, who are offering 5.85% at present gross.

Sue

Edit: to open an account with BBi you must not be UK resident.

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I don't think there is a problem per se with holding an A/C in a different EU country to which you reside it's more to do with the potential tax complications.

Continuing to pay into a UK Pension plan for instance where you could well be receiving tax relief which you're not really entitled to could be a problem area but I don't see why you shouldn't have a simple interest bearing savings A/C so long as you either paid tax at source or, as a non-resident, were paid net of tax but then declared it in France.

Whether a bank or financial institution will let you open or maintain an A/C as a non-resident is of course another matter and I suspect more to do with policy than law which is why it's best to organise such things whilst you are still UK resident.

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    Whilst not suggesting that you do anything illegal, transfer all funds to a relative who is remaining in the UK but use an internet only account which means only YOU can access the funds (via your passwords and ISP address). That way you get the interest and the French know nothing about it.

David

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"everything I have read about (ICICI) is good and they seem to be very well respected"

Have a nose round the forums at moneysavingexpert.com - pretty much everything I've read there about ICICI suggests they're absolutely abysmal.

I'd second the recommendation for Bradford & Bingley, excellent customer service as well as the best rate I've found. From memory, AngloIrish Bank and Alliance & Leicester offer similar accounts though at a lower rate than B&B (at least that was the case when we were looking).

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[quote user="David"]    Whilst not suggesting that you do anything illegal, transfer all funds to a relative who is remaining in the UK but use an internet only account which means only YOU can access the funds (via your passwords and ISP address). That way you get the interest and the French know nothing about it.

David

[/quote]

But what you are you are suggesting is illegal and dishonest and typical of the attitude of some of the British who live here, they want to have all the advantages of living in France whilst not paying anything towards the costs of maintaining the country's infrastructure and social care systems.  No wonder the Brits have a bad press here.  If you live in France you have to submit a tax return declaring all the bank accounts that you have and you must declare all the interest that you receive from them and pay social charges based on the amount received.

Of course the OP did not request  this sort of nudge nudge wink wink information and is probably equally appalled at the suggestion that he/she do anything illegal.

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[quote user="David"]    Whilst not suggesting that you do anything illegal, transfer all funds to a relative who is remaining in the UK but use an internet only account which means only YOU can access the funds (via your passwords and ISP address). That way you get the interest and the French know nothing about it.
David [/quote]

But what happens when the Bank/BS whatever concerned sends the tax certificate to your friend's home address so they can fill in their UK tax return and at the same time a copy to the UK tax authorities - as they are required to do? 

Sue [:-))]

 

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Thanks fellow forum members,

                                                  I am looking at a few offshore accounts such asB&B, HSBC International etc, with HSBC the system is you apply for an international current account with them and as soon as it is live you apply for the offshore account of your choice, by doing it this way all of the interest is paid directly into the international account free of charge so long as you dont touch the capital you will not lose anything , but if you do withdraw any capital then you lose all of the interest for that month of withdrawal which could turn out a very expensive withdrawal. All in not a bad deal as all the interest is paid gross which makes it easier to sort out the French tax liability.

However after reading what you guys have said I will also look at some other offshore institutions , the Band B sounds good .

Billy 10

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We have brought all our capital to France and invested in an Assurance Vie with Credit Agricole.  Not only is it protected from the eyes of the tax man as it is in a tax wrapper, it avoids potential inheritence tax.  We have taken a high risk - all relatively unrisky - and have made 7% tax free last year.

Everything is negociable in France - banks enjoy having relationships with customers.  I haggled with them and reduced the entrance fee.  The cash is readily available (with penalties).  The other thing is if you are not pensionable and past the time of having health from E106 and CPAM cover for the first two years, your health payment is calculated on 8% of world wide income, including savings in UK, (this is after an allowance of 7000 euros approx)  Money in an assurance vie is not grossed up for this calculation - which can be a further saving.  Further advantage we have found is that the banks will lend against the assurance vie - good for buying a property with interest rate of 4% fixed for life of the loan.  Again I haggled for this using the amount invested as the haggling point. 7-4=3% instant non taxable profit!

Good luck - Jan

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[quote user="Moulin Neuf"]We have brought all our capital to France and invested in an Assurance Vie with Credit Agricole.  Not only is it protected from the eyes of the tax man as it is in a tax wrapper, it avoids potential inheritence tax.  We have taken a high risk - all relatively unrisky - and have made 7% tax free last year.

Good luck - Jan

[/quote]

Jan

Thanks - I knew about assurance vie's but you are the first poster who has made it seem simple - all the financial wiz-kids I've asked have blinded me with science (as they say), so I think I'll be talking to my local CA (where I already have a small amount invested in a compte sur livret) especially as I shall have some large (by my standards) amount in my hot sticky hand by the time I get there next month!!

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Not sure this qualifies as "simple" but looks very interesting for my personal situation also.

I would think professional advice is err, advisable [:D]

***********************************************

Reduce your French tax liabilities with assurance

The assurance vie – tax and financial planning in one exercise

If you are considering moving to France or buying French property it would be well worth considering taking out an Assurance Vie which may reduce your French tax liability.

And if you take out an Assurance Vie before you move there the savings will be even greater.

Assurance Vie is the French term for an insurance bond, such as a Personal Portfolio Bond. It is a specialised form of life assurance arrangement which allows you to hold your own choice of assets as the investment content of the policy, and to invest very tax efficiently in France.

Advantages of Assurance Vie
● There is no French income tax or capital gains tax if the income and gains are accumulated within the policy, and no withdrawals are made.

● Where a withdrawal is made, it is taxed very favourably. Only the 'growth' element of the amount withdrawn is taxable. So if the whole portfolio of assets within the policy has grown by, say, 7%, only 7% of the withdrawal is taxable; 93% of the withdrawal is tax-free.

● The tax rates which then apply to the element of growth, i.e. 7% in the example above, can be at fixed rates of 46% for withdrawals within the first 4 years, and 26% for years 5 to 8 inclusive, and 18.5% thereafter, inclusive of social charges. If the taxpayer’s marginal rate of income tax is lower than the fixed rates, he can opt for the usual scale rates to apply. The election can be made for each withdrawal.

● These tax breaks are exceptionally favourable. As an example, if the investment has grown by, say, 40% after 8 years, the effective tax rate on withdrawals would not exceed 7% on any withdrawals whilst no tax is due on monies that remain invested within the Assurance Vie contract.

● The policy might also help reduce any wealth tax liability.

● There are considerable succession tax savings if the Assurance Vie was established before becoming French resident.

● All purchases and or sales within the policy are normally transacted at no cost. For example, if you were to purchase an offshore fund specialising in fixed interest securities or equities, the cost to purchase such funds directly would normally be up to 6%. This benefit alone can offset the cost of establishing the Assurance Vie. Switches do not attract any tax liability on profits made when switching from one internal fund to another.

● If your Assurance Vie is outside of France, you may escape wealth tax on the fund for 5 years.

● The Assurance Vie provider will carry out all the day-to-day administration for the portfolio.

Income Tax
With careful tax planning, Assurance Vie can reduce your tax rate on investment income and gains down to between 0-18% typically, which is well below the tax rate of most other EU countries.

Any monies rolled up and not withdrawn will be free from French income or capital gains tax. So: no withdrawals - no tax.

Where a withdrawal, either as regular capital or income, is made (other than payment on death) the French tax position is highly favourable as only the growth element is liable to tax.

On Growth Element Withdrawals Received

French Income Tax

French Social Taxes

Total Tax Rate

Within first 4 years

35.0%

11%

46.0%

4-8 years

15.0%

11%

26.0%

After 8 years

7.5%

11%

18.5%


After 8 years, there is an annual deduction available from the taxable element of the withdrawal. This is €9,200 for a married couple or PACS partners, or €4,600 if single or widow or widower.

So, for example, if a married individual makes a withdrawal of €100,000 after 8 years, and the growth from inception is, say, 40%, the taxable element of the withdrawal is €40,000. The deduction of €9,200 is then applied, reducing the taxable amount to €30,800, and this is then taxed at 18.5%.

Wealth Tax
Wealth tax is payable by French residents where your total worldwide assets exceed €750,000 (2006 rates) (including your spouse’s or co-habiting partner’s assets).

The Assurance Vie may reduce your wealth tax liability. French wealth tax plus income tax cannot exceed 85% of the taxable income. Because the Assurance Vie reduces your taxable income, it may also reduce your wealth tax liability, unless you have a significant amount of other taxable income. If your assets exceed €2.3m, the wealth tax cannot be reduced to less then half of what it might otherwise have been, but this is still a major reduction.

Succession Tax
Succession tax is the French equivalent of the UK's inheritance tax. It is a tax on gifts and inheritances.

If a policy is subscribed to before becoming a French tax resident, it is completely free from French succession tax. This exemption does not apply to policies where the life assured is over the age of 70 at the time the policy was set up, or at the time any top-ups are made.

If the Assurance Vie was set up after you became French resident it will remain liable to French succession tax, though if payment is made in event of death there’s no French income tax or capital gains tax. French succession tax is payable at a flat rate of 20% and if there are named beneficiaries to the policy, there’s a succession tax exemption of €152,500 per beneficiary (not per investor). The beneficiaries can be changed at any time. So if you have three children named as beneficiaries, €457,500 is free from French succession tax.

There is no income tax on death. The life assured need not be a French resident, nor the same person as the policyholder. The total investments, together with growth, can be drawn from the policy at anytime.

So the potential French tax resident can invest in the fund before taking up residence and thus tax at the higher rates in the earlier years can be avoided altogether.

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Take a look at www.boursorama.com. 

There are a number of others available, however you should consider entry fees (frais sur versements), annual charges (frais de gestion),  and fees for changing your portfolio (arbitrage fees) or making witdrawals (rachats).

You can invest direct without paying commission  and the annual charge  is .6% for funds in Euros or .85% for stock market based investments.

They also do free internet banking with free credit or debit cards, if you spend 1500€ every 3 months on the cards.

Very much like the UK Isa - with no annual investment limit and preferential tax treatment in France.

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Opening an AV before you arrive will allow you to benefit in two ways (as I undertand it).

1. Once the new UK / France tax treaty comes into force then the AV is not counted towards ISF (wealth tax) for the first 5 years of residence. This will only affect you if you have a gross worth in excess of 760k€.

2. The limit of 152k€ per inheritor is removed and all of the AV can be bequeathed without tax, however payments into the AV after you are 70 may still be subject to restrictions/tax.

Any of the major financial advisors can arrange to open an account for you whilst you are still UK resident.

That's how I understand it, but having been here over 5 years and the UK/France agreement is still not in force it was of no benefit to me.

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[quote user="ErnieY"]Advantages of Assurance Vie

...

● Where a withdrawal is made, it is taxed very favourably. Only the 'growth' element of the amount withdrawn is taxable. So if the whole portfolio of assets within the policy has grown by, say, 7%, only 7% of the withdrawal is taxable; 93% of the withdrawal is tax-free.

● The tax rates which then apply to the element of growth, i.e. 7% in the example above, can be at fixed rates of 46% for withdrawals within the first 4 years, and 26% for years 5 to 8 inclusive, and 18.5% thereafter, inclusive of social charges. If the taxpayer’s marginal rate of income tax is lower than the fixed rates, he can opt for the usual scale rates to apply. The election can be made for each withdrawal.

● These tax breaks are exceptionally favourable.[/quote]I can't understand why this is seen as "exceptionally favourable".  The 93% of the withdrawal (in the example) is the amount you originally invested: why should it be taxable?  If you put €93 into an ordinary savings account, and it earned €7 in interest, and then you withdrew the €100, you wouldn't pay any tax on the €93 -- why should you?

I'm not saying that the Assurance Vie offers no tax advantage, but it seems to me that its value lies in the fact that the income (interest or dividends or capital gains) can accumulate within the fund without being reduced by taxes.  But this advantage depends on the money being left in the fund, i.e. not withdrawn, until the maturity date (or death, if earlier -- I don't doubt the possible benefits for succession tax).

 

It should be mentioned that advisers who sell these contracts can earn handsome commissions on the funds chosen for the investment, so they have a reason to make the contract sound attractive.  I think it pays to remain sceptical.      

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allanb

You are correct in saying that the advantage lies in both the inheritance tax and the fact that the interest rolls up without being taxed.

The reality depends upon how you plan your income stream over a number of years, how much capital you have to invest and how long you can leave it before using all of your interest earned.

If you have a large pension and little capital or indeed just enough that you need to draw down the interest each year then there are other ways of skinning the cat.

However there is the advantage that after 8 years a couple can withdraw 9200€ a year free of tax and social charges.

As previously mentioned you can invest direct and avoid paying commissions and this is what I now do. You are right to remain scepitical but for myself and many others it is a highly advantageous method of financial planning and the inheritance benefit means that when my wife bequeaths an inheritance to my daughter she will not pay 60% tax on the first €152k.

Another thought - take a couple investing €300k in a capital safe investment at 4.5% producing €13.5k a year as a top up to a state pension. The taxable element is only 607€ as opposed to 13500€ outside an AV. After 8 years the taxable element falls to €194. By spreading the tax liability over a number of years they avoid being taxed in a higher  tax band and are able to leave their capital to their successors.

You do not have to leave the investment until maturity or death - in the example given the advantage is taken after 1 year and improves after 8 years.

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[quote user="Leslauriers"]

.

Another thought - take a couple investing €300k in a capital safe investment at 4.5% producing €13.5k a year as a top up to a state pension. The taxable element is only 607€ as opposed to 13500€ outside an AV. After 8 years the taxable element falls to €194. By spreading the tax liability over a number of years they avoid being taxed in a higher  tax band and are able to leave their capital to their successors.

You do not have to leave the investment until maturity or death - in the example given the advantage is taken after 1 year and improves after 8 years.

[/quote]

Could you add a bit more bones to this, particularly the figures of 607€ and 194€.

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[quote user="Benjamin"][quote user="Leslauriers"]

.

Another thought - take a couple investing €300k in a capital safe investment at 4.5% producing €13.5k a year as a top up to a state pension. The taxable element is only 607€ as opposed to 13500€ outside an AV. After 8 years the taxable element falls to €194. By spreading the tax liability over a number of years they avoid being taxed in a higher  tax band and are able to leave their capital to their successors.

You do not have to leave the investment until maturity or death - in the example given the advantage is taken after 1 year and improves after 8 years.

[/quote]

Could you add a bit more bones to this, particularly the figures of 607€ and 194€.

[/quote]

The €300k has grown by 4.5% (300000 x 4.5% = €13500) , you withdraw 13500€, of which only the interest part is taxable, (€13500 x 4.5% = €607.5) therefore €607 is added to your tax return and is subject to tax and social charges.

Once the investment has passed it's 8th anniversary a  couple can withdraw €9200 tax and social charge free, so in this example they withdraw €13500 - €9200 = €4300 of which the interest part is taxable, so €4300 x 4.5% = €193.5 which is added to your tax return and subject to social charges.

It's never easy to explain these things !

Edit

By year 8 the growth of the AV will be higher than than 4.5% but the effect on the bottom line is still advantageous.

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