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P.E.A. Questions


Grecian
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I do apologise in advance if any of my questions have been answered previously on this website, as I am sure some of them must have been. Like most people when you first consider the move, you start trawling through books, magazines and websites, it then comes to a point where your head cannot take anymore. I am at that stage.

 

P.E.A Questions:

 

I understand the personal allowance to be 132,000 euros that you are allowed to invest in a P.E.A. If you wish can this all be invested in one lump?

 

Can the P.E.A. be invested in cash, unit/investment trusts, and bonds in companies from the UK? Or do all the investments have to be confined to French companies?

 

Can existing investments from the UK be transferred into the P.E.A?

 

If I understand the system correctly no tax is payable after 8 years, although social charges of 11% are still payable. If you wait until you are 65 and then draw an income from the P.E.A., do you still pay the 11% social charge?

 

A question not allied to the P.E.A. but one that is puzzling me is: When paying the 11% social charges on investments/income does the personal allowance of 5500 euros which you are allowed to earn tax free, still appertain to the social charges. i.e. are you allowed 5500 euros income allowance before you start to pay the social charges?

 

Thanking anybody in advance, of any information that you can provide. Hope the questions don’t look too stupid.

 

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Plan d'Epargne en Actions, apparently. A sort of largely tax-free savings scheme.

All the main banks seem to have their own PEAs so if normal practice is followed, the rules, charges etc will vary considerably.

Looking at one of them - Credit Agricole, by way of a sample - it appears that investments can be in the EU as well as in France, certain non-European funds with a substantial EU content, and up to 25% in certain other investments in, say, USA or Japan.. There does not seem to be any reason why you could not use all your 132,000€ allowance in a single investment.

It looks as if you have to keep your PEA for five years before you begin to get tax benefits, and you cannot withdraw anything without penalty until eight years are up.

The 11% so-called 'social charge' is a charge that is levied on interest from all investment income, including PEA, regardless of the age of the investor, and no personal allowance is applied.

I may have translated some of these wrongly, and other banks may do things differently, so please ask an expert.

Edit - this might help, or on the other hand it might just confuse things further:
http://www.tax-in-france.fr/frameset_part_uk.php?url=http://www.tax-in-france.fr/uk/particuliers/patrimoine.htm

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[quote]I understand the personal

allowance to be 132,000 euros that you are allowed to invest in a

P.E.A. If you wish can this all be invested in one lump?[/quote]

 Yes

[quote]Can the P.E.A. be invested in

cash, unit/investment trusts, and bonds in companies from the UK? Or do

all the investments have to be confined to French companies?[/quote]

Almost all UK stocks are eligible, including most of those listed on AIM. Curiously, there is a sort of inversion of the UK ISA rule (in the UK you can include AIM stocks in an ISA provided they have a listing on a "recognized stock exchange" - most often Australia or Canada - but these are not permitted in a PEA). Also, depending on your broker, you may find that you can't easily deal with Irish stocks, even biggies like Tullow Oil (FT100 or thereabouts - #107 by MCap at the moment). Most ITs should be ok (I've got a couple). Dunno about UTs (why would you want 'em, though?) and bonds but I guess not (perhaps from an expensive "up-market" broker).

 [quote]Can existing investments from the UK be transferred into the P.E.A?[/quote]

Dunno but I doubt it. Ask your candidate PEA provider. (I assume you will avoid the big banks  - which will try and sell you one of their generally rubbish managed PEAs - and, like me, go direct to one of the on-line brokers - like a SSISA in UK - Fortuneo and Boursorama are the big two and both have informative web sites).

 [quote]If I understand the system

correctly no tax is payable after 8 years, although social charges of

11% are still payable. If you wait until you are 65 and then draw an

income from the P.E.A., do you still pay the 11% social charge?[/quote]

 As far as I know, you can't avoid the 11% on gains.  I am not sure how this gets calculated  (I  have only been running my PEA since last year) but I suspect it will be a nice simple calculation  ...

[quote]A question not allied to the

P.E.A. but one that is puzzling me is: When paying the 11% social

charges on investments/income does the personal allowance of 5500 euros

which you are allowed to earn tax free, still appertain to the social

charges. i.e. are you allowed 5500 euros income allowance before you

start to pay the social charges?[/quote]

Good question! Dunno but I suspect the 11% is unavoidable.

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I rather think the point (obscured by the OP's reference to "drawing an income") is that a "withdrawal" from a PEA is different from "income."  The question is how the calculations will work:

(1) to establish the "gain" on the total amount introduced into the PEA, which should be (initially, i.e. at time of first withdrawal) a nice simple B-A (probably getting more complicated thereafter since there will be a combination of a % of B-A combined with B2-A2 and so on) and

(2) the proportion of said "gain" within any amount (would pro-rata be too simple?) then withdrawn from the PEA.

The nearest thing to a detailed explanation I have seen is from "Vos Droits, Votre Argent 2007":

"Gain net soumis aux prél\evements sociaux ... lors de chaque retrait partiel (pour la fraction afférente \a chaque retrait) ..."

Although when it comes to it the calculations (and the deduction) will be made by the PEA provider before making a pay-out.

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I have just read an extra bit of "Vos Droits, Votre Argent 2007" that I had not previously read (because it involves trading in a PEA for an Annuity, which is something I do not plan to do but sounds like what the OP was getting at with his/her "draw an income" after "age 65").

The process is (1) swap PEA Bancaire for a PEA Assurance (2) PEA Assurance provides Annuity. Of course, you still pay the social charges:

"Les versements de la rente supportent les prél\evements sociaux (au taux global de 11%) sur une fraction de leur montant calculée comme pour les rentes soumises \a l'imp/o\t sur le revenu."

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Will/chessfou/BJSLIV thank you all for your prompt, and helpful replies to my questions.

If I understand this PEA animal, it seems that you can only invest in shares/investment trusts/unit trusts, either from the French side or other EU countries.

chessfou, you said that you own some investment trusts within your PEA, can these investment trusts themselves invest in corporate bonds within their funds? Looking at the link Will provided it says that you cannot invest in bonds. I assume that to mean directly, or could this mean via any investment trusts that holds bonds within its fund?

Also you mentioned charges linked to the provider, slightly confused here. If I am choosing my own investments, how do they get involved in the charges? Or did you mean just a annual management fee to be paid to them for holding your investments?

Not wishing to get even more confused at this stage, but if you cannot invest cash within the PEA, are there any products that you can invest cash in tax free?

Finally (for now) BJSLIV you said there is no escape from those pesky social charges on investments, does the personal allowance which you are granted for income tax (5515 euros) apply to income not derived from investments, in my and my wifes case company pension income? Or does all income from other sources other than investment income, get charged at the full 11%?

If so does the 11% social charge still apply to pension income when you are 65?

 

 

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The 11% (CSG/CRDS/PS) charge is something totally separate from income tax. In fact many French officials will insist that it is not a tax, it is a contribution to various social funds (in reality it is used to pay off drastic overspending by the health service). But to all intents and purposes, it is a tax.

It is not applied to pensions from outside France. France wanted to charge it on those, but an EU ruling prevented that. So at last something positive for you. But a company pension is taxable in France, and thus the usual personal allowances apply.

This link might help http://www3.finances.gouv.fr/calcul_impot/2007/simplifie/index.htm - put in the figures for your pensions, plus your years of birth etc, if in doubt leave the other boxes blank (it doesn't like you entering zeroes).

For cash alternatives to PEA, look at Livret A and Codevi, though they are somewhat limited.

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ITs/Bonds - too detailed - I dunno.

Charges - I was not 100% certain that you wanted to go the self-select route. Since you do, the range of charges is not dissimilar to the UK (some providers will help themselves to a %p.a. of your pot, others make no such holding charge and charge only for transactions - like the two I mentioned).

Cash - I am not aware of any restriction on keeping cash in a PEA (other than negligible interest - again similar to the UK from nothing at all upwards depending upon provider).

Do take a look at:

http://www.fortuneo.fr/bourse-finance/ or call them (within France) on 0 800 800 040

and

http://www.boursorama.com/ - 0 800 09 20 09

http://www.boursorama.com/banque/bourse/bourse_PEA.html

In the end I opted for Fortuneo but it was a close choice (the decider at the time was that Boursorama did not deal in several of the AIM shares that I was particularly interested in, otherwise, IIRC, they would have been very slightly cheaper).

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Once again many thanks for the replies.

Will I am slightly confused regarding the payments of CSG/CRDS/PS on company pension income.

On the Partial Disability Pension thread, Sunday Driver is saying that you will pay 8% to CPAM as well as income tax, after allowances, plus eventually the person  will be liable for CRDS payments as well.

Am I getting myself confused here? Is the 8% payment to CPAM different to CSG/PS, if so does this mean that as well as social charges of 11%, there is a further 8% to pay to CPAM as well? (I sincerely hope not!)

If it makes any difference, my wifes company pension is paid due to ill health, whilst my pension is just a straight company pension that I have started drawing early.

Any help would be much appreciated.

 

 

 

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As I understand it, a pension from outside France is not subject to CRDS/CSG/PS. But you will have to pay 8%, over a certain threshold, as health service (CMU) contribution once your E106 expires, unless you have E121. Forget about the 'social charge' label given to CRDS etc. It is a tax, dressed up in a name that is supposed to make it more palatable.

I know it's difficult and complicated - welcome to French bureaucracy.

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[quote user="Will "] I know it's difficult and complicated - welcome to French bureaucracy.[/quote]

Should you have the 'correct' accountant - not so difficult or complicated. Research, research and reasearch and all will become chrystal.

It's morning here, alas office calls.[B]

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I know - I get fed up with suggesting people see an accountant. Not saying this applies to the original question here, of course, but France seems to be full of British who don't understand that you need to pay for good advice, don't expect it to come free. It probably isn't helped by the fact that there are reputedly a lot of accountants targeting the English-speaking market who overcharge for poor advice - though I have never found one myself.

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Will once again many thanks for the info. I know this thread has veered a little off subject, but all information is valuable at this moment in time.

You mention that if in receipt of an E121 things are different. My wife currently receives long-term incapacity benefit for three different ailments. With what I have read so far I would assume she is eligible for an E121. So if you know, could you explain what deductions, be they income tax, social charges or otherwise she would have to pay.

I totally agree with your comment regarding an accountant, and if things become serious, serious then I will be contacting one in due course, just trying to find out the basics at the moment.

 

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