Are you an Expat living in France and are not sure how to grow and invest funds for your future?
France is an awesome place to live as an Expat. In this article, we will explain the basics of investing in France as an expat and some of the rules you have to follow while investing as a French resident.
Basics of investing in France
Before investing funds, it is really important to understand the basics of investing. Having a budget and putting money aside in an emergency fund is crucial. A common advice is to have 3 to 6 months monthly expenses saved in a savings account before investing funds.
That means, if you spend 3000 euro per month on expenses then you should have at least €9,000 (EUR) to €18,000 (EUR) saved in a savings account before investing any funds.
Also, investing funds should be a medium to long-term commitment (5 years minimum). In the event of a market downturn like we are experiencing this fall, you need to have enough time to recover and stay invested.
Your risk profile
The next topic to address would be your risk profile. As an investor, you will need to define the level of risk you are willing to take with your investment. The higher the risk usually provides the greater potential for higher returns.
A more aggressive investment will be invested in stocks which are shares of companies. The more conservative investor will allocate more funds to bonds (gilts) or fixed-income investments.
The allocation to each asset class will depend on the overall risk taken. And if you don’t know how to assess the level of risk you are willing to take, ask a professional for guidance.
How to invest in France?
Once you have money saved up and you know the level of risk you are willing to take then you need to find the right place where to invest your funds as an Expat. You have 2 options while being in France. You can invest in a local bank or you can invest your funds with a cross-border financial adviser. I will explain the difference.
Investing with a French Bank
- Usually sold with high commissions
- Investment options are restricted to the Funds offered by the Bank
- Paperwork in French only and no digital signature options
- Easily accessible at local banks
- In France, the bank only protects the first €100,000 (EUR).
- Not portable to another country
- Lower opening amounts
Investing with a Cross-border financial adviser
- Flexible and larger investment options are available
- Tax neutrality
- Portability of the product if the client moves to another country
- Secure online digital applications for clients
- Paperwork in French and English
- Lower cost and available without commissions
- Multi-currency options for the investment (EURO, GBP, USD)
- Initial Investments minimum is generally €100,000 (EUR)
When investing funds in France, you have to know your options and make sure you make the right decision on who you would like to manage your hard-earned money.
How are investments being taxed in France?
There are many things to take into account when investing in France as an Expat. The taxation of the investment is also to consider.
If you are an American Expat you will be more restricted in the choice of investments and you won’t be able to invest with a local French Bank. This is due to regulations and laws enacted in the US (FACTA).
In that case, the investment would have to be compliant with the IRS and only cross-border advisors with licenses in the US could advise you. This is also because Americans have to pay taxes in the US for a lifetime even if they live permanently in a different country.
If you are not US connected then your options are greater and the tax efficiency of the investment can be a factor in choosing the right investment.
There are tax-efficient investment options that deferred tax and increase the estate tax exemption. Living in France has great benefits but tax rates are not one of them.
If you have income from your investments in France, you will expect to pay a high level of taxes. There are ways to minimize the amount. It is important to get advice from a qualified tax adviser that is competent in France and your home country.
In conclusion, it is really important for expats to know their options and seek advice when needed.
When working with an adviser, make sure the adviser is not charging commissions but only a fee-based schedule.
That means you pay a set fee on the assets managed instead of a high commission on products sold.
You will want to work with someone that has your best interest in mind and doesn’t get paid by third-party companies to use their products. You will also need to review and rebalance the portfolio consistently.
We recommend a quarterly meeting so you are always updated on what is happening in the marketplace and are aware of any changes made to the plan.
At the end of the day it is important to know that your money is growing and that you have confidence in the choices made by your or the adviser.
At Harrison Brook, we give personalised holistic financial advice that meets your specific needs. If you would like to know more about how we serve the Expat community don’t hesitate to get in touch with Cedric Bernier.