France Investment Income Tax Guide (PFU — Prélèvement Forfaitaire Unique)
the French taxation of investment income. The guide covers: the Prélèvement Forfaitaire Unique (PFU) — the flat tax of 30% on investment income (12.8% income tax + 17.2% social charges) introduced in 2018; the PFU applies to: (a) dividends (the "dividendes" — distribution of profits by French and foreign companies), (b) interest (the "intérêts" — interest on savings accounts, bonds, loans, and cash deposits; the Livret A and the Livret de Développement Durable et Solidaire (LDDS) are exempt from income tax and social charges), (c) capital gains on the sale of securities (the "plus-values de cession de valeurs mobilières" — gains on the sale of shares, bonds, ETFs, mutual funds); the option for the progressive rate (the "option pour le barème progressif") — the taxpayer can elect annually to be taxed at the progressive IR rates instead of the PFU; the option may be advantageous for low-income taxpayers (whose marginal rate is below 12.8%) or for taxpayers with significant deductions; if the option is chosen, the 40% abatement on dividends (the "abattement de 40%") applies, and the social charges (17.2%) remain deductible in the next year (the "CSG déductible" — 6.8% of the gross dividends are deductible from taxable income); the social charges (prélèvements sociaux) — the CSG (9.2%), CRDS (0.5%), and the prélèvement social (4%) plus its surcharges (the "prélèvement de solidarité" etc.) — total 17.2%; the social charges apply to investment income regardless of whether the taxpayer chooses the PFU or the progressive rate; the life insurance (assurance-vie) — the most popular investment vehicle in France: withdrawals before 8 years are subject to the PFU (30%) or the progressive rate; withdrawals after 8 years benefit from a reduced rate: (a) for premiums paid up to €150,000: the gains are taxed at 24% (7.5% income tax + 17.2% social charges — but the income tax is reduced to 7.5% instead of 12.8%); for premiums above €150,000: the gains are taxed at 30% (12.8% + 17.2%); the annual allowance of €4,600 for single persons (€9,200 for couples) applies to gains on withdrawals from contracts older than 8 years; the PEA (Plan d'Épargne en Actions) — the French equity savings plan: the taxpayer can invest up to €150,000 in shares of European companies (with a maximum of €225,000 for the couple's PEA); the capital gains and dividends within the PEA are tax-free while reinvested; withdrawals from the PEA after 5 years are subject to social charges (17.2%) but the income tax is 0% (the "exonération d'impôt sur le revenu" after 5 years); withdrawals before 5 years trigger the PFU at 30% (12.8% + 17.2%) and the closure of the PEA; the PEA-PME — a variant with a limit of €225,000 for investments in SMEs and mid-cap companies; the capital gains on real estate (the "plus-values immobilières") — the sale of a property that is not the main residence is subject to capital gains tax: 19% income tax + 17.2% social charges = 36.2% total; the allowance for the holding period (the "abattement pour durée de détention") — 6% per year from the 6th to the 21st year (full exemption after 22 years for income tax, after 30 years for social charges); the allowance for the main residence — the sale of the main residence is fully exempt from capital gains tax; the PASS (Plan d'Épargne Retraite — PER) — the new French retirement savings plan (the PER individuel and the PER d'entreprise): the contributions are deductible from taxable income (up to the "Plafond Annuel de la Sécurité Sociale" or PASS); the withdrawals at retirement are taxed as a pension annuity (the "rente viagère") or as a lump sum (the "capital") — only part of the lump sum is taxable (the gains portion).
The PFU at 30% is a significant advantage compared to the progressive rates for high-income investors. All amounts in Euros (EUR). For related reading, see our Personal Tax Guide →, Pension Guide →, and Life Insurance Guide →.
PFU — 30% Flat Tax
- Dividends: Dividends are subject to the PFU at 30% (12.8% income tax withheld at source + 17.2% social charges). A flat-rate withholding of 12.8% is applied at the source by the paying institution (the "prélèvement forfaitaire non libératoire" — PFNL — 12.8% for income tax). The taxpayer can opt for the progressive rate and receive a credit for the 12.8% already withheld.
- Interest: Interest on bonds, savings accounts (Livret B, CAT, PEL after 10 years), and loans is subject to the PFU at 30% (12.8% + 17.2%). Interest on regulated savings accounts is exempt: Livret A (€22,950 limit), LDDS (€12,000 limit), Livret Jeune (€1,600 limit), LEP (Livret d'Épargne Populaire — €10,000 limit, for low-income households).
- Capital gains: Capital gains on the sale of securities (shares, bonds, ETFs, mutual funds) are subject to the PFU at 30%. The gain is calculated as the difference between the sale price and the acquisition price (plus the costs of acquisition). The allowable costs (frais d'acquisition) can be included at a flat rate of 7.5% of the sale price.
PEA (Plan d'Épargne en Actions)
- Tax-free growth: The PEA is an equity savings plan with a maximum contribution of €150,000. The contributions are made in cash (not in kind). The money must be invested in shares of European Economic Area companies (at least 75% of the PEA must be in equities). The capital gains and dividends within the PEA are tax-free while reinvested. Withdrawals after 5 years are subject to social charges (17.2%) but the income tax is 0%. Withdrawals before 5 years trigger the PFU at 30% and the closure of the PEA (the funds must be withdrawn entirely).
- PEA-PME: A variant of the PEA with a limit of €225,000 for investments in SMEs and mid-cap companies (the "PME et ETI"). The PEA-PME can be opened alongside a PEA (total limit of €225,000 across both plans). The same tax rules apply (exemption after 5 years).
For the life insurance taxation (assurance-vie), see our Life Insurance Guide →. For the retirement savings (PER), see our Pension Guide →. For the social charges on all investment income, see our Social Charges Guide →.