[UK ex-pat in France - please advise on investment accounts]

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Topic Author
Paddarazi
Posts: 9
Joined: Wed May 12, 2021 11:20 am

[UK ex-pat in France - please advise on investment accounts]

Post by Paddarazi »

[Moved into a new thread from: Popular retirement/savings products in France & Germany? --admin LadyGeek]

Hello,
I am a UK citizen but resident in France. I want to invest our savings in low-cost trackers but I would also like to be able to invest in some specific stocks and funds.

1. I am considering using a UK investment platform (Hargreaves Lansdown) to invest our savings. Will the taxation be the same as using a French or European stockbroker or investment service?

2. Would you advise using a PEA or CTO instead? I like the choice and flexibility afforded by Hargreaves Lansdown which is why I am not so keen on the French equivalents (and not an offshore bond like an Assurance Vie). I have three kids so little income tax so the benefits of the PEA seem to be nullified.

3. If I don't use a UK service, what is the best low-cost online broker or method of investing in France or Europe?

Many thanks for your help and advice!
Paddarazi
assyadh
Posts: 340
Joined: Tue Sep 18, 2018 12:44 pm

Re: [UK ex-pat in France - please advise on investment accounts]

Post by assyadh »

Hi.

How much savings are we talking about?

1/ Taxation on brokerage accounts overseas is the same. You just have a reporting requirement if it's not France based, which is normal. France recognize Accumulating ETF so make sure you have access to that.

2/ I would use a PEA if you plan to invest in stuff accessible through a PEA such as a MSCI World ETF (CW8, 0.38% er). The reason why is it's fairly easy to keep it for 5 years, and the benefit is actually capped at 150k contribution per individual. depending on how much we're talking about it.
The reason why I would use a PEA is that if you plan to leave France then it will just behave as a brokerage account.

Also, if you're not sure, you could just open a PEA (minimum 10E cash contribution at Bourse Directe) and start the clock on it. the 17.2% rate benefit is based on when the account was opened, not the contributions date. So you can open one for free with 10 euros cash contribution and start the clock.

3/ For brokerage accounts, DeGiro or IBKR (if you have 100k+), for PEA Bourse Directe.
Topic Author
Paddarazi
Posts: 9
Joined: Wed May 12, 2021 11:20 am

Re: [UK ex-pat in France - please advise on investment accounts]

Post by Paddarazi »

Hi assyadh,
Thanks so much for getting back to me.
We will be investing around 600k (Euros).
1. Great, will most likely be Accumulating ETF like the one you mention.
2. I'll look more into the PEA, definitely seems a good idea to take advantage of this benefit (with two allowances) and set the clock ticking!
I will check out Boursedirect, DeGiro and IBKR.

Is the benefit that after 5 years you avoid the 17.2% Prelevements Sociaux or that you avoid income tax?

Thanks again,

Paddarazi
assyadh
Posts: 340
Joined: Tue Sep 18, 2018 12:44 pm

Re: [UK ex-pat in France - please advise on investment accounts]

Post by assyadh »

Paddarazi wrote: Wed May 12, 2021 3:25 pm Hi assyadh,
Thanks so much for getting back to me.
We will be investing around 600k (Euros).
1. Great, will most likely be Accumulating ETF like the one you mention.
2. I'll look more into the PEA, definitely seems a good idea to take advantage of this benefit (with two allowances) and set the clock ticking!
I will check out Boursedirect, DeGiro and IBKR.

Is the benefit that after 5 years you avoid the 17.2% Prelevements Sociaux or that you avoid income tax?

Thanks again,

Paddarazi
After 5 years you avoid income tax (12.8% of the flat tax).

Depending on your family composition it may not be worth it because for regular capital gains you can opt out of the flat tax and pay regular income tax + 17.2% CSG. this may be better if you have a spouse and children because your 'parts fiscales' are high and you don't withdraw a lot of gains, which should be the case since you're just putting money in, most of your withdrawals would be basis?

If you look at the current rates: https://www.service-public.fr/particuli ... tes/A14556

Jusqu'à 10 084 € : 0 %

De 10 085 € à 25 710 € : 11 %

Which means that for two people you could draw 10084E *2 of gains for 17.2% (17.2% csg + 0 % income tax). Hope you see the point.

All things said one of the other advantages of the PEA is that assets in it are not liable for the exit tax (provided you qualify if you ever leave France).

Lastly, I wouldn't bet on the Assurance Vies because the main objective (reduce inheritance tax) will most likely be taken away by the government at some points, because they are being lobbied by the notaires (to increase their fees..)
Topic Author
Paddarazi
Posts: 9
Joined: Wed May 12, 2021 11:20 am

Re: [UK ex-pat in France - please advise on investment accounts]

Post by Paddarazi »

Thanks again.
Indeed I'm married and with three kids it means we have a big income tax allowance before paying anything.

When you say it may not be worth it, do you mean it might be better (more flexible) just to invest directly through a brokerage account (European or UK)?

And what do you mean by 'exit tax'?

Thanks, sorry if these are ignorant questions!
assyadh
Posts: 340
Joined: Tue Sep 18, 2018 12:44 pm

Re: [UK ex-pat in France - please advise on investment accounts]

Post by assyadh »

Exit tax: https://www.impots.gouv.fr/portail/inte ... y-exit-tax

Essentially if your housing has a portfolio of more than 800K and you are a long term resident and you change your residency then you are subject to an exit tax, unless you don't sell assets in the following two to 5 years (Rules are explained in the link above).

Given you have a lot of members in the family, I would invest in a regular brokerage account, unless you plan to eventually make really large withdrawals or stay in France for a long time.
Topic Author
Paddarazi
Posts: 9
Joined: Wed May 12, 2021 11:20 am

Re: [UK ex-pat in France - please advise on investment accounts]

Post by Paddarazi »

Ok I will check out all of that before pulling the trigger on anything, thanks again for the help!
TedSwippet
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Location: UK

Re: [UK ex-pat in France - please advise on investment accounts]

Post by TedSwippet »

Welcome. Good advice already on the French side of things. I've added a bit on the UK side.
Paddarazi wrote: Wed May 12, 2021 11:29 am 1. I am considering using a UK investment platform (Hargreaves Lansdown) to invest our savings. Will the taxation be the same as using a French or European stockbroker or investment service?
A couple of thoughts here.

Is your anticipated €600k investment already in EUR, or GBP, or a mix? And is it a current lump sum, or future income.

If using a UK broker, you may find yourself tied to GBP investing, which can incur a lot of forex costs you would want to avoid. Hargreaves Lansdown only allows GBP cash balances and dealing in accounts, and charges up to 1.5% on conversions. Interactive Investor may do a better job of supporting multiple currencies, but also has a forex fee of up to 1.5%. If stuck with currency conversions, avoid both these and the big banks, and instead use a specialist like (Transfer)Wise or Revolut, or perhaps Xe, MoneyCorp and so on.

In all cases, you will need to make double-sure that a UK investment platform will accept you as a customer when you are not a UK resident. Many platforms have become foreign-resident-phobic of late.

Finally, on tax. Do you anticipate a return to the UK? If yes, you will want to be sure you are well acquainted with the UK's capital gains tax rules, so that you do not return holding anything that is a UK tax trap (an HMRC non-reporting status fund, say) or with a built-in gain that might be better taken before becoming UK resident. And, have you checked into the UK/France tax treaty to see how a French PEA or Assurance Vie account would be treated, if you kept one, assuming French providers will let you, after returning to the UK.
Paddarazi wrote: Wed May 12, 2021 11:29 am 3. If I don't use a UK service, what is the best low-cost online broker or method of investing in France or Europe?
Interactive Brokers is popular here among folk with international lifestyles, and is reputed to have the absolute skimpiest forex charges going. A forum search should bring forward some threads for you on that.
Topic Author
Paddarazi
Posts: 9
Joined: Wed May 12, 2021 11:20 am

Re: [UK ex-pat in France - please advise on investment accounts]

Post by Paddarazi »

Hi TedSwippet,
Thanks for getting involved!

600K is a lump sum in GBP. Wont be earning a great deal in France so won't be adding to the 600k too much any time soon. Want to leave the money to compound long-term. Hoping that pound will become stronger that's why haven't converted yet (though I know it is risky having assets not in currency you may need in future).

Good point about Forex which I hadn't considered. Although I speak French I favour the UK platforms but there's not much point setting oneself up to losing hard-earned gains down the line. I'll check out Interactive Investor. I suppose I just have to work out what we do if the pound jumps to 1.2 or 1.25 Euros at some point in the future. I've used Transferwise before. Presumably I could just take the whole lot out of HL (or most of it) and at that point put it into a European broker.

HL have accepted me an Overseas Fund and Share Account so that should be ok, thankfully!

I don't anticipate a return to the UK but it is quite possible for our children, so you raise a good point!

I will check out the UK / French tax treaty and definitely Interactive Brokers.

Don't know why but there is a part of me that prefers the look and feel of the UK investment platforms. I suppose what matters though is how secure are the financials of the brokers, their track record, costs etc...

Thanks for the advice
TedSwippet
Posts: 3684
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: [UK ex-pat in France - please advise on investment accounts]

Post by TedSwippet »

Paddarazi wrote: Thu May 13, 2021 5:47 am 600K is a lump sum in GBP. Wont be earning a great deal in France so won't be adding to the 600k too much any time soon. Want to leave the money to compound long-term. Hoping that pound will become stronger that's why haven't converted yet (though I know it is risky having assets not in currency you may need in future).
It may not be as risky as you think. Your current holdings will be denominated in GBP, but what really matters is the currency of the assets they hold. To take an extreme example, you could invest all your current UK assets in an all-world index tracker fund, and you would get the same returns as if you converted everything from GBP to EUR and then invested those EUR in an equivalent EUR-based all-world index tracker fund.

Fully described here: Non-US investors and ETF currencies - Bogleheads
Paddarazi wrote: Thu May 13, 2021 5:47 am Good point about Forex which I hadn't considered. Although I speak French I favour the UK platforms but there's not much point setting oneself up to losing hard-earned gains down the line. I'll check out Interactive Investor. I suppose I just have to work out what we do if the pound jumps to 1.2 or 1.25 Euros at some point in the future. I've used Transferwise before. Presumably I could just take the whole lot out of HL (or most of it) and at that point put it into a European broker.
Again, on currencies what matters is what the ETFs you own hold, not what their trading or denomination currencies are.

For stocks, unhedged is usually preferred. For bonds however, hedging to your currency of consumption is usually best. This would mean finding an EUR-hedged bond or gilt ETF, assuming you plan to spend in EUR and not (say) return to the UK for retirement etc.
Paddarazi wrote: Thu May 13, 2021 5:47 am HL have accepted me an Overseas Fund and Share Account so that should be ok, thankfully!
Relatively positive. Take care to stick to ETFs with them rather than going for OEICs or unit trusts. Their platform charge for ETFs and shares is commendably low, but their platform charge for OEICs and unit trusts is ludicrously high.
Topic Author
Paddarazi
Posts: 9
Joined: Wed May 12, 2021 11:20 am

Re: [UK ex-pat in France - please advise on investment accounts]

Post by Paddarazi »

Thanks Tedswippet, I've just about got my head around that currency rabbit hole! Important points you make so thanks, particularly about hedged bonds.
It seems that I can use Bourse Direct for a PEA and then either HL or IBKR for the rest,
Paddarazi
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