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Types of accounts

AccountRecommended durationRecommended forTypical taxes on profits
Livret A, LDDS, LEPAnyKeeping your cash0%
CTOAnyFlexibility30%
PEA> 5 yearsTax benefits17.2%
Life Insurance> 8 yearsOptimizing inheritance17.2% + 7.5%
PERUntil retirement or purchase of your primary residenceDeferring income tax30%

Livret A​

Meaning: Booklet A

Livret A is a tax-free investment, with no lock-in duration and an interest rate set by the french government (3%/year as of March 1st 2024), paid annually. Savings amount is capped at 22 950€.

The Pros:

  • Maximum flexibility: no fees, no minimum duration, transfer in and out anytime you want.
  • No risk, interest rate is guaranteed
  • No taxes on generated interests
  • Cap can be exceeded by generated interests

The Cons:

  • Interest rate usually similar to inflation
warning

You can only hold one Livret A.

LDDS​

Acronym: Livret de Développement Durable et Solidaire (Sustainable and inclusive development booklet).

Same characteristics and interest rate as Livret A. The only difference is the savings amount that is capped at 22 950€.

tip

You can open a Livret A and a LDDS.

warning

You can only hold one LDDS.

LEP​

Acronym: Livret d'Epargne Populaire (Popular Savings Book).

Same characteristics as Livret A except:

  • Interest rate is always higher: at least the rate Livret A + 0.5%, or current inflation if higher.
  • Savings amount is capped at 10k€ (but can be exceeded by interest payments).
  • Your taxable income has to be under 22 419€ for a single person (as of March 1st 2024).
tip

Your account will have to be closed only if your taxable income exceed the maximum for two consecutive years.

warning

You can only hold one LEP.

CTO​

Acronym: Compte Titre Ordinaire (Sustainable and inclusive development booklet).

The Pros:

  • Maximum flexibility: you can buy or sell any open-market day, and transfer money anytime you need.
  • Maximum choice of ETFs and stocks: the only limit being the ones listed by your broker.
  • No account limit: you can open accounts with multiple brokers.

The Cons:

  • No tax benefit: profits and dividends are taxed a flat 30% (or 17.2% + your TMI if more favorable).
  • Dividends from foreign sources have to be declared annually on your tax form to avoid double taxation (by France + other country).
  • Accounts opened in foreign countries also have to be declared when filing your taxes.

PEA​

Acronym: Plan d'Epargne en Actions (Share Savings Plan).

The Pros:

  • Tax benefit: only 17.2% social taxes on realized profits
  • No taxation as long as the money stays in the account (except for foreign dividends taxed at source).
  • Taxation only on amounts withdrawn. Example: if your account had 15k€ of cumulative deposits, and is now worth 20k€, your account has 75% of initial capital and 25% of capital gains. If you withdraw 2k€ from this account, it corresponds to 1.5k€ of initial capital and 0.5k€ of profits. You would pay taxes only on these 0.5k€ of profits.
  • Some ETFs that use synthetic replication are eligible for this account even if the tracked index is not based in the EU.
  • Transaction fees are capped by french-law at 0.5% of the transaction amount.

The Cons:

  • Restricted to European Union stocks, and ETFs with at least 75% invested in EU stocks.
  • Withdrawal within the first 5 years after opening the account: loss of tax benefit (a 30% flat tax is applied) and the account is automatically liquidated and closed.
  • If you have deep pockets: cumulative deposits are limited to 150k€.
  • Limited to one account.
tip

Open a PEA as soon as you can even if you don't invest right away: tax-benefits are based on the account seniority.

warning

You can only hold one PEA.

PEA-PME​

Acronym: Plan d'Epargne en Actions - Petites et Moyennes Entreprises.

Pros & Cons: Same as the PEA, but restricted to small and medium size businesses (SMB).

SMB that qualify for the PEA-PME have to be based in the EU, and match one of these criteria.

  • Less than 5k employees and revenue under 1.5B€ or balance sheet under 2B€.
  • Market capitalization under 1B€.

Cumulative deposits on a PEA-PME are limited to 225k€, and the cumulative deposits on a PEA and a PEA-PME are also capped at 225k€.

tip

Only open a PEA-PME if you intend to buy eligible small cap stocks, and if you plan to exceed the limit of 150k€ of deposits of the regular PEA.

warning

You can only hold one PEA-PME.

Assurance vie​

Meaning: Life Insurance.

The Pros:

  • Tax benefit: 17.2% social taxes + 7.5% flat tax on realized profits
  • Taxation only on amounts withdrawn. Example: if your account had 15k€ of cumulative deposits, and is now worth 20k€, your account has 75% of initial capital and 25% of capital gains. If you withdraw 2k€ from this account, it corresponds to 1.5k€ of initial capital and 0.5k€ of profits. You would pay taxes only on these 0.5k€ of profits.
  • If you withdraw from contracts older than 8 years: you only pay taxes on profits above 4 600€ (or 9200€ if you file taxes with your partner). This can be applied every year, but the amount is global: withdrawing from one or more contracts does not matter.
  • Optimized for inheritance (reduced taxes).
  • No account limit: you can open accounts with multiple brokers.

The Cons:

  • Withdrawal within the first 8 years after opening the account: loss of tax benefit (a 30% flat tax is applied)
  • If you have deep pockets: deposits beyond 150k€ (over all your life insurance contracts) are also subject to the 30% flat tax.
tip

You can hold multiple Life Insurances.

PER​

Acronym: Plan d'Epargne Retraite (Retirement Savings Plan).

If you work for a French company, you may already have one (also called PERCO ou PERCOL, but different from PEE).

The Pros:

  • Tax benefit: deposits can reduce your taxable income (up to 10%, with a minimum of 4 399€ as of 2024). If your taxable income for the current year was 40k€ but you transfered 4k€ into your PER (and selected "versement déductible"), your income tax will only be calculated on 36k€.
  • You can transfer funds from one account to another: useful when your employer's PER has very high fees or poor choices of investments.
  • Optimized for inheritance (reduced taxes).
  • No account limit: you can open accounts with multiple brokers.

The Cons:

  • Funds are locked until retirement, purchase of your primary residence, disability (you, your partner or your children), death (you or your partner), expiration of unemployment benefits, over-indebtedness or liquidation of your own company.
  • If you chose to reduce your taxable income, defered income tax are still due when withdrawing money (only in the case of retirement or purchase of your primary residence).
  • PER contract usually charge annual fees of around 0.5% of the contract value, on top of transaction fees, management fees or ETF fees.
  • When you decide to do something on your PER, there is a one-to-two day lag between you decision and the purshase/sale actually being done.
tip

Deferring part of your income tax allows you to invest more now, and pay back the taxes you owe later.

tip

You can hold multiple PER.