What is a Plan d’épargne en actions (PEA) in France?
The Plan d’épargne en actions (PEA) can be translated as “Stocks and shares savings plan” and is a regulated savings and investment product in France which allows you to invest into European company shares or funds. The product has some tax advantages.
Types of PEA
There are three types of PEA:
- PEA classique bancaire
- Available from banks and enables you to invest into European company shares and investment funds
- PEA classique assurance
- Available from assurance companies in the form of a unit-based capitalisation contract (contrat de capitalisation en unités de compte) and enables you to invest into European company investment funds
- PEA-PME
- Enables you to invest into small and medium sized European companies.
Investment limits
You can invest up to 150,000 euros into a PEA classique bancaire or a PEA classique assurance. You can invest up to 225,000 euros into a PEA-PME. It is possible to combine either a PEA classique bancaire or a PEA classique assurance with a PEA-PME. In this case, the total invested into the two accounts cannot exceed 225,000 euros and the amount invested into a PEA classique (bancaire or assurance) cannot exceed 150,000 euros.
Gains, such as from capital growth, interest and dividends are uncapped.
Eligible investments
A Plan d’épargne en actions (PEA) features a cash account and a share account, the cash account is used simply to purchase shares.
Within a PEA classique bancaire, you can invest into individual companies based in the European Union, or into investment funds that are invested 75% into companies which have their head office in the European Union (EU) or the European Economic Area (EEA). Currently, with a PEA classique assurance, you can only invest into investment funds which are 75% invested into companies which have their head office in the EU or the EEA.
Investment funds in France are known as “organismes de placement collectif en valeurs mobilières (OPCVM) and there are two kinds: “sociétés d’investissement à capital variable” (SICAV) and “fonds communs de placement” (FCP). There two kinds of OPCVM are very similar to each other.
A PEA-PME is only for investing into small and medium sized companies. The company criteria for investment into private companies is as follows:
- Fewer than 5,000 employees
- Revenue less than 1.5 billion euros or a total balance sheet not greater than 2 billion euros.
- You cannot invest into companies that you, your conjoint, children or parents own directly or indirectly more than 25% of shares.
The PEA-PME criteria for investment into public companies is as follows:
- Fewer than 5,000 employees
- Revenue less than 1.5 billion euros or a total balance sheet not greater than 2 billion euros.
- Market capitalisation less than 1 billion euros during at least one of the last four accounting periods.
Tax rules and advantages
A PEA is designed to be held for at least five years. The tax rules in 2023 are as follows:
- Withdrawal after five years of investment
- For listed shares and funds, income and capital gains are free of income tax but not of social charges (17.2% in 2023)
- For private companies, 10% of the acquisition value of the company or companies are exempted from income tax but the rest is subject to income tax at 12.8% and to social charges at 17.2% (30% in total).
- Withdrawal before five years of investment
- The gains are taxed at 12.8% income tax and 17.2% social charges (30% in total). If you wish, you can opt for your normal tax rate, if lower.
- There are exceptions in the case of death, the loss of your job, disability and forced early retirement and if the funds are used to finance your new business.
- Absence of withdrawal
- Income and gains from investment funds and listed shares are not subject to income tax and social charges if the funds are not withdrawn and the income is reinvested into the PEA
- For private companies, 10% of the acquisition value of the company or companies are exempted from income tax but the rest is subject to income tax at 12.8% and to social charges at 17.2% (30% in total).
What happened on death?
In the case of a PEA classique bancaire, the PEA is closed and the shares are transferred to a standard general investment account, known as a compte-titres in French.
In the case of a PEA classique assurance, the PEA is closed and the funds are held within a capitalisation contract.
In the case of a PEA-PME, the PEA is closed and the shares transferred to a compte titres or held within a capitalisaiton contract, depending upon your PEA-PME.
Gains are not subject to income tax but they are subject to social charges at 17.2%, whether or not the shares have been held for five years. The amount remaining after social charges is subject to normal inheritance tax rules (spouse’s are normally exempt from inheritance tax, known as droits de succession in French).
Main sources
- https://www.service-public.fr/particuliers/vosdroits/F2385
- https://www.economie.gouv.fr/particuliers/plan-epargne-actions-pea
The views expressed in this article are not to be construed as personal advice. Therefore, you should contact a qualified, and ideally, regulated adviser in order to obtain up-to-date personal advice with regard to your own personal circumstances. Consequently, if you do not, then you are acting under your own authority and deemed “execution only”. Additionally, the author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Importantly, this article is dated and is based on legislation as of the date. It should be noted that legislation changes, but articles are rarely updated. Sometimes a new article is written; so, please check for later articles. Additionally, check for changes in legislation on official government websites. Finally, this article should not be relied on in isolation.
