Expatriate Tax Returns Helps U.S. Expats in France Navigate Assurance Vie and PFIC Reporting Requirements

An assurance vie is one of France’s most popular investment productsβ€”a life insurance wrapper used to grow savings tax-free under French law. For residents in France, it offers significant advantages:

  • No capital gains tax while funds remain invested
  • Inheritance flexibility outside of strict French succession laws
  • Tax benefits that increase with time
  • Flexible investment choices within the policy

But for U.S. citizens, things are more complex.

How the U.S. Treats Assurance Vie

The IRS doesn’t consider an assurance vie to be life insurance. Instead, it’s often classified as a Passive Foreign Investment Company (PFIC). This means U.S. expats must report it using Form 8621, even if no tax is due.

When You Must File Form 8621

You’ll need to file Form 8621 for each assurance vie policy if:

  • Your total PFIC holdings exceed $25,000
  • You receive any distributions
  • You sell or transfer shares in the policy

Note: Filing is still required even if you owe zero additional U.S. tax.

Taxation Methods: Three Options

  1. Excess Distribution Method (default)
    • Only taxed on distributions
    • Taxes spread over the period you’ve owned the policy
    • Often results in low current tax
  2. Mark-to-Market Election
    • Taxes unrealized gains annually
    • Requires annual valuations
    • Less common for long-term holders
  3. QEF Election
    • Requires insurer-provided data (rarely available from French providers)
    • Seldom used for assurance vie

Real-World Examples

Sarah, expat in Paris

  • Policy value: $82,000
  • No withdrawals
  • Filed Form 8621, no U.S. tax due

Michel, retired in Lyon

  • Policy started in 2019, now worth $150,000
  • Withdraws €5,000 annually
  • Minimal U.S. tax due due to small, consistent distributions

U.S. Tax Strategy Considerations

  • Foreign Tax Credit: Offsets U.S. tax with French taxes paid
  • Foreign Earned Income Exclusion (FEIE): Excludes up to $130,000 (2025) but doesn’t exempt PFIC reporting
  • Still a PFIC if you move away: Annual Form 8621 remains required

Compliance Tips

  • Keep clear records of contributions, withdrawals, and annual values
  • File Form 8621 on time with your U.S. return (including extensions)
  • Plan withdrawals carefullyβ€”small amounts over time typically reduce tax exposure

Avoid These Mistakes

  • Ignoring small policiesβ€”values add up across investments
  • Missing the filing deadline
  • Assuming PFIC status always results in taxβ€”often, it doesn’t

Final Word

For many expats in France, the French tax benefits outweigh the U.S. reporting burden, especially with proper guidance.

Need help reporting your assurance vie?
Connect with an expat tax specialist who understands PFICs and French investment rules. With the right support, staying compliant can be simple and stress-free.

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