Finance: Luxembourg attracts French Savers Frightened by the Return of the Wealth Tax (ISF) #FrenchFinance

Fiscal uncertainty looms once again over France, bringing with it a question that deeply concerns the country’s wealthiest savers: the potential return of the Impôt de Solidarité sur la Fortune (ISF). As political discussions intensify and the possibility of re-establishing this tax seems to gain credibility, there is a resurgence of investments in Luxembourg. This financial enclave, once a safe haven for capital seeking security in the face of European fiscal uncertainties, is once again attracting the attention of French investors.

The fear of the ISF’s return

The potential return of the Impôt de Solidarité sur la Fortune (ISF) is causing palpable concern among wealthy savers in France, to the point of reviving once-declining investment strategies. After the legislative elections and especially since the announcement of the fiscal intentions of the New Popular Front, widely perceived as favorable to increased taxation of the highest estates, wealth managers are observing a surge in demand for secure investments abroad, particularly in Luxembourg. Guillaume Gimbal, director of wealth management at Swiss Life Banque Privée, notes a “very significant increase in the number of requests” for life insurance contracts in Luxembourg. This product, well-known for its tax advantages, is seen as a direct response to the fear of a resurgence of taxation considered confiscatory by those who had benefited from the absence of the ISF in recent years.

Life insurance in Luxembourg, often seen as a safe haven during times of fiscal instability, is once again in vogue, reminiscent of the movements observed at the turn of the 2010s. At that time, investors were seeking to protect their assets against the European debt crises and uncertainty about the euro zone’s future. Today, this dynamic is fueled by similar fears, exacerbated by an uncertain political climate in France. Mr. Gimbal explains that “the specter of savings taxation” is pushing his clients to anticipate the ISF’s return, urging them to seek solutions that ensure some peace of mind. The attraction to these Luxembourg products is not only based on direct tax advantages but also on a perception of increased security in the event of new economic or legislative turmoil.

Luxembourg, a tax haven and its challenges

As the idea of an ISF return haunts the minds of wealthy savers, Luxembourg reappears as a preferred destination, but this choice is not without its challenges. Luxembourg life insurance contracts, despite their reputation as a safe haven during crises, do not guarantee total tax exemption for French tax residents. In reality, they primarily allow for fiscal optimization within the limits of legislation, offering a diversified range of investments and priority over other creditors in the event of the insurer’s bankruptcy.

Meanwhile, the more radical option of tax expatriation, while appealing to some, proves to be complex and costly. Leaving France to protect one’s assets requires not only selling real estate and ending professional activities but also reorganizing the entire family’s life around this decision. Luxembourg, aware of this issue, is multiplying tax incentives to attract these potential expatriates. However, experts remind that expatriation is not a miracle cure, as it involves significant constraints and may, in the long term, prove less advantageous than expected.

The French and wealthy savers, seeking protection from uncertainty, must therefore approach these choices with calculated caution, keeping in mind that quick solutions can sometimes lead to unexpected complications.

Luc Jose A.

A graduate of Sciences Po Toulouse and holder of a blockchain consultant certification issued by Alyra, I joined the Cointribune adventure in 2019. Convinced of the potential of blockchain to transform many sectors of the economy, I made a commitment to raise awareness and inform the general public about this constantly evolving ecosystem. My goal is to enable everyone to better understand blockchain and seize the opportunities it offers. I strive every day to provide an objective analysis of current events, decipher market trends, relay the latest technological innovations and put into perspective the economic and societal challenges of this ongoing revolution.

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The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.