Blog Country Specific Expat Tax Situations

Assurance Vie for U.S. Expats in France: PFIC Rules, Form 8621, and Tax Strategies

The IRS classifies your French assurance vie as a passive foreign investment company (PFIC), which means you must file Form 8621 annually to report it on your U.S. tax return. However, PFIC reporting does not automatically mean you owe additional U.S. taxes. Many Americans in France discover that, with proper filing, their primary obligation is to stay compliant through proper paperwork rather than paying a large tax bill. (Service-Public.fr: Assurance Vie)

Here is what you need to know at a glance:

IRS classification: the IRS treats assurance vie policies as PFICs, not as life insurance, triggering annual Form 8621 reporting
Filing threshold: Form 8621 is required when the total PFIC value exceeds $25,000 ($50,000 if married filing jointly), or anytime you receive distributions or dispose of shares
Additional reporting: your assurance vie may also trigger FBAR and FATCA obligations
Tax impact: proper filing with the Foreign Tax Credit often eliminates most or all additional U.S. tax liability

Own an Assurance Vie? The IRS Sees It Differently Than France Does.

Greenback helps Americans in France handle PFIC reporting, Form 8621, and assurance vie tax strategy correctly.

Below, we cover how the IRS treats your assurance vie, which forms you need to file, how the three PFIC taxation methods compare, and practical strategies to minimize your tax exposure.

What Is an Assurance Vie and Why Does the IRS Treat It as a PFIC?

An assurance vie is France’s most popular investment vehicle. It is a life insurance wrapper around various underlying investments that grows tax-free under French law. For French residents, the benefits are significant: no capital gains tax while funds remain invested, favorable succession rules that bypass France’s rigid inheritance laws, and tax advantages that increase the longer you hold the policy.

The problem for U.S. taxpayers is that the IRS does not recognize Assurance Vie as a life insurance product. Because the policy holds a pool of investments (typically mutual funds, bonds, or money market instruments), the IRS classifies it as a PFIC under IRC Section 1291. That classification triggers annual reporting requirements through Form 8621 and subjects any distributions or gains to special PFIC tax rules.

This distinction matters because French tax benefits do not carry over to your U.S. return. While your assurance vie may grow tax-free in France, the IRS applies its own rules to determine how that growth is taxed when you file your American return.

When Do You Have to File Form 8621 for Your Assurance Vie?

You must file a separate Form 8621 for each assurance vie policy you own. The IRS requires this filing in the following situations:

Annual reporting threshold: your total PFIC holdings exceed $25,000 across all foreign investments ($50,000 if married filing jointly) at any point during the year
Distributions received: You received any distribution from the policy during the tax year
Disposition of shares: you sell, surrender, or otherwise dispose of PFIC shares during the year
Election maintenance: you have made or are maintaining a mark-to-market or QEF election

An important note: if you receive a distribution or dispose of shares, the filing requirement applies regardless of your total PFIC value. The $25,000/$50,000 threshold applies only to the annual reporting obligation when none of the triggering events occur.

The December 2025 revision of Form 8621 added a new requirement in Part V: filers must now enter a three-letter currency code above Line 15a to identify the currency in which distributions were received. If you are receiving distributions in euros, you will need to include the EUR code on your filing.

How Are the Three PFIC Taxation Methods Different?

The IRS offers three methods for calculating taxes on PFIC holdings. Each has different implications for your assurance vie.

Method	How It Works	Best For
Excess Distribution (Default)	Taxes only triggered on distributions exceeding 125% of the prior 3-year average; excess is spread over your holding period and taxed at the highest rate for each year plus interest	Expats who take no or small distributions
Mark-to-Market	Annual tax on unrealized gains based on year-end policy value; requires annual valuations from your insurer	Rarely practical for assurance vie policies
Qualified Electing Fund (QEF)	Annual tax on your share of the fund’s ordinary earnings and capital gains; requires special statements from your insurer	Almost never available for assurance vie

For most Americans with an assurance vie, the excess distribution method is the default and often the most practical option. Here is why:

Mark-to-market requires your insurer to provide year-end valuations broken down by individual fund holdings. Most French insurers do not provide this level of detail in a format that satisfies IRS requirements.
QEF elections require your insurance company to issue annual PFIC statements showing ordinary earnings and net capital gains. French insurers almost never provide these statements, making the QEF election unavailable in practice.

Under the excess distribution method, you will not owe any additional U.S. tax as long as you do not receive distributions or the distributions you receive are small enough to stay below the 125% threshold.

What Other U.S. Reporting Does Your Assurance Vie Trigger?

Your assurance vie creates reporting obligations beyond Form 8621. Here is a summary of the forms that may apply:

Form	Requirement	Threshold
FBAR (FinCEN 114)	Report the cash surrender value of your assurance vie as a foreign financial account	Aggregate value of all foreign accounts exceeds $10,000 at any point during the year
Form 8938 (FATCA)	Report specified foreign financial assets, including your assurance vie	$200,000 for single filers living abroad ($400,000 married filing jointly) at year-end, or $300,000 ($600,000 joint) at any point during the year
Form 8621 (PFIC)	Report each PFIC you own and calculate any tax due	$25,000 total PFIC value ($50,000 joint), or any distribution/disposition
Form 3520	May apply if your assurance vie is classified as a foreign trust	Depends on the structure of your specific policy

Some tax professionals take the position that certain assurance vie policies should also be reported as foreign grantor trusts on Form 3520. This depends on the specific structure of your policy. If your assurance vie holds funds in a dedicated account managed at your direction, a trust classification may apply. Discuss this with your tax advisor.

What Does Assurance Vie PFIC Reporting Look Like in Practice?

The numbers often look better than expats expect. Here are two common scenarios:

Scenario 1: No distributions taken. You hold an assurance vie worth EUR 80,000 (roughly $85,000) and take no distributions during the year. Your U.S. tax result: you file Form 8621 for annual reporting, but you owe $0 in additional U.S. taxes. Your only cost is the tax preparation fee for the form.

Scenario 2: Small annual distributions. You hold an assurance vie worth EUR 150,000 and withdraw EUR 5,000 during the year. If the EUR 5,000 distribution stays below 125% of your average distributions over the prior three years, it is treated as a non-excess distribution and taxed at ordinary income rates. With the Foreign Tax Credit offsetting French taxes you have already paid, your net additional U.S. tax is often minimal or zero.

The key takeaway from both scenarios: the PFIC rules create a paperwork obligation, but for most expats in France, the actual tax bill is small or nonexistent when filed correctly.

How Can You Minimize the U.S. Tax Impact of Your Assurance Vie?

Several strategies can help reduce your U.S. tax exposure while keeping your assurance vie compliant:

Avoid large lump-sum withdrawals: distributions that exceed 125% of your three-year average trigger the excess distribution rules, which apply the highest marginal tax rate for each year of your holding period plus an interest charge. Smaller, regular withdrawals are far more tax-efficient.
Use the Foreign Tax Credit: if you pay French income tax on your assurance-vie distributions, the Foreign Tax Credit can offset your U.S. liability dollar-for-dollar. For many expats, this eliminates any additional U.S. tax entirely.
Keep detailed records: track your contributions, annual policy statements, distribution dates, and amounts. Form 8621 calculations require your complete ownership history, and organized records make filing faster and less expensive.
File on time: Form 8621 elections must be made by your tax return due date, including extensions (October 15 for most expats). Elections generally cannot be changed retroactively, so timely filing protects your options.
Consider your long-term plan: if you plan to stay in France long-term, the French tax benefits of your assurance vie (tax-free growth, favorable succession treatment after eight years) often outweigh the U.S. reporting burden.

What If You Are Behind on Your Assurance Vie Reporting?

If you have not been reporting your assurance vie on your U.S. returns, the Streamlined Filing Compliance Procedures can help you catch up. This IRS program is designed for taxpayers who were non-willfully non-compliant, and it allows you to file three years of amended tax returns and six years of FBARs with reduced or eliminated penalties.

For expats living abroad who qualify, the Streamlined Foreign Offshore Procedures waives all penalties entirely. You will need to include previously unfiled Forms 8621 for each year your assurance vie should have been reported.

Getting current sooner rather than later is always the better path. The longer you wait, the more complex the catch-up filing becomes and the higher the potential penalties if the IRS contacts you first.

FAQs About Assurance Vie and U.S. Taxes

Is my Assurance Vie reportable on FBAR?

Yes, the IRS considers the cash surrender value of your assurance vie a foreign financial account. If the aggregate value of all your foreign financial accounts exceeds $10,000 at any point during the year, you must include it on your FBAR (FinCEN 114). The FBAR deadline is April 15 with an automatic extension to October 15.

Do I owe U.S. taxes on my Assurance Vie if I do not take distributions?

No, if you do not receive any distributions and do not dispose of shares, you will not owe additional U.S. taxes on your assurance vie. You still need to file Form 8621 for annual reporting if your total PFIC holdings exceed the $25,000 threshold ($50,000 if filing jointly), but the form itself does not generate a tax bill in this situation.

Can I use the Foreign Earned Income Exclusion for assurance vie income?

No, the Foreign Earned Income Exclusion only applies to earned income from personal services, such as wages or self-employment. Assurance vie distributions are investment income and do not qualify for the FEIE. However, the Foreign Tax Credit can offset U.S. taxes on investment income, including PFIC distributions.

What happens if I cash out my entire assurance vie?

A full surrender of your assurance vie is treated as a disposition of PFIC shares, which triggers the excess distribution rules under the default method. The gain is spread over your entire holding period and taxed at the highest marginal rate for each year, plus an interest charge. This can result in a significant tax bill. If you are considering a full surrender, consult a tax professional first to model the U.S. tax impact.

Does the U.S.-France tax treaty help with PFIC taxation?

The U.S.-France tax treaty provides relief for many types of income, but it does not override the PFIC rules. The treaty can help through the Foreign Tax Credit mechanism (French taxes paid can offset U.S. liability), but the PFIC classification and Form 8621 reporting requirements still apply regardless of treaty provisions.

File With Confidence From Anywhere in France

Form 8621 requires specialized knowledge that many general tax preparers lack, and the calculations depend on your specific ownership history and distribution patterns. Whether you need help filing your first Form 8621 or catching up on missed years, our team regularly handles PFIC reporting for Assurance Vie policies.

PFIC Reporting Is One of the Hardest Parts of Expat Tax. Let Us Handle It.

Greenback helps you get matched with a CPA or Enrolled Agent who files Form 8621 regularly for clients in France.

This article is for informational purposes only. The content does not constitute tax, legal, or financial advice. Tax rules and regulations change frequently, and your individual circumstances may affect how they apply to you. For personalized guidance, consult a qualified tax professional.