Assurance Vie Taxation: What US Expats in France Need to Know About PFIC Reporting
Here’s the relief you need: According to the IRS Statistics of Income, most Americans with foreign investments owe little to no additional US taxes when they file correctly. Your French assurance vie requires specific reporting, but proper Form 8621 filing typically results in compliance without major tax bills.
Your assurance vie is treated as a passive foreign investment company (PFIC) by the IRS, which means annual Form 8621 reporting. However, this doesn’t automatically mean you’ll owe taxes. Many expats living in France discover that with correct filing, their primary obligation is simply staying compliant through proper paperwork.
At Greenback Tax Services, we’ve helped over 23,000 expats file over 71,000 returns while maintaining a 4.9-star average on TrustPilot. We handle PFIC reporting for Assurance Vie policies regularly, and here’s what we want you to know: most clients owe little to no US taxes on their French policies when filed correctly.
What Is an Assurance Vie and How Does It Affect Your US Taxes?
An assurance vie is France’s most popular investment vehicle—a life insurance wrapper around various investments that grows tax-free under French law. French residents benefit from:
- No capital gains tax while funds remain invested
- Favorable succession laws that bypass France’s rigid inheritance rules
- Tax benefits that increase with the holding period
- Flexibility to choose underlying investments
The US perspective: The IRS treats assurance vie policies as PFICs rather than life insurance. This requires Form 8621 reporting but doesn’t necessarily create additional taxes.
PFIC Reporting: Required Forms, Likely Outcomes
The IRS requires transparency through Form 8621 filing when you own an assurance vie. Here’s what this means in practical terms:
Form 8621 Requirements
You must file a separate Form 8621 for each assurance vie policy when:
- Total PFIC value exceeds $25,000 across all your foreign investments
- You receive any distributions from the policy
- You dispose of PFIC shares during the tax year
Filing requirements exist even if you owe no additional taxes.
Three Taxation Approaches
Excess Distribution Method (Default Option):
- Only creates tax liability when you receive distributions
- Treats large distributions as spread over your ownership period
- Most policies generate minimal current tax impact
Mark-to-Market Election:
- Creates an annual tax on paper gains
- Requires year-end policy valuations
- Generally not recommended for long-term policies
Qualified Electing Fund (QEF) Election:
- Requires special documentation from your insurance company
- Most French insurers don’t provide QEF statements
- Rarely available for assurance vie policies
Real Examples: Typical Outcomes for US Expats
Sarah’s Situation: Corporate expat in Paris
- Assurance vie value: €75,000 ($82,000)
- No distributions received in 2024
- US tax result: Filed Form 8621, owed $0 in additional US taxes
- Annual cost: Tax preparation fees only
Michel’s Approach: Long-term expat with growing policy
- Assurance vie purchased in 2019, now worth €150,000
- Takes small annual distributions of €5,000
- US tax result: Minimal additional US tax due to measured distribution strategy
- Key factor: Small, regular distributions vs. large lump sums
How Different Situations Affect Your Tax Outcome
- Living in France with the Foreign Tax Credit: Your French income taxes often eliminate most US tax liability, including PFIC-related taxes.
- Using the Foreign Earned Income Exclusion: You can exclude up to $130,000 (2025 tax year) from US taxation while still meeting PFIC reporting requirements.
- Moving from France: Your assurance vie remains a PFIC requiring continued US reporting, but the obligation is simply annual form filing.
- Planning your distributions: Strategic timing of withdrawals can minimize any US tax impact while maintaining compliance.
Practical Steps for Staying Compliant
- Keep organized records: Track your contributions, annual policy statements, and distributions. Form 8621 instructions specify the documentation needed.
- Consider your timeline: Long-term French residents often find the policy benefits outweigh the reporting requirements.
- Plan distributions carefully: Smaller, regular withdrawals typically create less US tax impact than large lump-sum distributions.
- Annual compliance: File Form 8621 by your tax return due date, including extensions (October 15th for most expats).
Simple Mistakes to Avoid
- Ignoring small policies: Multiple foreign investments can exceed the $25,000 reporting threshold even if each is individually small.
- Missing the filing deadline: Form 8621 elections must be made by your tax return due date and generally cannot be changed later.
- Panic over PFIC status: Remember that reporting requirements don’t automatically mean additional taxes owed.
- Compared to US investments, French tax benefits may justify the additional US reporting requirements for long-term French residents.
Your Next Steps: Simple Path to Compliance
- If you’re current with your US taxes, contact a qualified expat tax professional like Greenback for proper PFIC reporting. Once properly handled, most expats find the process straightforward.
- If you’re behind on filing, the Streamlined Filing Compliance Procedures help you catch up with minimal penalties, including missed PFIC reporting.
- If you’re considering an assurance vie, weigh the French benefits against US reporting requirements. Many long-term French residents find the advantages worthwhile.
Why Professional Help Ensures Peace of Mind
Form 8621 requires specialized knowledge that many general tax preparers lack. The calculations depend on your specific ownership history and distribution patterns.
Greenback Tax Services handles these exact situations regularly. Our CPAs and Enrolled Agents live in 14 time zones (many are expats themselves) and know both the US requirements and French investment structures.
We’ve helped over 23,000 expats file over 71,000 returns while maintaining our 4.9-star TrustPilot rating. Our specialized experience with PFIC reporting means you’ll have confidence that your taxes are handled correctly.
Ready to get your assurance vie reporting sorted?
Most situations are more straightforward than they initially appear. Contact us, and one of our Customer Champions will explain precisely what you need to do. If you’re ready to be matched with a Greenback accountant who handles PFIC reporting regularly, click here to get started.
For general questions about your specific situation, you can also schedule a consultation with one of our expat tax experts.
This article provides general information about US tax obligations for assurance vie policies and should not be considered specific tax advice. Individual situations vary, and you should consult a qualified tax professional about your circumstances.
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