Investing Taxes in France (2026):
PEA, flat tax, and ETF eligibility
France’s tax system for investors has two tiers: a 30% flat tax in a standard account, or a 17.2% effective rate via the PEA after five years. This guide explains how each account works, which ETFs qualify, and how to structure your portfolio for the lowest legal tax drag.
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How French investment tax works at a glance
- Open at a French institution.
- €150,000 contribution cap per person.
- After 5 years: 17.2% effective rate (social charges only — income tax waived).
- Equity ETFs only — bond and commodity ETFs excluded.
- Global index ETFs via swap-based UCITS often qualify.
- No contribution cap, no fund restrictions.
- 30% flat tax (PFU) on gains and dividends.
- Use for assets that cannot go in the PEA.
- Available at international brokers (IBKR, DEGIRO).
- Prefer accumulating ETFs to defer tax events.
The 30% flat tax (PFU) — how it breaks down
Since 2018, investment income in a standard French brokerage account is taxed through a single rate: the Prélèvement Forfaitaire Unique (PFU), or flat tax. It applies to capital gains, dividends, and interest.
| Component | Rate | Recipient |
|---|---|---|
| Income tax (IR) | 12.8% | French state |
| Social charges (prélèvements sociaux) | 17.2% | Social security system |
| Total PFU | 30% | — |
Lower-income investors can elect to use the progressive income tax scale instead of the flat 12.8% component. The 17.2% social charges still apply either way. The election covers all investment income for the year — you cannot mix rates across different assets.
Capital losses in a CTO can be offset against gains in the same year. Unused losses carry forward for up to ten years. Losses inside a PEA cannot be used to offset CTO gains — the two accounts are treated separately.
The PEA: how the five-year tax advantage works
The Plan d’Épargne en Actions (PEA) is France’s most powerful tool for long-term equity investors. The tax benefit is straightforward: hold the account for five years, and the income tax component on withdrawals drops to zero.
| Holding period | Income tax on gains | Social charges | Effective rate |
|---|---|---|---|
| Under 5 years | 12.8% | 17.2% | 30% |
| 5 years or more | 0% | 17.2% | 17.2% |
- €150,000 contribution cap per person (gains can push value above this).
- One PEA per person — couples can each hold one (€300k combined).
- Partial withdrawals after 5 years are allowed without closing the account.
- Gains inside the account compound tax-free — the tax event only occurs on withdrawal.
- The 5-year clock starts on the account opening date, not the first investment.
A PEA-PME targets small and mid-cap European companies and has a separate contribution cap of €225,000. The same five-year tax advantage applies.
In practice, fund selection is more limited and this account is less commonly used by passive ETF investors. Most people focus on the standard PEA first.
Which ETFs qualify for the PEA?
This is the most nuanced part of the French tax system for ETF investors. Not every UCITS fund qualifies — the rules depend on fund structure and domicile.
To qualify for the PEA, a fund must invest at least 75% of its assets in equities of companies headquartered in the EU or EEA. Most physical UCITS ETFs tracking global or US indexes fail this test — they hold significant allocations to US and emerging-market stocks.
The solution is synthetic (swap-based) UCITS ETFs. French tax law allows swap-based funds to qualify even when the target index is global or US-focused, because the physical basket satisfies the 75% EU rule while the swap delivers the index return. Amundi and Lyxor (now Amundi) are the main providers of PEA-eligible synthetic UCITS ETFs.
| Asset type | PEA-eligible? | Notes |
|---|---|---|
| EU/EEA equity UCITS ETF — physical | Usually yes | Must meet the 75% EU/EEA equity threshold |
| Global equity UCITS ETF — physical (e.g. MSCI World) | Usually no | Fails 75% EU/EEA rule due to US/EM exposure |
| Global or S&P 500 UCITS ETF — synthetic | Often yes | Must be structured for PEA compliance; verify with broker |
| Bond UCITS ETF | No | Fixed income funds are excluded from PEA by definition |
| Commodity or gold ETF/ETC | No | Not equity-based; excluded from PEA |
| US-domiciled ETFs (e.g. VOO, SPY) | No | Not purchasable by EU retail investors anyway (PRIIPs/KID) |
The CTO: your overflow and non-PEA-eligible account
The compte-titres ordinaire (CTO) is a standard taxable brokerage account. No contribution cap, no fund restrictions — and no special tax treatment. Gains are taxed at 30% PFU.
- Assets that cannot go in the PEA: bond ETFs, commodity ETFs, non-EU index funds.
- Amounts above the €150,000 PEA contribution cap.
- Investors who are not French residents (PEA not available to non-residents).
- International broker accounts (IBKR, DEGIRO) function as CTOs.
- 30% PFU on all capital gains and dividends.
- Dividends trigger a taxable event in the year received — even if reinvested.
- No tax deferral inside the account.
- Prefer accumulating ETFs to defer the tax event to the point of sale.
PEA vs CTO: how the numbers compare
The tax difference compounds significantly over long holding periods. Here is how the two accounts compare across common investor scenarios.
| Scenario | PEA (after 5 yrs) | CTO |
|---|---|---|
| Capital gain on sale | 17.2% social charges only | 30% PFU (12.8% + 17.2%) |
| Dividend from distributing ETF | Reinvests tax-free inside PEA | 30% PFU in year received |
| Accumulating ETF growth | Tax-deferred until withdrawal | 30% on gain at sale |
| Annual tax drag on compounding | None while funds stay in PEA | Annual drag on distributions |
| Tax reporting | Automatic (French broker) | Must declare gains on tax return |
| Contribution limit | €150,000 per person | Unlimited |
| Fund eligibility | Equity only; eligibility rules apply | No restrictions |
IFI — no impact on your ETF portfolio
France’s old wealth tax (the ISF) covered all assets. Since 2018, it was replaced by the IFI (Impôt sur la Fortune Immobilière), which applies exclusively to real estate. Your investment portfolio is entirely outside its scope.
- Direct real estate holdings (residential, commercial, land)
- Real estate held through property companies (SCIs)
- REITs and real estate investment funds above certain thresholds
- Stocks and equity ETFs
- Bond ETFs and fixed income
- Cash and savings accounts
- Cryptocurrency
- Life insurance (assurance-vie) in financial assets
Six practical tips for French ETF investors
The five-year clock starts on the account opening date — not the first investment. Open the PEA with a minimal deposit today; fund it gradually. Every day of delay is a day of the tax advantage not accruing.
The €150,000 cap is generous for most investors. Prioritise PEA-eligible synthetic global index ETFs inside the PEA. Only use the CTO for assets that genuinely cannot go there.
Distributing ETFs trigger a 30% tax event on every dividend payment in a CTO. Accumulating versions reinvest dividends internally — deferring the tax to the point of sale, which compounds meaningfully over time.
French tax uses a weighted average cost basis (PAMP) to calculate gains. Most brokers handle this automatically — but if you transfer positions between brokers, verify the cost basis data transfers correctly to avoid overpaying tax.
CTO accounts with international brokers (IBKR, DEGIRO) must be declared annually on Formulaire 3916. Foreign income is declared on Formulaire 2047. Non-disclosure carries heavy penalties — this is non-negotiable.
France’s assurance-vie is another tax-advantaged wrapper, particularly suited for bond exposure and estate planning. After 8 years, it offers favourable rates and an annual tax-free allowance on gains (€4,600 singles, €9,200 couples).
Need a broker for your CTO?
PEA accounts must be opened at a French institution (Boursorama, Fortuneo, Bourse Direct). For a standard CTO with broad ETF access and competitive fees, these two are worth considering for French residents.
IBKR excels for multi-currency portfolios and lower FX costs at scale. DEGIRO is a simpler, lower-cost option for straightforward ETF investing.
Go deeper
Frequently asked questions
What is the flat tax rate on investments in France?
France applies a 30% flat tax called the Prélèvement Forfaitaire Unique (PFU), split into 12.8% income tax and 17.2% social charges. It applies to capital gains and dividends in a standard CTO account. Lower-income investors can opt for the progressive income tax scale instead if that produces a better result — but the 17.2% social charges apply either way.
What is a PEA and how does it reduce taxes?
The Plan d’Épargne en Actions (PEA) is a French tax-advantaged account for investing in eligible EU/EEA equities and funds. After holding the account for five years, withdrawals are exempt from income tax — you pay only the 17.2% social charges on gains, cutting your effective rate from 30% to 17.2%. Withdrawals before the five-year mark trigger the full 30% rate.
Can I hold UCITS ETFs in a PEA?
Yes, with conditions. Physical UCITS ETFs must invest at least 75% in EU/EEA equities to qualify. Synthetic (swap-based) UCITS ETFs can qualify even when tracking global or US indexes, because the physical basket in the fund satisfies the 75% rule. Amundi offers PEA-eligible synthetic ETFs on the S&P 500 and MSCI World. Always verify eligibility with your PEA provider before buying.
What is the contribution limit for a PEA?
The standard PEA has a contribution cap of €150,000 per person. There is no cap on total account value — gains can grow the account well above €150,000. A PEA-PME (for small and mid-cap companies) has a separate €225,000 cap and can be held alongside a standard PEA. Couples can each hold one standard PEA, giving a combined household ceiling of €300,000 in contributions.
Does France have a wealth tax on investment portfolios?
No. Since 2018, France’s wealth tax (the IFI — Impôt sur la Fortune Immobilière) applies only to real estate assets. Stocks, ETFs, bonds, cash, and cryptocurrency are fully excluded. Your investment portfolio — whether in a PEA, CTO, or assurance-vie — is not subject to any French wealth tax. The old ISF that covered all assets was abolished when the IFI was introduced.
What is a CTO and when should I use one?
A CTO (compte-titres ordinaire) is a standard taxable brokerage account with no contribution cap and no fund eligibility restrictions. Use it for assets that cannot go into a PEA — bond ETFs, commodity ETFs, or amounts above the €150,000 PEA cap. Gains are taxed at the 30% PFU. International brokers like IBKR and DEGIRO function as CTOs for French residents.
Are accumulating or distributing ETFs better in France?
Inside a PEA, accumulating ETFs are preferred — dividends reinvest automatically without triggering a taxable event. In a CTO, distributing ETFs trigger the 30% PFU every year on dividends paid out. Accumulating funds defer the tax to the point of sale, which is more efficient for long-term compounding in a taxable account.
QuantRoutine provides educational content only. Nothing on this page constitutes tax or financial advice. French tax rules are complex and change frequently — always verify current rules with a qualified French tax professional (conseiller fiscal) or the Direction Générale des Finances Publiques (DGFiP) before making decisions. Tax treatment depends on your individual circumstances, residency status, and the specific funds you hold.