Finance: Luxembourg attracts French savers frightened by the return of the ISF

Fiscal uncertainty is once again hovering over France, and with it, a question that deeply worries the country's wealthiest savers: the possible return of the Wealth Solidarity Tax (ISF). As political discussions intensify and the hypothesis of a reestablishment of this tax seems to gain credibility, there is a resurgence of investments in Luxembourg. This financial enclave, once a haven for capital seeking security from European tax uncertainties, is once again attracting the attention of French investors.

Fear of a return of the ISF

The possibility of a return of the Wealth Solidarity Tax (ISF) is causing palpable concern among wealthy savers in France, to the point of reviving investment strategies that were previously in decline. Following the legislative elections and especially since the announcement of the tax intentions of the New Popular Front, widely perceived as favourable to increased taxation of the highest assets, wealth managers are seeing a surge in demand for secure investments abroad, particularly in Luxembourg. Guillaume Gimbal, Head 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 seeing the re-emergence of taxation deemed confiscatory by those who had benefited from the absence of the ISF in recent years.

Luxembourg life insurance, often seen as a safe haven in times of fiscal instability, is once again in vogue, recalling the movements observed at the turn of the 2010s. At that time, investors sought to protect their assets against European debt crises and uncertainty over the future of the eurozone. Today, this dynamic is fueled by similar fears, exacerbated by an uncertain political climate in France. Mr. Gimbal explains that “the specter of taxation of savings” is pushing his clients to anticipate a return of the ISF, prompting them to seek solutions that provide them with a certain peace of mind. The appeal of these Luxembourg products is not only based on direct tax advantages, but also on a perception of increased security in the event of further economic or legislative turbulence.

Luxembourg, a tax haven and its challenges

While the idea of ​​a return of the ISF haunts the minds of wealthy savers, Luxembourg is reappearing as a preferred destination, but this choice is not without pitfalls. Luxembourg life insurance contracts, despite their reputation as a refuge in times of crisis, do not guarantee total tax exemption for French tax residents. In reality, they mainly allow for tax optimization within the limits of the legislation, by offering a diversified range of investments and priority over other creditors in the event of the insurer's bankruptcy.

At the same time, the more radical option of tax expatriation, although attractive to some, is complex and costly. Leaving France to protect one's assets requires not only selling one's real estate and ending one's professional activities, but also reorganizing one's entire family's life around this decision. Luxembourg, aware of this issue, is increasing its tax incentives to attract these potential expatriates. However, experts point out that expatriation is not a miracle cure, as it involves heavy constraints and may, in the long term, prove less advantageous than expected.

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