Introduction to the Equity Savings Plan (PEA) and Its Taxation
The Equity Savings Plan (PEA) is a regulated savings product designed to encourage investment in European equities. It benefits from a favorable tax framework, especially after 5 years of holding, but includes specific rules regarding withdrawals, closure, and inheritance. This detailed analysis explains the taxation applicable to the PEA based on key events: withdrawal, plan closure, and transfer in the event of death.
1. Income Tax Exemption After 5 Years
The main tax advantage of the PEA lies in the exemption from income tax (IR) on realized gains, provided the plan is held for at least 5 years. This exemption applies to capital gains, reinvested dividends, and interest generated within the plan.
Before 5 years, gains are subject to income tax at the progressive scale or the flat tax (PFU) of 12.8%, at the taxpayer's choice, in addition to social contributions of 17.2%. After 5 years, gains are exempt from income tax, but social contributions at the overall rate of 17.2% remain due on gains at the time of withdrawal or closure.
Numerical example: a gain of €10,000 realized on a PEA held for more than 5 years will be subject only to social contributions of €1,720 (€10,000 × 17.2%), with no income tax (source: General Tax Code, Article 200 A).
2. Social Contributions: A Tax Always Due
Social contributions at the overall rate of 17.2% (CSG, CRDS, solidarity levy, etc.) systematically apply to gains realized within the PEA, regardless of the holding period. These contributions are calculated on capital gains and distributed income upon withdrawals or plan closure.
Since January 1, 2018, the overall 17.2% rate breaks down as follows:
Type of Contribution
Rate (%)
CSG
9.2
CRDS
0.5
Solidarity Levy
7.5
It is important to note that these social contributions are due even after 5 years, which limits the PEA's tax advantage to income tax exemption only (source: Official Bulletin of Public Finances-Taxes, BOI-RPPM-PVBMI-10-10-20).
3. Partial Withdrawal Before and After 5 Years: Tax Consequences
Withdrawal conditions influence the PEA's taxation and the plan's continuity:
Holding Period
Partial Withdrawal
Tax Consequence
Plan Consequence
Less than 5 years
Yes
Taxation of gains at income tax scale or PFU + social contributions (17.2%)
Automatic closure of the PEA
More than 5 years
Yes
Gains exempt from income tax, social contributions due on gains
Plan remains open, possibility of new contributions
Before 5 years, any withdrawal results in plan closure and taxation of gains. After 5 years, partial withdrawals are possible without closing the plan, allowing retention of tax benefits and the possibility to contribute again within the limits (source: AMF, PEA Practical Guide).
4. PEA Closure: Conditions and Taxation
PEA closure can be voluntary or automatic (notably in the case of withdrawal before 5 years). It results in definitive exit from the favorable tax scheme.
The tax rules upon closure are:
Closure before 5 years: taxation of gains at income tax scale or PFU + social contributions (17.2%) on realized gains.
Closure after 5 years: income tax exemption, social contributions due on gains.
After closure, the holder cannot make contributions to a new PEA for 5 years, except in the case of a separate PEA-PME (source: General Tax Code, Article 163 quinquies B).
5. Death of the Holder: Tax Treatment and Transfer
In the event of the holder's death, the PEA is automatically closed on the date of death. The following tax rules apply:
Gains realized are subject to social contributions of 17.2% on the taxable portion.
Gains are exempt from income tax if the plan was older than 5 years.
The plan's value on the date of death enters the estate and is subject to inheritance tax according to the degree of kinship (applicable scales and allowances).
Heirs cannot benefit from the PEA tax regime and must close the plan. However, they may open a new PEA in their name, within the applicable contribution limits (source: INSEE, Report on Inheritance Taxation).
6. Reopening the PEA After Closure: Rules and Limits
After closure, notably following a withdrawal before 5 years, the holder cannot reopen a new PEA for a period of 5 years. This measure aims to limit abuses related to the favorable tax treatment.
After this period, it is possible to reopen a new PEA, still limited to a global contribution ceiling of €150,000 for a classic PEA (€225,000 for a PEA-PME).
Note: acquired rights on a closed PEA are not transferable to a new PEA. The new plan starts from zero in terms of holding period and gains (source: AMF, PEA FAQ).
Conclusion: Verdict for French Investors
The PEA remains a fiscally attractive tool for investors wishing to prioritize investment in European equities. The income tax exemption after 5 years of holding is a significant advantage, although social contributions of 17.2% on gains must always be anticipated.
Withdrawal conditions must be carefully planned: withdrawal before 5 years leads to plan closure and full taxation, while withdrawal after 5 years allows retention of the scheme's benefits.
In the event of death, automatic plan closure and inheritance taxation must be anticipated in wealth management.
Finally, reopening a new PEA after closure is possible but limited to a five-year frequency, imposing a medium- to long-term investment strategy.
Recommendation: French investors should prioritize holding their PEA beyond 5 years to maximize tax benefits, avoid early withdrawals that close the plan, and integrate the PEA into a comprehensive wealth planning strategy that considers inheritance.
