The French PEA: A Tax-Exempt Equity Investment Account

The PEA: Purpose and Structure

The plan d'épargne en actions (PEA) is a tax wrapper — not itself an investment product — that allows individuals to build and manage a portfolio of equities sheltered from income tax. Deposits are made in cash and invested in eligible shares, mutual fund units, or European collective investment vehicles substantially invested in equities. Gains, dividends, and all other income accumulating within the plan are not subject to income tax so long as no withdrawal is made, and must be reinvested within the plan (CGI Art. 157, 5° bis). Two variants exist: the PEA classique for listed and unlisted equities of EU/EEA companies (€150,000 ceiling), and the PEA PME, designed to channel retail investment toward small and mid-sized companies and ETIs (€225,000 ceiling, broader eligible instruments). Both operate under an identical tax regime.

Eligibility and the One-Plan Rule

Any adult individual with their tax domicile in France may open a PEA classique (C. mon. fin. Art. L 221-30). This includes fiscally-dependent adults — such as children aged 18 to 25 attached to their parents' tax return — though their deposit ceiling is capped at €20,000. The PEA PME is available only to taxpayers, not fiscally-dependent adults, and may be opened by each spouse or PACS partner under joint taxation. Each person may hold only one PEA classique and only one PEA PME. Opening multiple PEA classiques (or multiple PEA PMEs) in the same person's name results in mandatory closure of all plans concerned as of the date the second plan was opened, plus a 2% penalty on knowingly excess deposits (CGI Art. 1765). The opening date — which starts the five-year clock — is the date of the first deposit, not the contract signature date.

Deposits, Deposit Ceilings, and Fee Caps

Cash-only deposits and ceilings

All deposits must be made in cash. It is not possible to transfer securities from an ordinary brokerage account into a PEA. Gains and income accumulating within the plan do not count toward the ceiling. PEA classique ceiling: €150,000 (€20,000 for fiscally-dependent adults). PEA PME ceiling: €225,000. For holders of both plans simultaneously, combined deposits may not exceed €225,000. Exceeding the ceiling triggers mandatory closure. Deliberately exceeding the €225,000 or €20,000 combined ceiling triggers an additional 2% fiscal penalty on the excess.

Statutory fee caps

Fees are capped by regulation (C. mon. fin. Art. L 221-32 III and D 221-111-1): opening fees maximum €10; annual custody maximum 0.4% of securities value + €5 per line (€25 for unlisted); transaction fees on listed equities maximum 0.5% (electronic order) or 1.2% (other means); transactions on non-platform securities maximum 1.2%; transfer/closure fees maximum €15 per line (€50 unlisted), capped at €150 total. The fixed ceilings are revised every three years against the INSEE consumer price index. Fee caps do not cover discretionary or advisory management fees.

The PEA Bancaire: Two-Account Structure

A PEA held at a bank consists of two linked accounts: a cash account (compte en espèces) and a securities account (compte-titres). Deposits are credited to the cash account first; the holder then purchases securities recorded in the securities account. The cash account may never have a debit balance. Selling one security and buying another within the plan (arbitrage) is freely permitted — sale proceeds must remain within the PEA envelope. Self-selling into a PEA (vente à soi-même) — using securities already held by the holder, their spouse/PACS partner, or their ascendants/descendants to fund PEA purchases — is prohibited for acquisitions from 6 December 2016 onwards. Purchases on credit (short selling, securities lending, repurchase agreements) are also prohibited.

The PEA Assurance

When subscribed with an insurance company, the PEA takes the form of a contrat de capitalisation in units of account invested in PEA-eligible securities. Deposits fund contract premiums and associated fees. It is not possible to transfer an existing capitalisation contract opened outside a PEA into a PEA wrapper. One practical benefit: the PEA assurance avoids the 7.5% prélèvement libératoire that would otherwise apply to a capitalisation contract redeemed after eight years.

Eligible Securities

PEA classique

Eligible securities (C. mon. fin. Art. L 221-31) include: shares, investment certificates, SARL units and equivalent interests, cooperative instruments — provided the issuer has its registered office in France or another EU/EEA Member State and is subject to corporate income tax under ordinary law (this tax condition does not apply to entreprises nouvelles or venture capital companies); and Sicav shares, FCP units (including FCPR, FCPI, and FIP units), and coordinated European OPCs — provided the fund holds more than 75% of assets in qualifying securities. Listed and unlisted instruments both qualify.

PEA PME

The PEA PME additionally admits (C. mon. fin. Art. L 221-32-2): bonds convertible or redeemable into shares (excluding convertible bonds not admitted to a regulated market or multilateral trading facility); OPC units and ELTIF units — subject to the ELTIF maintaining at least 50% in qualifying ETI instruments and holding no disqualifying real estate assets; and crowdfunding participatory securities and fixed-rate bonds, and minibons acquired before 10 November 2023. For a security to qualify for the PEA PME, the issuing company must meet ETI thresholds: fewer than 5,000 employees and either annual turnover ≤ €1.5 billion or total balance sheet ≤ €2 billion. Listed companies must have market capitalisation below €1 billion (or have been so at close of at least one of the four preceding financial years). Thresholds are assessed after consolidation with linked and partner companies.

Excluded securities

The following may not be held in either type of PEA (C. mon. fin. Art. L 221-31 s.): SCI shares (even if the SCI has opted for corporate tax); SIIC shares and European REIT equivalents; split-ownership instruments (usufruit, nue-propriété); preference shares (unless held before 1 January 2014); subscription or allocation rights and warrants (same grandfathering); employee savings fund units; shares acquired through stock options; BSPCE warrants and shares subscribed on exercise; carried interest units. Cumulation of the PEA wrapper with a separate income tax reduction for the same security is prohibited.

The 25% family shareholding limit

The holder, together with their spouse/PACS partner, ascendants, and descendants, may not hold directly or indirectly more than 25% of the profits of any company whose shares are in the plan — at any time during the five years preceding the purchase or during the life of the PEA (C. mon. fin. Art. L 221-31 II). Any breach — even for a single day — triggers immediate mandatory closure, unless exceptional circumstances (succession, gift, marriage, or acquisition by a family member outside the tax household) allow a two-month regularisation window to sell the securities within the PEA or withdraw them with a compensating cash payment.

The Five-Year Rule and Withdrawal Consequences

Social Charges: The Historical Rates Rule

Social charges (17.2% since 1 January 2018) apply to PEA gains at every withdrawal or closure event, regardless of the plan's age. For plans opened before 1 January 2018, the portion of gains accrued before that date is subject to the taux historiques rule — each sub-period is taxed at the rate in force when it accrued:

For plans opened before 1 January 2018 but that had not yet reached five years as of that date, the historical rates apply only to gains accrued during the first five years; gains accrued after the five-year mark are taxed at the rate in force at withdrawal (17.2%). For plans opened on or after 1 January 2018, historical rates do not apply. Social charges are collected directly at source by the managing institution and are not deductible for income tax purposes.

Exit as a Life Annuity (Rente Viagère)

Instead of taking the plan's value as a cash lump sum, the holder may elect to convert the PEA into a lifetime annuity (rente viagère) (C. mon. fin. Art. L 221-32). The holder of a PEA bancaire may transfer their plan to an insurance company and sign an immediate lifetime annuity contract. Before five years: each annuity payment is subject to income tax and social charges on a fixed fraction determined once based on the holder's age at the time of the first payment (standard rente viagère à titre onéreux rules). After five years: annuity payments are fully exempt from income tax (CGI Art. 157, 5° ter). This exemption extends to the reversionary annuity paid to the surviving spouse. Social charges remain due on each payment, calculated on the same age-based fraction.

Transfer and Mandatory Closure

Transfer to another institution

The holder may transfer their PEA to a different managing institution at any time without triggering any tax event, provided the transfer covers the entire plan — all securities and all cash. A partial transfer would be treated as a withdrawal. The original institution must transmit the plan's opening date and total cumulative deposits to the new institution. The five-year clock continues running from the original opening date.

Mandatory closure events and consequences

The PEA must close on: death of the holder; transfer of the holder's tax domicile to a non-cooperative State or territory (CGI Art. 238-0 A); passage of contractual maturity (unless extension available); transfer to the Caisse des dépôts et consignations as an inactive account; and breach of any operating rule — multiple plans of the same type, exceeding the deposit ceiling, debit balance on cash account, holding of ineligible securities, or retention of securities that have ceased to be eligible. When closure results from a rule breach, the plan is deemed closed as of the date the breach occurred — interest for late payment (0.20% per month) applies. A new PEA may be opened immediately after closure; there is no waiting period.

Death of the holder

The plan closes automatically on death. Gains are exempt from income tax regardless of the plan's age — but social charges are still due and levied at source (the social charges paid are deductible from the taxable estate). The plan's value enters the succession at liquidation value on the date of death and is subject to inheritance tax in the normal way. Heirs who receive the securities may keep them in an ordinary account but may not transfer them into their own PEA. Donation or legacy of a PEA is prohibited.

Cost basis after closure

Once the PEA has been closed (or after a post-five-year withdrawal), securities retained and subsequently sold are taxed under the ordinary securities capital gains regime. The acquisition cost for any future disposal is the value of the securities at the date the PEA regime ceased to apply — either the closure date or the date of the relevant withdrawal. Losses incurred within the PEA during the plan's life are not taken into account in calculating future gains after closure (CGI Art. 150-0 D, 5).

This article is provided for general information and educational purposes only. It does not constitute financial or tax advice. The fee caps cited reflect the regulatory ceilings at the date of publication and are revised periodically. The historical social charges rate schedule applies to plans opened before 1 January 2018; for plans opened from that date, the current rate applies throughout. The 10% cap on unlisted security income within the PEA requires annual self-assessment by the account holder.