The OAT market for retail investors

AFT, in partnership with Euronext and the primary dealers, has established a secondary market where retail investors can easily buy and sell OATs, which are bonds issued by the French Republic that are backed by the full faith and credit of the State. Retail investors can purchase fixed-rate OATs with maturities ranging from 2 to 50 years. These bonds have annual coupons and are redeemable at maturity. Retail investors may also buy index-linked OATs.

Anyone can access the OAT market. OATs offer private individuals numerous advantages, including a regular income, protection against inflation, a source of capital to supplement their pension or finance a project in the future, or a means of diversifying their assets.

An organised secondary market

Like any other negotiable security, OATs can be traded at the market price at any time. The Government took steps to modernise the OAT market in 2005 to ensure that it met retail investors’ needs. The retail OAT market is managed by Euronext. It operates under the stock market regulations in force and complies with transparency and disclosure rules. This market provides:

  • liquidity: OATs are highly liquid. Financial institutions acting as market makers have undertaken to facilitate transactions. This market is overseen by Euronext.
  • acceptance of orders: orders can be placed through traditional or online financial intermediaries.

Tax treatment of OATs

Article 28 of Act 2017-1837 of 30 December 2017 (2018 Budget Act) altered the rules of taxation for capital gains and investment income. Since 1 January 2018, capital gains and investment income has automatically been subject to personal income tax at a flat rate of 12.8%, under the terms of Article 200 A(1) of the General Tax Code (CGI), plus social security contributions at an aggregate rate of 17.2%. Nevertheless, the taxpayer can opt to have these gains and income taxed at the rate corresponding to their personal income tax bracket. This irrevocable choice must be made when declaring aggregate income, in accordance with the provisions of Article 200 A(2) of the General Tax Code.

In respect of investment income, interest on OATs and government bonds received by individuals who are residents of France for tax purposes is liable to a flat-rate tax or progressive income tax in the year following its receipt after being subject, in the year of receipt, to a non-discharging withholding tax (“advance payment”) of 12.8% (plus social contributions totalling 17.2% on investment income). This mandatory withholding tax is charged to the personal income tax liability for the year in which it was made. If the amount withheld is greater than the tax liability, the difference is reimbursed in accordance with the provisions of Article 125 A(V)(1) of the General Tax Code.