January 21, 2021

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Better life insurance

Life insurance taxation

The life insurance contract is a savings plan or an investment support which enjoys particularly advantageous taxation, especially if the contract has been held for more than 8 years. We invite you to discover the taxation of life insurance.

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Life insurance taxation

The insurance contract is a means of transmission or inheritance of assets which allows an individual to save and benefit from the payment of a capital or an annuity at the end of the contract. The life insurance contract benefits from very favorable taxation.

Indeed, if life insurance contracts established before January 1, 1983 are exempt from income tax and those before contracted before September 26, 1997 benefit from a total or partial exemption depending on the date of payment of the premiums. . Life insurance products concluded after this date (September 1997) are subject to a tax on redemptions which differs according to the length of the contract. Taxes are lower on older contracts.

An insurance contract that has less than 8 years of life will benefit either from a flat-rate levy in discharge (35% for contracts of less than 4 years, 15% between 4 and 8 years) or a non-discharge deduction of 12.8% (applicable on all products after September 27, 2017).

Taxation of life insurance in the absence of redemption

Whether it is a capital in euro funds or a unit-linked fund, a buyback authorizes a subscriber of a life insurance contract to receive the total or partial payment of his pension before maturity. Only a subscriber can make this redemption request, however, beneficiaries of a life insurance contract cannot claim it.

If the insured opts for a partial surrender of his contract, the unredeemed units will support his savings and continue to produce the same benefits as before the payment of the annuity. On the other hand, a full redemption obliges him to close his contract.

Thus, depending on the medium chosen by the insured when signing the contract, the taxation of the contract will be different. However, it should be noted that in the absence of redemption of a life insurance product, the contract is not subject to taxation. The tax deduction will only be made if there is redemption or death of the contracting party.

Taxation of life insurance in the event of redemptions (Total or partial)

Following a total or partial surrender of a life insurance policy, only capital gains are subject to tax. Taxation differs according to the length of life, the tax applicable to contracts less than 8 years old is quite different from those which are more than 8 years old .For contracts of less than 8 years concluded before 2017, capital gains are taxable at a flat-rate deduction of 35% or at an integration in taxable income for contracts of less than 4 years and a flat-rate withholding of 15% for contracts that have between 4 to 8 years of existence. While those after 2017 are subject to flat tax: capital gains are taxed at 30% (12.8% in flat-rate deduction and 17.2% in social deduction).

For contracts of more than 8 years, if the capital gains are subject to a flat-rate withholding of 7.5% or to an integration into taxable income after deduction of 4600 Euros for a subscription before 2017, a contract of a lower amount at 150,000 Euros will be subject to a tax of 7.5% in flat-rate deductions and 17.2% in social contributions (note that beyond 150,000 Euros the capital will be taxed at 30%).

Taxation According to payments and subscriptions

Real estate wealth tax (IFI)

Update on social security contributions

Taxation Expatriate

Exceptional cases of non-taxation of capital gains

Taxation in the event of death

life insurance-Advantageous taxation

In the event of death, the age of the subscriber is taken into account for the tax system. In particular, it defines the enjoyment of an inheritance right for beneficiaries.

If the subscriber dies after the age of 70, regardless of the number of contracts and beneficiaries, only the part of the payments that exceed 30,500 Euros of the annuity to be paid is taxable on contracts established from November 20, 1991 against a flat-rate levy of 20% on the capital for products before this date.

Taxation in the event of retirement

The calculation of the tax in the event of withdrawal into an annuity on a life insurance contract depends on the age of the annuitant at the time the withdrawal takes place. If he is under 49 years old, the taxable pension is 70%, 50% if he is between 50 and 59 years old, 40% from 60 to 69 years old and 30% from 70 years old.

For the retirement of a couple, we take into account the age of each on the date of the first payment to calculate the taxable portion of each exit.

Our opinion on the taxation of life insurance

Life insurance is a very flexible savings plan which makes it possible to capitalize a sum invested in investment while providing various attractive tax advantages. Indeed during all the life of the product, the tax is zero. The subscriber will not pay tax until they touch their investment. It is only in the event of total or partial surrender of his insurance that he will have to pay taxes. At a particularly low rate unlike other savings plans, however, it is advisable to take out an insurance contract for a period exceeding 8 years to fully benefit from all the tax advantages that the contract has to offer.

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