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Life insurance and income taxation

When it comes to investing your savings, the range of products available is very wide. However, the French have a certain aversion to risk and prefer safer solutions, including life insurance.

This is a very popular investment, i.a The favorites of the citizens of France. However, its taxation leaves savers confused. The tax system is quite complex, but many advantages are at stake. By adopting the right strategy, it is possible to achieve significant savings on the tax bill.

How life insurance works

Life insurance is based on an envelope, which subscribers must regularly deliver with a contribution. The payment amounts and rates are flexible in relation to the savers’ needs and capacity.

Several specialized organizations are now able to distribute this type of product, even online stores. Investors can choose to place the capital only in funds in euros (100% guaranteed) or choose a multi-support contract. In the second case, part of the capital is invested in units of account such as shares, SCPI shares, etc.

Exit baby

Life insurance policyholders can include a beneficiary in the event of death in the contract. The capital will then be transferred to him with complete exemption from inheritance tax within the limit of €152,500 (tax of 20 to 31.25% if above) and for any subscription before age 70.

For a contract concluded before 27 September 2017, gains are either subject to a fixed charge in discharge (PFL) (7.5 to 35%), or the progressive scale of income tax. We must not forget the social contributions (17.2%). Beyond 27 September 2017, a withdrawal may also generate a one-off tax of 30% or liability to IR.

How to take advantage of the relief?

It is possible not to be taxed at the full rate. To do this, it is advisable not to redeem its capital before eight years in prison. After this period, a reduction of 4,600 euros (9,200 euros for a pair) per extra years on the generated interest is planned.

For the case of life insurance opened after September 27, 2017, the amputation remains the same, but the outstanding amounts are taxed at 24.7% if they do not exceed €150,000 (30% if above). Relationships that remain attractive.

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