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Life insurance: abolition of advantageous taxation of old contracts




Paying attention to the taxation of contracts subscribed before 1983 may be compatible with other contracts (Credit: Fotolia)

Very advantageous tax treatment of life insurance contracts opened before 1 January 1983 should be abolished.

Taxation of life insurance policies opened before 1983

Unlike other savings products, life insurance contracts are generally unaffected by changes in tax regimes. For example, life insurance policies opened prior to January 1, 1983 are currently benefiting from a very favorable tax system. A surrender is wholly or partially exempted from capital tax, regardless of the date of payment. They are subject to social security premiums only (17.2%).

An amendment removes this tax advantage

This humiliating tax cut may soon disappear. As part of the 2020 Finance Bill, Modern Member of Parliament Jean-Noël Barrot made a change aimed at regulating the taxation of older contracts before 1983 to new contracts: Payments to be made after the adoption of this current budget bill will be taxed at a discount of 7.5% . "If the text is finally adopted, the measure will apply to payments made from 1 January 2020. For these payments, in the case of reimbursement, earnings will be taxed as 17.2% (social security premiums) within 4 limits. EUR 9 200 for a couple, and earnings will be taxed at 24.7% (7.5% income tax + 17.2% social security premium).

Payments made in these old contracts before 1 January 2020 will therefore not be affected by the measure.

The amendment was adopted with the positive opinion of the Government and the Rapporteur of the Finance Committee at the first reading. The text should be considered by the Senate in November.

Read also : Sort by your life insurance contracts

Life insurance taxation

Payments made before 27.09.2017 :

– In the case of reimbursement, earnings from contracts opened for less than 4 years are taxed at 52.2% (35% of taxes and 17.2% of social security contributions).

– Gains from contracts open for less than 8 years and contracts longer than 4 years are taxed at 32.2% (15% tax and 17.2% social security premium)

– Earnings from contracts that have been open for more than 8 years are taxed at 17.2% (social security premiums) at the limit of EUR 4,600 for a single person and EUR 9,200 for a couple. In addition, 24.7% (7.5% of taxes + 17.2% of social security contributions) are taxed.

Payments made after 27.09.2017 :

– if the cost of protective unpaid life insurance is less than 150,000 euros (300,000 euros for a couple):

o Earnings from contracts that have been open for less than 8 years are subject to fixed tax (30%)

o Earnings from contracts that have been open for more than 8 years are taxed at 17.2% (social security premiums) at the limit of EUR 4,600 for a single person and EUR 9,200 for a couple. In addition, 24.7% (7.5% of taxes + 17.2% of social security contributions) are taxed.

– If the protector's unpaid life insurance is greater than EUR 150,000 (EUR 300,000 for a couple): the rate of payments of EUR 150,000 (or EUR 300,000 for a couple) is subject to fixed tax. (30%).


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