Many French people opt for a life insurance contract. Indeed, it is possible to benefit from attractive taxation with such a contract, although the regulations are relatively complex to understand. Indeed, the rules are not the same depending on whether it is a redemption or a transmission for example. In addition, it is often necessary to wait several years after the opening of a contract to benefit from the most advantageous taxation.
When subscribing to a life insurance contract, many points must be examined, in particular to limit the annual fees but also to obtain an attractive return. However, finding out about taxation from the start is ideal insofar as it will allow you to assess after how many years you will be able to concretize your project, for example, or to know when is the ideal time to make a donation during your lifetime.
Favorable taxation for this savings product
Different tax rules apply depending on when you want to withdraw your money but also depending on your age. As long as you do not touch your investments or your interests, you are not taxed on your life insurance.
On the other hand, from the moment you make withdrawals or in the event of inheritance, a tax scale is applied. Do not hesitate to consult a summary table of taxation for life insurance in order to know the percentage of your savings that will be taxed in the event of partial or total withdrawal, for example. A lot of data is taken into account to know how you will be taxed. You should read your life insurance contract carefully before signing it in order to know, for example, when you can withdraw your savings to carry out a project or to make a donation to a loved one during your lifetime.
The redemption of your savings, or, in other words, the withdrawal of the latter, whether partial or total, is interesting from the moment when a certain number of years have passed since the subscription of the contract. Indeed, it takes on average 8 years before being able to benefit from optimal taxation. Note that in all cases, your winnings are the only ones to be taxed, the amount of the payments made since the opening of the contract is not taken into account for the calculation of your tax base.
Moreover, payments made before September 27, 2017 are not taxed in the same way as those made after this date. Consult the table gathering all the data relating to the taxation of life insurance will allow you to determine the tax rate applicable in the event of surrender.
Special taxation in the case of an inheritance
Many French people turn to life insurance in order to prepare their succession because of the advantageous taxation that is applied to this savings product. Two criteria are taken into account to determine the taxation applied to the capital remitted to the beneficiary: the age of the subscriber when the various payments were made and the date on which they were made.
Thus, a certain part of the capital transferred will be exempt from tax depending on whether the payments were made before or after the insured’s 70th birthday.
Note that the surviving spouse or PACS partner is totally exempt from inheritance costs. This has been effective since 2007, via the TEPA law, and therefore also applies to the capital of the life insurance which the spouse or PACS partner inherits.
In addition to this, it is quite possible to have several life insurance policies, in this way, it is possible to simplify the succession by designating a specific beneficiary for each contract.
Absent taxation in certain specific cases
It is possible not to be taxed on payments or on interest and capital gains in certain cases provided for by the legislator. Thus, if you are made redundant, or even your spouse, you can redeem your savings without being taxed. The same applies in the event of the liquidation of your company or that of your spouse, if one of you is placed in early retirement or even if you suffer from a 2nd or 3rd category disability.
If you took out your policy many years ago, you may also be able to withdraw your money without being taxed. This is particularly the case if your contract was taken out before January 1, 1983 or if the last payments were made on your life insurance before September 25, 1997.