Life insurance and taxation on earnings

When it comes to investing your savings, the choice of products currently available is very wide. However, the French have a certain aversion to risk, favoring more secure solutions, including life insurance.

This is a very popular investment, among the favorites of the citizens of France. Its taxation, however, leaves savers perplexed. The tax system is quite complex, but many advantages are at stake. By adopting the right strategy, it is possible to make considerable savings on the tax bill.

How life insurance works

Life insurance is based on an envelope that subscribers must regularly supply with a contribution. The amounts and rates of payment are flexible according to the needs and capacities of savers.

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 opt for a multi-support contract. In the second case, part of the capital is deposited in units of account such as shares, SCPI shares, etc.

Exit tax

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 beyond) and for any subscription before age 70.

In addition, for a contract concluded before September 27, 2017, winnings are either subject to a fixed levy in discharge (PFL) (7.5 to 35%), or the progressive scale of income tax. We must not forget the social contributions (17.2%). In addition, beyond September 27, 2017, a withdrawal may 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 couple) per additional year on the interest generated 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 beyond). Conditions that remain attractive.

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