Life insurance contract and income tax declaration
French resident policyholders of life insurance and capitalisation policies taken out with insurance companies established outside France are required to declare them annually, at the same time as their income tax return.
The declaration is made by ticking box 8TT of the income tax declaration and by filling in the information on the special declaration (CERFA n°3916) in accordance with Articles 1649 AA of the CGI and Article 344 C of Annex III of the CGI.
The declaration does not give rise to taxation but failure to declare is punishable by a tax fine (Article 1766 of the GTC).
Declaration on the Wealth tax (IFI : Impôt sur la Fortune Immobilière)
The surrender value of life insurance and/or capitalisation policies up to their representative value of the units of account, invested directly or indirectly in property assets and rights in France and outside France, must be declared annually in the tax base for Wealth Tax (Cerfa 2042-IFI).
The policyholder will be subject to Wealth Tax if his taxable net wealth exceeds the tax threshold of EUR 1,300,000. The Wealth Tax is calculated in accordance with the following progressive scale:
- between EUR 0 and EUR 800,000: 0%;
- between EUR 800,000 and EUR 1,300,000: 0.5%;
- between EUR 1,300,000 and EUR 2,570,000: 0.7%;
- between EUR 2,570,000 and EUR 5,000,000: 1%;
- between EUR 5,000,000 and EUR 10,000,000: 1.25%;
- above EUR 10,000,000: 1.5%.
If there is delay or failure in submitting the WT declaration, the amount of tax due will include both the late payment interest provided for in Article 1727 of the GTC, as well as the increase for late submission of the declaration provided for in the Article 1728 of the GTC.
The insurer must send to the taxpayer, on the latter’s request and for each policy concerned, the surrender value, and the fraction of this value represented by the taxable assets constituting the units of account.
Declaration in case of surrender
If the policyholder providing the mandate to the insurer is an individual, the insurance company can make the necessary declarations and proceed with the deduction at source of the withholding tax, or compulsory lump sum deduction, and the social contributions. Failing this, the policyholder makes the necessary declarations and pays the sums due. With regard to policyholders which are legal entities, they themselves make the necessary declarations and pay the taxes/social contributions due.
Death of the insured and termination of the policy
- When premiums have been paid before the insured person’s 70th birthday, the insurer must submit a specific declaration to the tax authorities, and pay any deduction due under Article 990 I of the General Tax Code. After receipt of all the documents necessary for payment, the company pays the beneficiary(ies) the death benefit, less any deduction due under Article 990 I, and informs the beneficiaries that they must declare and pay any social security contributions due to the competent tax authorities.
- With regard to premiums paid after the insured’s 70th birthday, the insurer sends a specific declaration to the tax authorities (Article 292 B of the GTC) indicating in particular the amount of the premiums paid after the insured’s 70th birthday together with the allocation of these sums between each of the beneficiaries for each policy.
After receipt of all the documents necessary for payment, the insurance company pays the benefit to the beneficiaries and informs them that they must pay any social security contributions due and make a specific declaration to the tax authorities.