French life insurance taxation (articles 990 I and 757 B)
A tax regime that taxes gains on surrender with a benefit after eight years, and subjects death benefits to a specific levy or to inheritance tax depending on the age at which premiums were paid.
French life insurance taxation rests on two separate regimes, one during life, the other on death. During life, only the gains included in a surrender are taxed, never the capital paid in. After eight years, they benefit from an annual allowance of 4,600 euros for a single person and 9,200 euros for a couple, then from a reduced rate of 7.5 percent on the portion corresponding to 150,000 euros of premiums, with the 12.8 percent flat tax applying above that, social levies on top. On death, everything depends on the insured's age when premiums were paid. For premiums paid before age 70, article 990 I of the General Tax Code applies its own levy, outside the estate: each beneficiary has an allowance of 152,500 euros, then is taxed at 20 percent up to 700,000 euros and 31.25 percent above. For premiums paid after age 70, article 757 B subjects premiums to inheritance tax after an overall allowance of 30,500 euros, across all policies and beneficiaries, but exempts the gains. The spouse and civil partner are exempt in both cases. This taxation, and the first-payment date that starts the eight-year clock, explain the value of tax seniority and the use of life insurance as an estate planning tool.
Hypothetical case: a father pays 400,000 euros before age 70 into a policy naming his two children. On death, the 500,000 euro benefit is split: each child receives 250,000 euros, exempts 152,500, and pays 20 percent on 97,500 euros, or 19,500 euros, outside the estate.
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