Life insurance – How are social security contributions calculated? – News

The products generated by the insurance contract are subject to social levies. The time they are taxed depends on the type of investment fund in which you have placed your assets. Explanations.

Often presented as a “tax envelope”, life insurance allows you to make your savings pay off with or without tax. Earnings generated within it are tax-free as long as they are reinvested, and in the event of withdrawal, they are taxed at a lower rate as your contract is old. Better yet, after 8 years, you can recover up to € 4,600 in earnings each year (€ 9,200 if you are married or paid) in a tax deductible. And if you are the holder of an old contract signed before 1998, you can benefit from a total tax exemption on certain earnings. But these advantageous rules interest us that the tax on income, not social levies. These are due on all earnings generated by your life insurance, including those that are exempt from tax, when you are tax domiciled in France.

Three modes of taxation

Earnings generated by your life insurance are subject to social security contributions under different conditions depending on the funds from which they are derived:

  • Interest generated by euro funds with guaranteed capital is charged each year at the time of entry in the account.
  • Revenues generated by the funds in units of account with unsecured capital are taxed in the event of partial or total withdrawal (or redemption) made on the contract.
  • Products generated by Euro-growth funds are taxed when the guarantee offered by these funds is reached, ie at the end of their eighth year of detention.
  • The products of the different funds not subject to the social levies of your living will be taxed at your death. The insurer will deduct them from the capital to be paid to the beneficiaries designated in your contract.

This difference in treatment is obviously to the advantage of funds in units of account and Euro-growth funds because the products they generate each year are fully reinvested to become productive in turn. On the contrary, the annual interest generated by the euro funds is not partially capitalized.

Good to know. Over-the-counter taxation of interest on euro funds can result in you being charged more social security contributions, which you must, if your contract is overall in loss due to counter-performance recorded by the funds in units of account in what you have invested. In this case, at the end of your life or death insurance, the insurer will have to pay the excess payments to the contract.

Three different taxes

Social security contributions on life insurance earnings are broken down into three distinct taxes:

  • the CSG (generalized social contribution) at the rate of 9.2%;
  • the CRDS (contribution to the repayment of the social debt) at the rate of 0.5%;
  • and the solidarity levy at the rate of 7.5%.

That is an overall tax rate of 17.2%. However, you are not exempt from CSG and CRDS and you are in France, but you are covered by the social security scheme in the EEA (EU, Iceland, Norway, Liechtenstein) or Switzerland, and beyond. taxe d’un régime obligatoire de sécurité sociale français (because you are a frontier worker for example). In this case, you are redevable only during the solidarity takeover of 7.5% of the gains d’assurance vie.

Also note that the CSG levied on your non-tax-exempt earnings is deductible from other taxable income up to 6.8% if you waive the flat tax and subject it to the progressive tax scale. But this partial deductibility is not tax advantageous which if you are taxable in the first tranche of the tax scale, taxed at 11%. If you are taxable in the tranche of 30% or more, on the other hand, they are not because the tax savings induced by deduction from the CSG are less than the tax supplement payable in case of waiver of the apartment tax.

Good to know. The rate applicable to your life insurance earnings is that in effect on the date they are taken out by the insurer. The so-called “historical rate” rule, which allows you to tax your earnings at the rate in force at the time of their acquisition, no longer applies in a very exceptional way.

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