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. This obligation cannot be delegated to the insurer.
The declaration is made by ticking the appropriate box of the income tax declaration (Cerfa 2042) and attaching the special declaration (Cerfa 3916) in accordance with article 1649 AA of the CGI (the details of which are set out in article 344 C annex III of the CGI).
This declaration does not give rise to taxation, but failure to declare is punishable by a tax fine (article 1766 of the CGI) or the 80% tax surcharge (provided for in article 1729-0 A of the CGI) if this is greater than the fine.
N.B.: the administration's right of recovery is extended to 10 years (instead of 3) in the event of failure to file a tax return.
The surrender value of life insurance and/or capitalization contracts expressed in unit-linked investments subscribed by a French resident is taxable for the French Wealth Tax (IFI). This taxation is applied to the portion of the value representing real estate assets and rights as considered for IFI purposes (i.e., in the case of a French resident, all real estate assets and rights, regardless of their location or issuing place) included in the unit-linked investments of said contracts. Therefore, this "real estate" fraction of the surrender value of the contracts must be integrated into the taxable base of the IFI declared annually (Cerfa 2042-IFI).
As this declaration relates to the policyholder's personal property assets taken as a whole, it cannot be delegated to the insurer.
Any policyholder resident in France whose taxable property assets (property and property rights) exceed €1,300,000 on 1 January of the tax year will be liable for the IFI. The IFI is calculated according to the following progressive scale:
- between €0 and €800,000: 0%
- between €800,000 and €1,300,000: 0.5%
- between €1,300,000 and €2,570,000: 0.7%
- between €2,570,000 and €5,000,000: 1%
- between €5,000,000 and €10,000,000: 1.25%
- above €10,000,000: 1.5%.
In the event of failure or late filling of the IFI return, the due taxes are subject to the late interest provided for in Article 1727 of the General Tax Code (CGI) and the penalty for late filing of the declaration provided for in Article 1728 of the CGI.
The insurer provides the taxpayer, upon request, for each relevant contract, in particular the surrender value and the portion of this value representing the taxable underlying assets for IFI purposes.
If the policyholder providing the mandate to the insurer is an individual, the insurance company may make the necessary declarations and deduct at source the withholding tax/compulsory flat-rate tax (depending on whether the premiums were paid before or on or after 27 September 2017) and social security contributions.
Otherwise, the policyholder must make the necessary declarations and pay the amounts due.
- Where the premiums were paid before the insured's seventieth birthday, the insurer declares the death to the relevant tax office and pays any levy due under article 990 I of the General Tax Code, provided that it has received the necessary information from the beneficiaries (in particular, the declaration on honour concerning the amount of the allowance still available to the beneficiary). Once all the documents required for payment have been received, the company pays the death benefit to the beneficiary(ies) (after deduction of any levy due under article 990 I).
- In the case of premiums paid after the insured's seventieth birthday, the insurer sends a special declaration to the tax authorities indicating the full identity of the insured, the date of death, the full identity of the beneficiary or beneficiaries and the amount of the premiums paid after the insured's seventieth birthday (article 292 B of the CGI). On receipt of the tax clearance certificate (or certificate of non-entitlement) issued by the tax authorities and all the other documents required for payment of each beneficiary's share, the insurer pays them the share of the death benefit allocated to them.
In both cases, the insurance company informs the beneficiaries, at the time of payment of the benefit, that they must pay any social security contributions that may be due and make a specific declaration to this effect to the tax authorities.
Unlike life insurance contracts, capitalisation contracts do not include a policyholder or beneficiary. Neither does the death of the policyholder result in the unwinding of the capitalisation contract. However, the value of the contract must be included in the deceased policyholder's estate. The policy will therefore form an integral part of the policyholder's declaration of inheritance.
Unless required by law or requested by the tax authorities, the insurer does not have to declare the death of the policyholder.
The heirs may decide to surrender the policy in its entirety or to allow it to continue to maturity (in which case they automatically take the place of the policyholder, and the policy retains its tax status). In principle, the reporting obligations relating to the capitalisation contract in the event of the death of the policyholder are the responsibility of his heirs, assisted, where appropriate, by the notary in charge of the estate.
Article originally published in May 2021 and updated in March 2024.
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