Assurance Vie is a favorite savings product of the French, in particular due to its favorable taxation. But when it comes to declaring income from your investments, the process can get complicated.
How to declare Assurance Vie to the tax office?
In the early stages of a life insurance contract, as a rule, a declaration is not required. Of course, payments under the agreement are not taxed and are not subject to declaration to the tax authorities. As for income from your investments, they do not have to be reported on your tax return. Your insurer is the tax operator and is responsible for automatically deducting social contributions due under the contract and all declarations to the tax authorities. But the situation changes in case of repayment. Regardless of whether it is full or partial, it must be declared to the tax authorities.
What must be declared upon full repayment of the Assurance Vie agreement?
When the contract is fully paid off and closed, the capital gain must be declared to the tax authorities for tax purposes. This capital gain corresponds to the difference between all contributions paid since the opening of the contract and the maturity amount of the contract.
What must be declared when partially repaying Assurance Vie?
In case of partial repayment, the same principle applies. It is necessary to calculate the portion that represents taxable capital gains in the amount withdrawn. The insurer is responsible for this calculation in proportion to the total amount of the contract at the time of partial repayment. It is these capital gains that must be declared for income tax purposes.
How is the repayment of an Assurance Vie agreement declared?
Whether full or partial repayment, the insured must choose between the option of a lump sum deduction or a progressive income tax scale. This choice is made at the time of repayment, not when filing your tax return.
If the flat rate deduction option is selected, the insurer will withhold the corresponding amount of tax at the time of redemption. In the annual tax return, the surrender amount is automatically pre-populated by the insurer and tax authorities, even if it has already been taxed. If the general regime has been chosen, the corresponding capital gains are also included in the income tax return. They are taxed differently depending on the duration of the contract:
- or as “eligible income” under an Assurance Vie opened 8 or more years ago;
- or as “income not entitled to tax relief” for contracts concluded for less than 8 years.
The tax authorities are responsible for calculating an additional tax benefit of €4,600 (for a single person, €9,200 for a couple) on capital gains realized on contracts of more than 8 years.
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