Taxation on full or partial redemption of life insurance policies

The redemption of a life insurance policy by a person who is not resident of France for tax purposes is subject to a flat-rate levy (PLF) carried out by the bank or insurance company (Article 125 O A II bis of the General Tax Code).

The rate of this levy is calculated on the accrued interest and is dictated by the length of time the policy has been held on the full or partial redemption date:

  • policy held for less than eight years: 12.8%

  • policy held for more than eight years: 7.5%

(current rate since 1st January 2021)

These rates may be reduced under international tax treaties to eliminate double taxation of income tax and wealth tax.

Nevertheless, the rate is 75% irrespective of the policy's term when the revenue is paid to persons based in a NCST.

Moreover, persons who are not resident of France for tax purposes are not subject to social levies on their investment income.

 

UPDATED DINR PART - MARCH 12, 2021