The taxation of life insurance revenues changes with the introduction, in 2018, of the single flat-rate levy (PFU), or flat tax. Explanations with Stéphane Carlucci, General Manager of LinXea.com, a specialist in low cost online savings.
Paris Match. What about the flat tax?
Stéphane Carlucci. This is a simplification of the patrimonial taxation: different rates according to your tax bracket, two withholding tax rates, various abatements … since 2013, the system had become illegible. With the flat tax, everything is clearer, with an overall tax rate of 30%, including social security contributions. When you collect interest or an appreciation, you’ll know right away how much you’ll pay. If you are taxable, you will pay less taxes than you currently have. If you are not taxed, you will remain so.
Read also: What are the main tax measures of the 2018 budget?
And for life insurance?
The tax system was penalizing before the eight-year limit. From 2018, the levies will be aligned on the flat tax, regardless of the level of outstandings of your contract. Withdrawals will therefore be cheaper for everyone from zero to eight years of detention, including taking into account the increase in the CSG.
The upcoming introduction of the single 30% flat-rate tax will make the securities account tax equivalent to that of life insurance for the first eight years
What are the consequences ?
This decline in taxation before eight years changes the nature of life insurance, considered until now as a long-term investment because of the tax penalty on exit. With a tax of 30%, an investment in a fund with guaranteed capital will bring in a good contract two and a half to three times more than booklet A. Life insurance becomes a short-term cash investment.
Read also: Saving: Knowing how to draw in one’s life insurance
And for the long run?
Beyond eight, nothing changes to less than € 150,000 invested in life insurance. With a higher amount, on all contracts, your tax rate will increase from 7.5% to 12.8%, ie, social contributions included, from 24.7% to 30%, including the CSG increase. But since the annual allowances of € 4,600 or € 9,200 for a couple will be maintained, most withdrawals will be subject only to social security contributions.
In this context, the securities account seems more competitive than before …
The introduction of the single flat-rate levy at 30% will make the securities account tax equivalent to that of life insurance for the first eight years. And the absence of annual management fees is even an advantage over life insurance. But the latter allows to change support without tax, and even at no cost on arbitrations in contracts like ours, or entry fees on SICAV and FCP