The 2013 Finance Act had already attempted to include certain latent income in the income to be taken into account to calculate the wealth tax cap and, notably, capital gains on life insurance contracts, income capitalized in trusts, distributable profits for shareholders controlling a company subject to the corporate income tax etc. The French Constitutional Court (Conseil Constitutionnel) had already cancelled these provisions on the ground that such income was not realized, the taxpayer could not freely dispose of it and the legislature had, therefore, based its assessment on criteria that violated the requirement that the taxpayer's actual contribution capabilities had to be taken into account.
Despite this decision, the tax authorities had published a tax guideline the day before the date for declaring the wealth tax, aimed at including in the cap calculation the income from bonds or capitalization contracts and investments of like nature, and, notably, life insurance contracts that are subject to social withholding taxes on an ongoing basis irrespective of whether subscribed with insurance companies established in France or abroad. This guideline had been reinforced by a ministerial response before, in the end, being cancelled after a petition for abuse of power.
The 2014 Finance Act took the matter back up, providing to include in the wealth tax cap calculation the income from bonds or capitalization contracts and investments of like nature, and, notably, life insurance contracts taken out with insurance companies established in France or abroad, that are subject to social withholding taxes on an ongoing basis.
Once again, the Constitutional Court cancelled this provision for the same reasons stated the previous year. The Court also stated that the legislature violated the res judicata effect of a decision handed down by the Court in that it adopted provisions that had already been deemed unconstitutional.
In practice, taxpayers may, therefore, continue to benefit from the cap on their wealth tax without taking into account income from their life insurance contracts, including when they are partially or fully invested in euros.