Euro-growth contract - Article 125-0 A of the French tax code
The new “euro-growth” contract ("contrat euro-croissance") is a life-insurance contract that allows the subscriber to allocate a portion or all of the premiums to financial investments giving rise to a diversification provision (by which the life insurance company may reach better performance). This life-insurance contract can be subscribed as of January 1, 2014, or can result from the transformation of an existing contract.
For this purpose, article 125-0 A of the French Tax Code was modified to:
- avoid having the transformation of an existing contract into a “euro-growth” contract treated as a termination of this contract for French tax purpose;
- maintain the anteriority of an existing contract for French tax purpose, after its transformation.
Modification of the specific 20% / 25% final withholding tax due upon termination of the life-insurance contract – Article 990 I of the FTC
Article 9 of the 2013 Amending Finance Law modifies the taxation of gratuitous transfer upon termination by death of the insured person when the premiums were paid before the insured person had reached the age of 70. This modification applies for life-insurance contract terminated by death occurring as of July 1, 2014. The withholding tax will be at a 20% rate for the taxable fraction of premiums computed by beneficiary until Eur 700,000 (previously, Eur 902,838) and at a 31.25% rate for the taxable fraction exceeding this limit (previously, 25%).
Simultaneously, the 2013 Amending Finance Law creates a new “life-generation” contract ("contrat génération-vie") that offers an additional 20% allowance, before application of the Eur 152,500 allowance.
The “life-generation” contract is a contract in units of account, which can be subscribed as of January 1, 2014, or which results from the transformation of an existing contract before January 1, 2016, whose units of account notably include:
- units or shares of UCITs or of alternative investment funds (FIAs), either French or European;
- units or shares of European real-estate oriented entities and other real-estate oriented vehicles (OPCIs or SCPIs).
In any event, 33% of these units or shares must be invested in pre-determined sectors, notably the innovation sector, small and mid-sized companies, social housing and social and solidarity-based economy.
Insurers and subscribers reporting obligations – FICOVI
As of January 1, 2016, insurance companies located in France will be subject to annual and event-driven reporting obligations to the French tax authorities:
- reporting of subscription or termination of a life insurance or a capitalization contract;
- annual reporting:
- of the total amount of premiums paid after the subscriber’s 70th birthday for non-redeemable life insurance contracts subscribed since November 20, 1991;
- of the total amount of premiums paid and of the amount of guaranteed capital or the redemption value for other contracts.
Failure to report these information is penalized by a 1,500-euro fine per failure and, within a limit of Eur 10,000, a 150-euro fine per omission or inaccurate information provided.
These information will be entered into a new national database of life insurance and capitalization contracts (“FICOVI”) to improve the resources for fighting against fraud and tax evasion.
Lastly, article 1649 AA of the FTC was completed in order to include in the annual declaration obligations of French tax residents who have subscribed for a life insurance contract with a company located outside France: (i) capitalization contracts, and (ii) payments of premiums made on a life insurance or capitalization contract over the previous year and the redemption value or the guaranteed capital on January 1 of the year of the declaration.