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France Unveils Life Insurance Tax Reform

by Ulrika Lomas, Tax-News.com, Brussels

15 November 2013


The French Finance Ministry has presented the year-end 2013 supplementary finance bill (PLFR) to the Council of Ministers, providing for a raft of "ambitious" tax measures, including plans notably to reform the taxation of life insurance contracts.

Within the framework of the PLFR, the Finance Ministry intends to create new life insurance products, specifically designed to benefit the financing of the country's economy, thereby benefiting from more favorable rates of taxation than existing products.

The Ministry aims to introduce a "Euro growth" product, guaranteeing capital invested for a period of at least eight years. The envisaged product is a "multi-support" contract, combining traditional savings and unit-linked components. For individuals opting to move to the new product, the existing rate of taxation applicable to their old life insurance contract will be maintained.

Furthermore, the Ministry plans to establish new products to encourage savers to channel their investments into small- and medium-sized enterprise (SME) or intermediate-sized enterprise (ETI) shares, or into intermediate or social housing, for example. By way of an incentive, taxpayers opting for these proposed new contracts will benefit from a 20 percent reduction in the taxable base upon inheritance.

To encourage savers in France to transfer to life insurance contracts that better finance the economy, the Ministry aims to ensure that other products simply become a less attractive option for investors. Consequently, as part of the reform, the Ministry plans to increase from 25 percent currently to 31.25 percent the rate of tax levied on life insurance inheritances in excess of EUR1m (USD1.3m) per beneficiary.

France's year-end PLFR also provides for the introduction of an "exceptional depreciation" scheme to benefit corporate capital investments in innovating SMEs. Other measures include plans to simplify and to modernize tax procedures, and to provide tax relief in the forestry, press, restaurant, and video game industries.

Finally, the bill provides for a reform of the country's so-called "exit tax," imposed on latent capital gains crystallized at the time of departure from France and transfer of a fiscal residence abroad, to ensure that the levy is in accordance with Community law.

TAGS: individuals | Finance | tax | investment | law | insurance | tax rates | France | tax breaks | tax reform | Other

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