Social security contributions (CSG and CRDS) for life insurance contracts


Gains generated by life insurance contracts are subject to social security contributions. photo credit: CREDIT_NON_AFFICHE

The gains produced by your life insurance contract are subject to social security contributions, the rate of which is currently set at 17.2%. Their methods of recovery differ according to the nature of the contract (mono-support, multi-support or “euro-croissance” life insurance). When deducted from earnings subject to the progressive tax scale, a fraction of the CSG paid is deductible from your taxable income. In rare cases, certain contracts are exempt from social security contributions.

Summary:

  • Social contributions from life insurance contracts: basic rule

  • Social security contributions for mono-support contracts

  • Social contributions from multi-support contracts

  • Social contributions from “euro-croissance” contracts

  • Cases of exemptions from social security contributions on life insurance

  • The liquidation of the life insurance contract in life annuity

  • Partial deduction of CSG from life insurance contracts

Social contributions from life insurance contracts: basic rule

If the earnings from a life insurance policy can escape tax, they are subject to social security contributions. The social levy rate has been set at 17.2% since January 1, 2018, regardless of income level. The debit is carried out automatically at the end of the year for funds in euros (and each time a withdrawal is made) and only in the event of an outflow of money for investments made in units of account. The insurer is responsible for the formalities and directly pays the amounts due to the tax authorities.

What are social contributions used for?

Social security contributions contribute to the financing of social protection: Social security, RSA (Revenu de Solidarité Active), retirement and family allowances. Only natural persons domiciled in France for tax purposes are subject to social security contributions. They relate to income from assets and investments.

Social security contributions for mono-support contracts

So-called “monosupport” life insurance contracts are contracts invested entirely in the

euro funds:

  • As the name suggests, a single medium carries the investment.

  • It is the safest investment medium, because the capital paid cannot be lost.

  • The insurer guarantees a minimum rate of remuneration.

  • The interest generated by the contracts is subject to social security contributions each year, at the time of their registration in the account (generally, in December).

Social contributions are deducted directly by the insurer from the interest produced. Indeed, the latter is responsible for paying them directly to the tax administration. Their overall rate is set at 17.2%. They are composed for 9.2% of the CSG (Contribution Sociale Généralisée), of the CRDS (Contribution to the Reimbursement of the Social Debt) for 0.5%, and of the solidarity levy up to 7.5%. Since 2010, the year of the death of the subscriber of the life insurance contract, the fraction of interest acquired since the last registration is also subject to social security contributions.

Social contributions from multi-support contracts

Unlike mono-support contracts in life insurance, multi-support contracts offer at least one fund in euros and several supports expressed in units of account (UCITS, shares, bonds, shares in real estate companies, etc.). These contracts, which are not guaranteed, make it possible to take advantage of financial market opportunities and therefore generate potentially better profitability, but they present a higher level of risk than funds in euros.

The interest generated by the euro funds of the

Multi-support contracts since July 1, 2011 are subject to annual social security contributions, like those for life insurance contracts in euros. On the other hand, the interest generated by these funds before 2011 is subject to social security contributions only in the event of redemptions made by the saver, or since 2010 when he died. They are also deducted by the insurer.

The applicable rate is in principle that in force at the time of redemption, settlement or death. i.e. 17.2% since January 2018. However, for contracts taken out between January 1, 1990 and September 26, 1997, the rate applicable to tax-exempt gains generated during the first eight years following subscription and attached to payments made before September 26, 1997 is that in effect when they were acquired. Or 0.5% for gains acquired between February and December 1996, 3.9% for those acquired in 1997, 10% for those acquired from 1998 to June 2004, 10.3% for those acquired from July to December 2004, and 11% for those acquired in 2005.

Does the tax administration carry out adjustments in the event of overpayments?

A regularization mechanism is provided if the social contributions paid each year on the interests of the vehicles invested in the financial markets prove to be higher than those due at the time of a withdrawal, the settlement of the contract or the death of the insured. This may be the case, for example, if the performance of the unit-linked funds of the life insurance contract is negative. Therefore, the excess social security contributions paid are transferred to the life insurance contract. Funds in euros are not concerned, since the capital is guaranteed and, therefore, there is no risk in the collection of social security contributions.

Social contributions from “euro-croissance” contracts

The

Life insurance contracts called “euro-croissance” contracts are halfway between a fund in euros and a unit-linked fund. They allow higher returns than a fund in euros, while offering a capital guarantee (or annuity) at the end of a minimum holding period of eight years. Invested in funds in euros and in units of account, they give rise to the constitution of a provision for diversification.

In addition to the ordinary procedures for submitting their funds in euros and in units of account to social contributions, these “euro-croissance” contracts present an additional constraint in terms of social contributions. Indeed, they are also subject to it when the guarantee is reached, for fund products giving rise to the constitution of the diversification provision. The tax base is then equal to the difference between the redemption value of the funds concerned and the sums invested by the subscriber of the contract.

Cases of exemptions from social security contributions on life insurance

Interest from contracts settled or subject to partial surrender following the disability of the subscriber or his or her spouse, corresponding to classification in the 2nd or 3rd category within the meaning of the Social Security Code, is exempt from deductions. social. Therefore, the redemption request must be made at the latest before the end of the year following that of the event.

To know

Life insurance contracts held by non-residents for tax purposes are exempt from social security contributions.

Social tax is also totally exempt for so-called “survival annuity” contracts. These allow a person to take out a life insurance contract and to make payments therein for the benefit of another person with a disability preventing him from acquiring vocational training or working in normal conditions. The insured thus receives an annuity not subject to social contributions. In addition, as this type of contract prohibits redemptions, the insured does not have to pay income tax.

Disability savings contracts concern people whose disability prevents them from carrying out a professional activity under normal conditions. The latter are also exempt from social security contributions, except in the case of total or partial withdrawal subject to income tax. However, interest recorded in the account since January 1, 2010 is exempt from CRDS.

The liquidation of the life insurance contract in life annuity

In the event of the settlement of your

life insurance in life annuity, the gains generated by your contract are exempt from social security contributions. The pension itself is then subject to it for a fraction of its variable amount according to your age on the date of its first payment. It is 70% if you are under 50, 50% if you are between 50 and 59, 40% if you are between 60 and 69 and 30% if you are 70 or over.

In this case, social security contributions are calculated by the tax authorities for the amounts entered on your annual income tax return. Since January 1, 2019, they are payable in the form of monthly or quarterly installments deducted by the tax authorities from your bank account, as part of the deduction at source of social security contributions.

Partial deduction of CSG from life insurance contracts

The CSG paid on life insurance gains is deductible only when these gains are subject to the progressive scale of income tax. That is to say when you waive the single flat-rate direct debit. In this case, you can apply a deduction of 6.8% to your earnings, then include them in your other taxable income received. Otherwise, the CSG paid on the earnings of your life insurance policy is taxed at a flat rate and, in most cases, not deductible.

.

Leave a Comment