Social security contributions on life insurance
The arrangements for levying social security contributions on life insurance (or the capitalization contract) differ according to the type of contract taken out:
Monosupport contract in euro. At each annual capitalization, social security contributions are applied at the prevailing rate. In the case of total redemption during the year, interest for the last year is calculated and gives rise to social security contributions.
Multi-Purpose Contract. Until the end of 2009, social contributions were only levied at the time of partial withdrawal or at the time of the total settlement (excluding the death of the insured). The calculation base was the same as for taxation, ie the difference between the capital obtained and the payments made.
From 1 January 2010, the Social Security Financing Act ended the exemption when the policy was terminated by the death of the insured.
From 1 July 2011 (Article 22 of the Finance Act for 2011), any interest paid on a fund in euro of the contract is also subject to social security contributions when the interest is entered in the account (except If these interests relate to the 2010 financial year).
This regulatory change now operates the monosupport contract in euros and the euro fund of a multi-fund contract in the same way. But, unlike a contract in euro where valuation can only increase, that of a multi-unit contract may decline over time in the event of unlucky investment choices on a unit-linked fund. In this situation, the legislature has provided that when the total amount of social contributions already deducted exceeds the contributions calculated on the whole of the gains of the contract, this surplus is returned to the contract. It should be noted that this comparison is made on the amount of the contribution and not on the basis on which the contribution is calculated.
Partial withdrawals are also impacted by this change. Previously, all gains included in the amount of the partial withdrawal were subject to social security contributions. From 1 July 2011, the insurer will only have to levy social contributions on the part of the gain that has not yet been paid social contributions in respect of annual interest. If necessary, refund the excess.