Capitalization contract: definition and differences with assurance-vie

According to a response from the Minister of the Economy and Finance published in the Official Journal in 2019, capitalization contracts are not designed to cover risks dependent on human lifespan: they simply represent the investment of a sum of money, the interest earned from which is capitalized. According to the ACPR (French Prudential Control and Resolution Authority), assurance-vie covers risks related to human lifespan. The clearest difference arises upon death: according to this 2019 ministerial response, the capitalization contract forms part of the estate, unlike sums paid out under assurance-vie contracts.

This page reports what we have read from official sources, including dates. It does not provide a legal definition from the Insurance Code, which we have not been able to consult. It does not quantify social security contributions, as the official documents do not provide the same rate. It does not address the division of the contract, the beneficiary clause, ownership by a company, or subscription by a non-resident.

What the sources say about the nature of the two contracts

Three official texts, from different dates, should be read:

• Ministerial response from 2019 (Written question no. 13459, answer published in the Official Journal on April 16, 2019). Capitalization contracts are not intended to cover a risk dependent on the duration of human life, but correspond to the simple investment of a sum whose interest earned is capitalized.
• Ministerial response of 2001 (Written question no. 57890, answer published on December 24, 2001). It indicates that assurance-vie contracts and capitalisation contracts are not subject to the same legal regime.
• Prudential Control and Resolution Authority (Analyses and Syntheses No. 65, updated September 24, 2026). It describes assurance-vie as insurance against risks related to the duration of human life. It is used here only for this definition.

These three sources are cited for what they say. The two ministerial responses date from 2001 and 2019; none of the 2026 pages we have read refer to them for capitalization. They should be reviewed before any decision is made.

The taxation of buybacks is addressed in a single commentary.

For income tax purposes, the BOFiP (French Official Tax Bulletin) addresses, in a single commentary (BOI-RPPM-RCM-20-10-20-50), the proceeds and gains from the sale of capitalization bonds or contracts and assurance-vie policies, whether taken out with companies established in France or abroad. This commentary does not define a capitalization contract.

He gives the following rules:

• Seniority. The unique legal nature of the contract means that its seniority is calculated from the day of subscription.
• Partial buyout. Premiums paid are only retained in proportion to the amounts reimbursed under the partial redemption.
• Rate. The BOI-RPPM-RCM-20-15 expressly names the bonds or capitalisation contracts: the flat rate of 12.8 % applies in principle, the rate of 7.5 % targets contracts of 8 years and more, under the conditions set by the BOFiP (in particular on the insurer and on the calculation of the threshold of 150,000 € of premiums, to be checked with the source); the fraction beyond the threshold remains at 12.8 %.
• Dejection. An annual allowance of €4,600 (single person) or €9,200 (couple subject to joint taxation) applies to the proceeds of contracts of 8 years and more.
• Acquisition free of charge. The acquisition price refers to the market value used for calculating inheritance tax.

Contracts taken out before January 1, 1983, and premiums paid before October 10, 2019, are subject to specific provisions in official texts, which should be verified with the BOFiP (French Official Tax Bulletin). This case is handled on a case-by-case basis.

The calculation of the taxable proceeds of a redemption is detailed on the firm's page on the taxation of the redemption of a capitalisation contract.

Upon death: estate assets or assurance-vie

The two ministerial responses describe a difference in treatment upon death.

The 2019 response indicates that capitalization contracts are part of the estate, unlike sums paid out under assurance-vie contracts. Their value is included in the taxable base for inheritance tax under the standard rules. The provisions of Articles 757 B and 990 I of the French General Tax Code, which concern assurance-vie, do not apply to them. The response adds that if a assurance-vie contract is reclassified as a capitalization contract, the sums paid to the beneficiary are subject to inheritance tax. The 2001 response is consistent with this: capitalization contracts are subject to standard inheritance tax, whereas sums due under assurance-vie policies are not part of the insured's estate, subject to Articles 757 B and 990 I.

For assurance-vie, the tax under Article 990 I applies after a deduction of €152,500 per beneficiary, at a rate of 20% on the taxable portion up to €700,000, and then 31.25% on the portion exceeding that amount. According to the BOFiP (Official Bulletin of Public Finances), for contracts taken out from November 20, 1991, it applies to premiums paid before the insured reached age 70. Further details can be found on the firm's page on assurance-vie upon death.

The PEA insurance

Service-public.gouv.fr states that a PEA (Equity Savings Plan) with an insurance provider is opened with an insurer in the form of a capitalization contract. The maximum contribution limit for a standard PEA with an insurance provider is €150,000. A withdrawal before five years results in the closure of the plan, except in specific cases; after five years, a partial withdrawal does not close the plan, but a full withdrawal does. Amounts invested in stocks or unit-linked funds carry a risk of capital loss.

Capitalization contract: numerical example (fictitious profile)

Situation. A female business owner has €300,000 in capital. She has one child, no other assets, and has not made any prior gifts. She compares two contracts of equal value: a assurance-vie policy taken out after November 20, 1991, with premiums paid before she turned 70, and a capital redemption contract. The child is the sole beneficiary or heir. These are hypothetical scenarios.

Issue. Upon his death, what portion of these €300,000 is taxed, depending on whether the capital is held in one contract or the other?

Strategy. The firm considers the two interpretations described by the sources: the levy under Article 990 I for assurance-vie; and the standard inheritance tax for the capitalisation contract, according to the ministerial response of 2019. It then verifies the age at the time of payments, the beneficiary clause and the relationship.

Result.

The assurance-vie tax is €147,500 × 20 % = €29,500. For the capitalization contract, the allowance is €100,000 per child and per deceased parent, and the tax brackets for direct descendants are 5 % up to €8,072, 10 % up to €12,109, 15 % up to €15,932, then 20 % up to €552,324: the base of €200,000 gives €38,194.35. The difference is €8,694.35 in this example.

This profile is fictitious. The calculation does not take into account other assets, income tax on products, social security contributions, or any potential reclassification. It applies the interpretation of the 2019 ministerial response, which is dated. The figures illustrate the mechanism and do not predict any outcome for your specific situation.

Capitalization contract: what changes depending on your case

• The type of contract you hold or are considering: assurance-vie, capitalisation contract, PEA insurance.
• The insured's age at each payment, for a assurance-vie policy.
• The relationship to the person receiving the capital determines the allowance and the tax scale.
• Previous gifts, which reduce the available allowance.
• The subscription date determines the rate in case of redemption.
• The total of your premiums, across all contracts, compared to the threshold of €150,000.
• The latest information on the ministerial response from 2019 and the text that applies to your contract.

The rule depends on your situation. No results are guaranteed.