Scheduled assurance-vie redemptions: receiving regular income, and what is taxed

A scheduled redemption is a partial withdrawal that is planned in advance, for example, to generate regular supplemental income. According to service-public.gouv.fr, every redemption includes a portion of capital (which is not taxable) and a portion of gains (which is taxable). The BOFiP (Official Bulletin of Public Finances) provides the formula for the taxable portion of a partial redemption. If no redemption is made, the gains are exempt from income tax.

This page deals with French assurance-vie contracts for a tax resident of France, for premiums paid since September 27, 2017. It does not cover: the frequency, minimum amount, fees and procedures for setting up a program, which are governed by your contract; social security contributions, which are covered on a dedicated page; payout as a life annuity; or contracts with foreign insurers.

What a planned buyout is

The website service-public.gouv.fr states that partial withdrawals can sometimes be scheduled, for example, to provide regular supplemental income. It addresses these withdrawals in its "Partial Redemption" section: the policyholder can make several redemptions (or partial withdrawals) up to the surrender value of their contract. The website economie.gouv.fr indicates that the policyholder can make withdrawals at any time, including regular withdrawals, or convert their capital into a life annuity.

Two key points to remember:

• The limit is the surrender value of the contract.
• The accepting beneficiary. According to service-public.gouv.fr, the consent of the accepting beneficiary is required to carry out a buyback. This point should be verified before implementing a program.

What is imposed on each payment

Every redemption includes a portion of capital and a portion of gains (interest and capital gains). Only the portion of gains is taxable. The BOFiP, the official tax administration guidelines, provides the formula for the taxable proceeds of a partial redemption:

surrender amount − [premiums paid × (surrender amount ÷ total surrender value of the contract on the date of surrender)]

For a redemption following another, the premiums taken into account are those that have not already been reimbursed as a lump sum. The formula is calculated on the date of each redemption, taking into account any lump sum reimbursements already made.

The taxable event is a partial redemption (or the termination of the contract). Gains from a redemption are subject to income tax in the year of the redemption. If there is no redemption, the gains are exempt from income tax.

Income tax rates (bonuses since 27/09/2017)

The €150,000 threshold is assessed globally, across all your contracts. The basis for calculating this threshold should be verified with the source before designing a program close to this amount. Premiums paid before September 27, 2017, are subject to a different regime, which is not addressed here.

You can opt for the progressive tax scale when filing your tax return. This option is comprehensive: it applies to all your income and investment gains. Before checking box 2OP, you should check with the tax authorities whether you can change your mind about this option.

The annual allowance

For contracts of 8 years or more, a tax allowance of €4,600 (single person) or €9,200 (married or civil union couple filing jointly) applies to gains. Three characteristics count towards a regular income:

• It is annual. The BOFiP specifies that it is only granted once a year.
• It is global. It covers all of the taxpayer's assurance-vie contracts.
• It is allocated in a fixed order. For premiums paid since 27/09/2017, the BOFiP (French Official Tax Bulletin) applies it first to the portion taxed at 7.5% of the % (taxable income), then to the balance taxed at 12.8% of the %. Prior premiums have their own allocation order, which is not addressed here.

The allowance does not carry over: the portion not used one year is not used the following year.

The deduction made at each withdrawal

With each redemption, the insurer applies a flat-rate, non-final withholding tax: 12.8% for a contract of less than 8 years; 7.5% for a contract of 8 years or more, subject to the €150,000 threshold (above this, 12.8%). This is an advance payment of income tax. It is credited against the tax due for the year in which it was made, and any excess is refunded.

According to service-public.gouv.fr, you can request an exemption if your reference tax income for the year before last is less than €25,000 (single person) or €50,000 (married or civil union couple filing jointly). The procedure and deadline for this request are not covered here; they can be found on the page about exemption from withholding tax and should be verified with your insurer.

The statement

The institution provides a receipt (the IFU). According to service-public.gouv.fr, you declare these earnings after deducting the allowance. If a pre-filled amount is incorrect, it can be corrected. The amount to enter in each box (gross or net of the allowance) can be verified in the instructions for the tax return for the year.

For a contract of 8 years or more and premiums paid since September 27, 2017, the practical guide to income tax 2026 (income from 2025) stipulates:

For a contract of less than 8 years, the brochure uses a different section, which can be found on the form for the current year. These boxes are those from the brochure for 2025 income: they may change for 2026 income, to which the withdrawals in the example below relate, and should be checked on the form for the current year.

Numerical example (fictitious profile)

Situation. Claire, single and a tax resident of France, opened a contract in November 2017 with a single premium of €100,000. As of January 1, 2026, the contract will be over 8 years old and worth €130,000. It is invested in unit-linked funds, which carry a risk of capital loss. Claire has no other contracts and is not requesting a waiver of the tax. The 12 monthly withdrawals will take place in 2026. She is setting up a monthly withdrawal for 12 months.

Issue. What portion of these withdrawals is taxed, and what happens to the deduction made by the insurer?

Strategy. Apply the formula to each withdrawal, then deduct the €4,600 allowance from the total annual earnings. Three monthly amounts are compared.

Assumptions of the example: the value of the contract only varies due to withdrawals (the real value varies with the markets and can fall); premiums and value remain below €150,000, so the rate of 7.5 % applies; the 7.5 % levy is calculated on the share of gains of each withdrawal and rounded to the nearest cent at each withdrawal; the scale is not used; social security contributions are not calculated.

Result. Each withdrawal of €2,000 contains €1,538.46 of capital and €461.54 of gains. This distribution is the same every month because, under this scenario, the remaining value and bonuses decrease proportionally.

In this scenario, the year's earnings exceed the allowance starting with a monthly withdrawal of approximately €1,661. The tax deducted during the year is higher than the tax due in all three cases: the difference is refunded after the tax return is filed.

This profile is fictitious. The figures illustrate the calculation and do not predict your situation.

What changes depending on your situation

• The seniority of the contract : it sets the rate (12.8 % or 7.5 %) and access to the allowance.
• The date of your bonuses : those prior to September 27, 2017 fall under a different regime.
• The ratio between your premiums and the value of the contract : the more the value exceeds the bonuses, the higher the share of gains from each withdrawal.
• Your other contracts and other buybacks : the allowance and the threshold of €150,000 are assessed on the whole.
• The beneficiary clause : an accepting beneficiary must give their consent.

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