Buying back a Luxembourg life insurance policy: taxation for a French resident

Are you a French tax resident and redeeming a Luxembourg contract? The standard tax rate is a flat levy of 12.8%. This drops to 7.5% for contracts of 8 years or more, up to a limit of €150,000 in premiums paid. An annual allowance of €4,600 (single person) or €9,200 (couple) reduces the taxable base. Another point to note: with an EEA insurer established outside France, you are responsible for filing and paying the tax, unless you have given a mandate to a European financial institution.

Income tax rates

For premiums paid since 27/09/2017, the redemption is taxed as follows:

For premiums paid up to September 26, 2017, the tax treatment is different. Taxation is based on the progressive income tax scale or, optionally, on a flat-rate withholding tax: 35% of % before 4 years, 15% of % from 4 to 8 years, and 7.5% of % from 8 years onwards. If your contract is older, separate the two premium periods before making any decisions.

The €150,000 threshold: a personal threshold

The 7.5% tax rate (%) applies only up to a limit of €150,000 in premiums paid. This threshold belongs to each individual taxpayer. It is not shared with a spouse, except for a jointly held contract: in that case, the premiums are counted for each joint holder.

It is assessed across all your contracts, regardless of the insurer's location. Your Luxembourg contract is therefore included with your French contracts. The taxable base is the premiums paid but not refunded as a lump sum as of December 31st of the year preceding the taxable event.

This is the first point to check if you hold multiple contracts with several insurers.

The allowance of €4,600 or €9,200

The tax allowance applies to the proceeds of contracts held for 8 years or more. It amounts to €4,600 for a single person and €9,200 for a married or civil union couple filing jointly. It is annual and cannot be carried forward: any unused portion is lost in a given year.

For an insurer established in the European Union or the European Economic Area (EEA), it applies under the same conditions as for a contract taken out in France. It is calculated globally across all contracts.

It does not reduce the base for social security contributions.

The condition relating to the insurer

The 7.5% % rate assumes an insurer established in France or another EU member state. For an EEA state, an administrative assistance agreement is required. Luxembourg is an EU member state: a Luxembourg insurer meets the requirement.

The proceeds of a contract taken out with an insurer established outside of France are subject to income tax in the category of foreign securities.

Social security contributions in 2026

The rule changed on 01/01/2026. The Social Security Financing Act for 2026 increases the CSG (General Social Contribution) from 9.2% to 10.6% on investment products, effective 01/01/2026. For most of these products, the overall rate increases from 17.2% to 18.6%.

For life insurance, the CSG (General Social Contribution) remains at 9.2%. Notice 2778-SD 2026 confirms this. According to a government website, "survivorship annuity" and "disability savings" contracts are now subject to 18.6%.

The administration's website gives a total of 17.2 % for life insurance in general; the information leaflet, however, does not provide this total. This total is not explicitly confirmed for a Luxembourg contract invested solely in unit-linked funds. An official page describes the contracts affected by this maintenance with a formula that leaves some doubt in this case. None of the sources consulted provide a definitive answer.

We therefore do not provide a rate for your contract. Before any redemption, please read the official notice 2778-SD 2026 and verify the applicable rate.

Who pays, and how?

With an EEA insurer established outside France, the mandatory flat-rate levy and social security contributions are declared and paid by you, the liable taxpayer. The declaration bears the number 2778. It must be filed within the first 15 days of the month following receipt of payment. An exception applies if you have authorized a European financial institution to make the declaration.

Notice 2778-SD also provides for an exemption from the non-final withholding tax if your reference tax income for the year before last is less than €25,000 (single person) or €50,000 (couple). This exemption does not apply to social security contributions.

The proceeds are then reported on your tax return. The lines and forms are detailed on our page dedicated to declaring a contract opened abroad.

The option for the progressive scale

You can choose the progressive income tax scale instead of the flat-rate levy. The option is annual and applies to the entire tax year.

The rules governing a change of mind after the option has been selected are not addressed here: the official texts consulted (BOFiP of 21/06/2021 and the 2026 practical guide) do not agree, and we do not take a definitive stance. Please check the instructions for the tax return for the year.

Numerical example (fictitious profile)

Situation. A fictitious married couple, filing jointly, opened a Luxembourg life insurance policy in December 2017. They have paid €120,000 in premiums into it since then. A withdrawal in October 2026 includes €40,000 in proceeds. The policy will then be over 8 years old.

Issue. This couple expects to pay 12.8 % on 40,000 €, or 5,120 €.

Strategy. Check three points before the redemption: the age of the contract, the threshold of €150,000 (here, €120,000 of premiums are below the threshold), and the couple's allowance of €9,200.

Result. Income tax on the redemption: (40,000 − 9,200) × 7.5 % = €2,310. The same redemption made before the contract's 8-year mark would have cost 40,000 × 12.8 % = €5,120, or €2,810 more. These amounts are exclusive of social security contributions, which are added according to the official information sheet.

CALCULATION: 40,000 − 9,200 = 30,800; 30,800 × 7.5 % = 2,310; 40,000 × 12.8 % = 5,120; 5,120 − 2,310 = 2,810. The €120,000 in bonuses and the €40,000 in products are assumptions of the fictitious profile.

What changes depending on your situation

• The date of the bonuses. Before or after 27/09/2017: two regimes.
• The number of contracts. The €150,000 threshold counts them all.
• Your family situation. Single person or couple: €4,600 or €9,200.
• The insurer and the type of contract. It determines the social security contribution rate to be checked on the notice.
• Your choice between flat-rate and sliding scale payments. It depends on your total income.

These points are examined on a case-by-case basis. No tax outcome is guaranteed in advance.