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Comparison of the taxation of capitalisation policies in Belgium, France, Luxembourg, Monaco and Portugal

By - Bâloise Vie International
  Belgium France Luxembourg Monaco Portugal
Use of capitalisation policies possible for legal entities YES YES YES YES YES
Use of capitalisation policies possible for individuals NO YES YES YES YES

PERSONAL TAXATION

1/ Subscription

Belgium France Luxembourg Monaco Portugal
N/A* N/A N/A N/A Tax on premiums 0.048%

2/ Partial or total surrender when the policy ends

Belgium N/A
France

Premiums paid before 27/09/2017:
Capital gains tax may be deducted from the policyholder's income + social security contributions 17.2%
OR option for flat-rate withholding tax (35%/15%/7.5% depending on the length of the holding period) + social security contributions 17.2%.

Premiums paid as from 27/09/2017:
At the time of surrender: compulsory lump-sum withholding tax not in full discharge (12.8%/7.5% depending on the length of the time held) + social security contributions 17.2%
Year following surrender: withholding tax imposed on single lump-sum payments (12.8%/7.5% depending on the length of time held and the amount of premiums paid)
OR option for capital gains tax on the subscriber's income.

Deduction of a tax credit equal to the mandatory lump-sum withholding tax paid in the year of surrender.

Luxembourg

No taxation as long as a minimum period of 6 months is respected between the subscription date and the surrender date.

Monaco

Residents in Monaco deemed to be tax resident in France:
Taxation is the same as the one applying to French tax residents.

Subscibers who are tax resident in Monaco:
No taxation on capital gains
No social security contributions.

Portugal

Capital gain taxable at a fixed rate of 28% or at the subscriber's income tax according to the following rules:

- 100% of the taxable capital gain for the first five years;

- 80% of the taxable capital gain between 5 and 8 years;

- 40% of the taxable capital gain after 8 years.

3/ Wealth tax

Belgium N/A
France

Wealth Tax on Real Estate (WTRE):
Surrender value at 1 January taken into account when calculating the tax base for WTRE, up to the value represented by the units of account invested in real estate assets and rights located in and/or outside France.

Luxembourg N/A
Monaco

No wealth tax in Monaco
Possible application of the French wealth tax on property:
Tax residents in Monaco who transferred their domicile to Monaco as from 01/01/1989:
Surrender value at 1 January taken into account in the taxable base for wealth tax on real estate up to the value represented by the units of account invested in real estate assets and rights located in and/or outside France.


Tax residents in Monaco, including French nationals who transferred their domicile to Monaco before 01/01/1989:
Surrender value at 1 January taken into account in the taxable base for wealth tax on real estate up to the value represented by the units of account invested in real estate assets and rights located only in France.

Portugal N/A

4/ Death of the policyholder

Belgium N/A
France

Surrender value taken into account in the assets of the estate and subject to inheritance tax depending on the amount transferred and the family relationship between the policyholder and his heirs.

Luxembourg

Surrender value taken into account in the assets of the estate and subject to inheritance tax depending on the amount transferred and the family relationship between the policyholder and his heirs.

Monaco

Residents in Monaco, including French nationals who have been habitually resident in Monaco for more than five years at the time of their death:
No inheritance tax in Monaco if the assets are deposited in a custodian bank not located in Monaco
Failing this, the surrender value will be taken into account in the assets of the estate and subject to inheritance tax depending on the family relationship between the policyholder and his heirs.

Residents in Monaco who are French nationals habitually resident in Monaco for less than five years at the time of their death:
Subject to French inheritance tax: the surrender value taken into account in the assets of the estate and subject to inheritance tax depending on the amount bequeathed and the family relationship between the policyholder and his heirs.

Portugal

 No inheritance tax in direct line of succession.

 

CORPORATION TAX

1/ On subscription

Belgium France Luxembourg Monaco Portugal
N/A* N/A N/A N/A Tax on premiums 0.048%

2/ On partial or total surrender or at the end of the policy

Belgium

Legal entities subject to income tax:
Realised capital gains are subject to withholding tax (currently 30%).


Legal entities subject to corporation tax:
Realised capital gains are subject to withholding tax, but may be recovered subject to certain conditions.

In both cases, capital losses are deductible.

France

Legal entities subject to income tax:

Realised capital gains are subject to tax in the hands of the partners/shareholders depending on their the amount of their shareholding and in accordance with the same rules as if the shares were held by an individual.


Deduction of a tax credit equal to the mandatory lump-sum withholding tax paid in the year of surrender.


Legal entities subject to corporation tax:
Annual taxation calculated on a lump sum basis set at 105% of the Monthly Rate for Long-Term Government Bonds (the ‘MRL’) in force on the date of subscription of the policy
On surrender/at term: regularisation of tax by taxing the difference between the surrender value and the lump-sum revalued value at the rate of 105% of the MRL.

Luxembourg

Legal entities subject to a system of tax transparency:
Realised capital gains are subject to tax in the hands of the partners/shareholders depending on the amount of their shareholding and in accordance with the same rules as if the shares were held by an individual.

No taxation provided a minimum period of six months between the subscription date and the surrender date is respected.

Legal entities in the form of limited companies:
Capital gains taxable as a legal entity for the purposes of the local authority income tax and the municipal business tax (26.01% for Luxembourg City).

Monaco

Legal entities subject to Income Tax:
Inclusion of capital gains as part of the income which is taxable at Income Tax rate (28% for 2020).

Legal entities not subject to Income Tax:
No taxation.

Special cases of non-commercial partnerships, limited partnerships, commercial partnerships with partners resident in Monaco who are deemed to be tax resident in France:
Capital gains are taxable in the hands of each partner, up to the amount of their share (taxation similar to that applicable to individuals).

Portugal


See the same taxation applicable to surrender by individuals.

3/ Wealth tax

Belgium N/A
France Surrender value at 1 January taken into account to determine the value of the units of the legal entity to be included in the taxable base for real estate wealth tax, up to the value  representing the units of account invested in real estate assets and rights located in and/or outside France.
Luxembourg Limited companies: wealth tax of 0.5% on the basis of the nominal value of their capital.
Monaco N/A
Portugal N/A

* The law does not in itself prohibit an individual from taking out a Luxembourg capitalisation policies, without a guaranteed return. Each company still reserves the right to sell it to them, or not. 

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