Life Insurance Estate Transfer for Non-Residents: Guide

Non-residents and life insurance: a specific tax framework

Estate transfer via life insurance (assurance vie) for non-residents follows particular tax rules that differ significantly from those applicable to French residents. Whether the insured person is non-resident at the time of death or the beneficiaries reside abroad, the tax consequences vary considerably. Understanding these mechanisms is essential for French expats, foreign nationals holding French policies, and international families.

France has approximately 2.5 million French citizens living abroad, a significant proportion of whom hold life insurance policies taken out before their expatriation or during periods of residence in France. Additionally, many foreign nationals or dual citizens have taken out policies with French insurers. For all these individuals, the question of what taxation applies to death benefits is crucial and often misunderstood.

The tax regime governing life insurance estate transfer for non-residents rests on a set of cross-referenced criteria involving the residence of the insured, the residence of the beneficiary, and any applicable international tax treaties. The complexity is compounded by the fact that the rules differ depending on whether premiums were paid before or after the insured's 70th birthday.

The general tax framework

The territoriality principle

In the area of life insurance death benefits, France applies a territoriality principle based on two criteria:

The tax residence of the insured at the time of death
The tax residence of the beneficiary at the time of death (and during the preceding years)

Article 990 I of the CGI, in its first paragraph, specifies the conditions under which the levy applies based on the parties' residence. This residence-based approach (rather than one based on nationality or the location of the policy) is characteristic of the French tax system for estate transfers.

The four possible scenarios

The combination of residence criteria for the insured and the beneficiary gives rise to four distinct scenarios, each with different tax consequences. Understanding these scenarios is the starting point for any non-resident estate transfer strategy.

Scenario 1: insured resident, beneficiary resident -- The standard regime applies in full. Article 990 I of the CGI applies to premiums paid before age 70 (allowance of 152,500 euros per beneficiary, then a levy of 20% up to 700,000 euros and 31.25% beyond). Article 757 B of the CGI applies to premiums paid after age 70 (global allowance of 30,500 euros, then inheritance tax at standard rates).

Scenario 2: insured non-resident, beneficiary resident -- The Article 990 I levy is due if the beneficiary has their tax domicile in France at the time of death and has had it for at least six of the ten years preceding the death.

Scenario 3: insured resident, beneficiary non-resident -- The Article 990 I levy is due, as the insured's residence in France is a sufficient criterion for taxation, regardless of the beneficiary's residence.

Scenario 4: insured non-resident, beneficiary non-resident -- In principle, no levy is due in France under Article 990 I, provided that neither the insured nor the beneficiary is a French tax resident.

Summary of applicable taxation by residence of the insured and the beneficiary
Scenario	Insured	Beneficiary	Art. 990 I CGI levy	Art. 757 B CGI levy
Scenario 1	French resident	French resident	Yes (standard regime)	Yes (standard regime)
Scenario 2	Non-resident	French resident (6 yrs/10)	Yes	Depends on inheritance tax territoriality rules
Scenario 3	French resident	Non-resident	Yes	Yes
Scenario 4	Non-resident	Non-resident	No	No (except for assets located in France)

Article 990 I of the CGI and non-residents

Conditions for liability

For the Article 990 I levy to apply, one of the following must be true:

The insured has their tax domicile in France at the time of death, OR
The beneficiary has their tax domicile in France at the time of death and has had it for at least six of the ten years preceding the death

If neither of these conditions is met, the Article 990 I levy is not due in France, even if the policy was taken out with a French insurer and the premiums were paid from France. It is the residence at the time of death (not at the time of payment) that determines liability.

The Article 990 I levy applies to death benefits corresponding to premiums paid before the insured's 70th birthday, after an allowance of 152,500 euros per beneficiary. The rate is 20% on the portion not exceeding 700,000 euros (after the allowance) and 31.25% beyond. The surviving spouse and PACS partner are completely exempt from this levy.

The six-out-of-ten-years rule

The beneficiary residence condition (six years out of ten) is an anti-avoidance mechanism designed to prevent a beneficiary from temporarily leaving France just before the insured's death to escape the levy. It does, however, offer an optimisation window for beneficiaries who are genuinely established abroad long term.

In practice, a beneficiary who left France more than four years ago and does not plan to return may find themselves below the six-year threshold over the last ten years. From that point, if the insured is also non-resident, no levy is due in France under Article 990 I.

Karim, 45, international consultant in Dubai

Karim, 45, an international consultant specialising in the oil sector, has been based in Dubai for 8 years. A Franco-Algerian national, he was a French tax resident from birth until age 37. His father Youssef, 75, resides in Algeria and holds a French life insurance policy worth 900,000 euros, taken out when he was working in France in the 1990s. The premiums were entirely paid before Youssef turned 70. Karim is designated as the sole beneficiary.

Analysis of the taxation applicable upon Youssef's death:

The insured (Youssef) is not a French tax resident at the time of death: the first criterion is not met.
The beneficiary (Karim) is not a French tax resident at the time of death. Has he had his tax domicile in France for at least six of the last ten years? Having left France 8 years ago, Karim was a French resident for only 2 of the last 10 years. The second criterion is not met.
Conclusion: no levy is due in France under Article 990 I of the CGI. The 152,500-euro allowance does not even need to be used since the entire capital is exempt from the French levy.

Karim will receive the full 900,000 euros with no taxation in France. However, he will need to verify the taxation applicable in his country of residence (the United Arab Emirates does not levy inheritance tax) and in his father's country of residence (Algerian tax law may apply).

If Karim had left France only 3 years ago (and therefore been a French resident for 7 of the last 10 years), the Article 990 I levy would have been due. The taxable base would have been 900,000 - 152,500 = 747,500 euros, with a levy of 20% on the first 700,000 euros (140,000 euros) and 31.25% on the remaining 47,500 euros (14,844 euros), for a total of 154,844 euros.

Article 757 B of the CGI and non-residents

Link to inheritance tax

Premiums paid after age 70 (Article 757 B of the CGI) follow a different regime: they are subject to standard inheritance tax (droits de mutation par deces), after a global allowance of 30,500 euros shared among all beneficiaries. For non-residents, the applicability of French inheritance tax depends on the standard territoriality rules for inheritance tax (Article 750 ter of the CGI).

The 30,500-euro allowance is significantly less favourable than the 152,500 euros under Article 990 I, which reinforces the case for paying the maximum amount of premiums before age 70. This strategy is even more relevant for non-residents, because premiums paid before 70 fall under Article 990 I (which offers the possibility of total exemption in cases of dual non-residence), while those paid after 70 fall under standard inheritance tax (with different territoriality criteria).

The territoriality criteria

French inheritance tax applies if:

The deceased had their tax domicile in France (all worldwide assets are taxed)
The beneficiary has their tax domicile in France and has had it for at least six of the last ten years (they are taxed on all assets received, wherever located)
The assets are located in France (for non-residents)

For life insurance, the question of where the policy is located is debated. The tax authorities generally consider that a policy taken out with a French insurer constitutes an asset located in France. This position, disputed by some commentators, can have significant consequences for non-residents holding French policies: even in the absence of French residence for both the insured and the beneficiary, premiums paid after age 70 could be subject to French inheritance tax if the policy is deemed an asset located in France.

Premiums paid after age 70: a specific risk for non-residents

Article 757 B of the CGI refers to standard inheritance tax, whose territoriality criteria are broader than those of Article 990 I. A non-resident whose premiums paid before 70 would escape the Article 990 I levy (thanks to dual non-residence) could nonetheless be taxed on premiums paid after 70 if the policy is deemed an asset located in France. The global allowance is only 30,500 euros (versus 152,500 euros per beneficiary under Article 990 I), and the tax is calculated according to the standard inheritance tax scale. This is why non-residents have an even stronger incentive than residents to pay the maximum amount of premiums before their 70th birthday.

The impact of international tax treaties

The role of treaties

France has signed numerous bilateral tax treaties covering inheritance. These treaties can modify the territoriality rules and eliminate double taxation situations. However, not all treaties cover life insurance death benefits, and their application to life insurance is sometimes uncertain.

Tax treaties on inheritance are distinct from treaties on income tax. They are fewer in number (France has signed only around thirty inheritance treaties, compared with over 120 income tax treaties) and their scope is sometimes limited to certain categories of assets.

Key treaties

France-Belgium treaty (terminated as of 1 January 2024 for inheritance matters): before termination, this treaty assigned the right to tax solely to the country of the deceased's residence. Its termination fundamentally changed Franco-Belgian inheritance taxation. French domestic law now applies without any treaty filter, which can lead to double taxation situations for Franco-Belgians.

France-Switzerland treaty: it assigns the right to tax movable assets (including life insurance) to the state of the deceased's residence. An insured person resident in Switzerland whose policy is taken out in France would in principle not be taxed in France on the death benefits. This treaty is particularly favourable for French nationals settled in Switzerland.

France-Luxembourg treaty: it generally provides for taxation in the state of the deceased's residence for movable assets. This treaty reinforces the appeal of the Luxembourg contract for international families.

France-United States treaty: it assigns the right to tax to the country of the deceased's residence, with a tax credit to eliminate double taxation. This treaty is complex in its application to life insurance, as the United States does not always recognise the French life insurance contract as an insurance product.

Impact of key tax treaties on life insurance estate transfer
Treaty	Attribution rule	Impact on life insurance	Current status
France-Belgium	Deceased's residence (former)	Favourable before termination	Terminated as of 1 January 2024
France-Switzerland	Deceased's residence	Favourable for Swiss residents	In force
France-Luxembourg	Deceased's residence	Favourable for Luxembourg residents	In force
France-United States	Deceased's residence + tax credit	Complex (possible reclassification)	In force
No treaty	Each country's domestic law	Risk of double taxation	Not applicable

No treaty in place

In the absence of an applicable tax treaty, each country applies its own territoriality rules, which can lead to double taxation. The beneficiary may be taxed in the country of the insured's residence, in their own country of residence, and potentially in the country where the policy is located. This situation is common with countries in the Middle East, Asia or Africa, with which France often has no inheritance treaty.

Strategies for non-residents

Strategy 1: the Luxembourg contract

For international families, the Luxembourg life insurance contract offers optimal portability. Its tax neutrality allows it to adapt automatically to the taxation of the policyholder's and beneficiary's country of residence, considerably simplifying cross-border issues. The triangle of security and the Luxembourg super-privilege protect capital without limit, whereas the French FGAP caps the guarantee at 70,000 euros. For an expat who regularly changes country of residence, the Luxembourg contract is often the only vehicle that offers genuine continuity.

Strategy 2: maximise contributions before age 70

Premiums paid before age 70 fall under Article 990 I of the CGI, whose liability criteria (residence of the insured or residence of the beneficiary for six out of ten years) offer genuine possibilities for exemption in cases of dual non-residence. Premiums paid after 70 fall under Article 757 B of the CGI, whose criteria are broader and less favourable. The allowance is only 30,500 euros (global) versus 152,500 euros per beneficiary. It is therefore strategically crucial for non-residents to pay the maximum amount of premiums before their 70th birthday.

Strategy 3: plan the tax residence at the time of death

The insured's tax residence at the time of death is a determining criterion. A French expat who plans to remain abroad permanently can structure their estate transfer accordingly, taking advantage of the exemption from the Article 990 I levy when neither the insured nor the beneficiary is a French resident. This strategy presupposes a lasting establishment abroad, not a last-minute departure motivated solely by tax considerations (abuse of law could be invoked).

Strategy 4: diversify beneficiaries according to their residence

When beneficiaries reside in different countries, it may be worthwhile to take out separate policies with different beneficiaries, in order to optimise the taxation for each one according to their country of residence. A beneficiary resident in France will be subject to the Article 990 I levy (with a 152,500-euro allowance), while a beneficiary who has been living abroad for more than four years could be exempt (if the insured is also non-resident). Structuring with separate policies allows these distinct tax regimes to be isolated.

Strategy 5: take advantage of the spousal exemption

The surviving spouse who is a French tax resident remains completely exempt from the Article 990 I levy, even if the insured was non-resident. This exemption, introduced by the loi TEPA of 21 August 2007, is particularly valuable in mixed couples (one spouse in France, the other abroad). The PACS partner benefits from the same exemption.

Case studies

Case 1: French expat in Switzerland

Mr Duval, 65, has been resident in Switzerland for 15 years. He holds a French life insurance policy worth 800,000 euros, funded with premiums paid before age 70. His two children are resident in France.

The insured is not a French resident: no taxation based on his residence
The children have been French residents for more than 6 years: the Article 990 I levy is due
Each child benefits from the 152,500-euro allowance
Capital per child: 400,000 euros
Taxable base per child: 400,000 - 152,500 = 247,500 euros
Levy per child: 247,500 x 20% = 49,500 euros
Net received per child: 350,500 euros
The France-Switzerland treaty could, however, assign the right to tax exclusively to Switzerland (the country of the deceased's residence), which requires an in-depth analysis of the treaty

Case 2: Franco-American couple

Mrs Smith, an American resident in France for 20 years, holds a French life insurance policy worth 500,000 euros. Her American husband resides in the United States.

The insured is a French resident: the Article 990 I levy is due in principle
The husband is non-resident: the France-US treaty may assign the right to tax differently
The husband benefits from the spousal exemption (loi TEPA): no levy in France under Article 990 I
However, the tax consequences in the United States (federal estate tax, state inheritance tax) should be verified

Case 3: non-resident with non-resident beneficiary

Mr Chen, resident in Singapore, holds a French life insurance policy worth 1,000,000 euros funded with premiums paid before age 70. His son resides in Hong Kong and has never lived in France.

The insured is not a French resident
The beneficiary has not resided in France for six out of ten years
No levy is due in France under Article 990 I of the CGI
The 152,500-euro allowance does not need to be used
The taxation of Singapore and Hong Kong will apply as applicable (neither jurisdiction levies inheritance tax)

Dual non-residence: a case of total exemption in France

When neither the insured nor the beneficiary is a French tax resident at the time of death (and the beneficiary has not resided in France for at least six of the last ten years), no levy is due in France under Article 990 I of the CGI. The policy may have been taken out with a French insurer, the premiums may have been paid from France -- it does not matter: it is the residence at the time of death that determines liability. This "dual non-residence" situation is a case of total exemption from the French levy on life insurance death benefits for premiums paid before age 70. However, for premiums paid after age 70 (Article 757 B of the CGI), the situation is more nuanced because the territoriality criteria of standard inheritance tax apply and the location of the policy in France could provide grounds for taxation.

Reporting obligations

For the non-resident policyholder

A non-resident policyholder holding a French contract has no annual reporting obligation in France in respect of that contract (unlike a French resident holding a foreign contract, who must file form 3916 bis). However, reporting obligations may exist in their country of residence. Certain countries (notably the United States and the United Kingdom) require a detailed declaration of all accounts and financial contracts held abroad, including French life insurance policies.

For the beneficiary

The non-resident beneficiary must contact the French insurer for the settlement formalities. The insurer will apply the Article 990 I levy if the conditions are met, or issue an exemption certificate as appropriate. The beneficiary will need to provide evidence of their tax residence (tax residence certificate, foreign tax notice) to benefit from the non-residence exemption.

The deadline for payment of death benefits by the insurer is one month from receipt of the complete supporting documents. In practice, international cases often require longer timescales due to the complexity of the verifications involved (tax residence, applicable treaties, regulatory compliance).

Points to watch

Residential mobility

Changes in tax residence during one's lifetime can radically alter the taxation applicable to death benefits. It is essential to review your estate strategy with each change of country. A return to France, even a temporary one, can reactivate the residence criterion and subject death benefits to the Article 990 I levy. Conversely, a long-term expatriation may open the door to an exemption.

Residential mobility also affects the beneficiary: a child who leaves France to settle abroad gradually changes their residence counter (six years out of ten). After four years of continuous absence, they may fall below the threshold and escape the levy if the insured is also non-resident.

Double taxation risks

In the absence of a tax treaty, death benefits may be taxed in several countries. The beneficiary may be taxed in the country of the insured's residence, in their own country of residence, and potentially in the country where the policy is located. A prior tax audit is essential for complex international situations. The cost of such an audit (generally between 2,000 and 5,000 euros) is very modest relative to the financial stakes involved.

Qualification of the policy

Certain countries do not recognise the French life insurance contract as an insurance product. In the United States, for example, a French life insurance policy may be reclassified as a trust or an investment account (PFIC -- Passive Foreign Investment Company), with very different and often very unfavourable tax consequences. This reclassification can trigger annual taxation on unrealised gains within the policy, in addition to taxation at the time of death. Americans or Green Card holders must consult a specialist tax adviser before taking out or retaining a French life insurance policy.

The European Succession Regulation

Regulation (EU) No 650/2012, which entered into force on 17 August 2015, allows individuals to choose the law applicable to their estate (the law of the country of residence or the law of their nationality). This choice can have an indirect impact on life insurance taxation, particularly regarding the forced heirship reserve and manifestly excessive premiums. A French expat who chooses the law of their country of residence as the law applicable to their estate may find themselves in a country that does not apply the concept of a forced heirship reserve, which reduces the risk of life insurance premiums being challenged by heirs.

Conclusion

Life insurance estate transfer for non-residents offers significant optimisation opportunities, particularly when neither the insured nor the beneficiary is a French tax resident. Article 990 I of the CGI, with its 152,500-euro allowance per beneficiary, applies only if the insured or the beneficiary (six years out of ten) is a French resident. Article 757 B of the CGI, with its global 30,500-euro allowance, refers to standard inheritance tax whose territoriality criteria are broader. However, the complexity of the territoriality rules, the impact of tax treaties and the risks of double taxation demand a case-by-case analysis. Engaging a specialist adviser in international taxation is essential to secure the estate transfer strategy in a cross-border context. Optimal structuring often involves a combination of French and Luxembourg contracts, maximising contributions before age 70, and rigorous consideration of the tax residence of each party involved.