TLDR: Policies taken out before 1 January 1983 benefit from a total exemption from income tax (IR) on the proceeds linked to premiums paid before 10 October 2019. Premiums paid from this date and their proceeds are taxable, with an annual allowance of €4,600 (single) or €9,200 (couple) for proceeds acquired or recorded from 1 January 1998. A mandatory separation into two compartments distinguishes tax-exempt proceeds from taxable proceeds.
Total exemption for premiums paid before 10 October 2019
The proceeds from life insurance policies taken out before 1 January 1983 are exempt from IR if they are linked to premiums paid before 10 October 2019. This exemption is absolute and does not depend on the duration of the policy or the type of fund (euro or unit-linked).
Mandatory separation into two compartments
To determine the taxable base, pre-1983 policies must be divided into two separate compartments:
- First compartment: premiums paid before 10 October 2019 + related proceeds → exempt from IR.
- Second compartment: premiums paid from 10 October 2019 + proceeds acquired or recorded from 1 January 2020 → taxable under IR.
This separation is mandatory for any surrender or liquidation of the policy.
Annual allowance on taxable proceeds
An annual allowance applies only to taxable proceeds (second compartment):
- €4,600 for single, widowed or divorced taxpayers.
- €9,200 for married or PACS couples subject to joint taxation.
This allowance concerns exclusively proceeds acquired or recorded from 1 January 1998 (or from this date for unit-linked policies).
Tax treatment of proceeds from the second compartment
The proceeds from the second compartment (premiums paid from 10 October 2019) are subject to IR under the general rules applicable to income from movable capital. Their taxable event occurs from 1 January 2020.
Special cases and limits
- The exemption does not apply to proceeds from premiums paid from 10 October 2019, even if the policy was taken out before 1983.
- The annual allowance does not cover exempt proceeds (first compartment).
- The separation into compartments is essential to avoid incorrect taxation in the event of a partial or full surrender.
Non-applicable calculation examples
No concrete examples are provided here, as the rules apply deterministically based on the payment dates of the premiums and the generation of the proceeds.