Luxembourg Life Insurance for French Residents: What It Changes and What It Does Not

The Luxembourg life insurance (assurance-vie) policy is presented sometimes as a tool for secrecy, sometimes as a superior financial product. It is neither. It is a policy governed by Luxembourg law that offers stronger protection for the policyholder and a wider investment universe. For a French resident, its taxation is identical to that of a French policy, and it must be reported every year to the tax authorities.

The overall wealth planning framework is set out on our page wealth strategy before 2027 (in French).

Is Luxembourg life insurance legal for a French resident?

Yes. Taking out a policy with an insurer established in another Member State of the European Union falls under the freedom to provide services. No provision of French law prohibits or restricts it.

The trade-off is a reporting obligation. Article 1649 AA of the French Tax Code (Code général des impôts, CGI) requires you to report capitalisation contracts and similar investments, including life insurance policies, taken out outside France. The report is made on form 3916-3916 bis, together with the income tax return, and is renewed every year.

What the Luxembourg policy really offers

The security triangle. The assets representing the insurer’s technical provisions are deposited with a custodian credit institution approved by the Commissariat aux assurances, under a deposit agreement concluded between the insurer and the bank and subject to the Commissariat’s approval. This agreement requires the bank to freeze the assets on notification by the Commissariat aux assurances, in the situations provided for by the Luxembourg law of 7 December 2015 on the insurance sector (“loi sur le secteur des assurances”).

The policyholder’s priority right. If the insurer fails, the policyholder ranks as a preferred creditor on the assets representing the technical provisions. The terms and scope of this priority right are set by Luxembourg law and by the regulations of the Commissariat aux assurances: they must be checked policy by policy.

The investment universe. Beyond standard unit-linked funds, the policy can hold dedicated or collective internal funds, allowing discretionary management and access to wider asset classes. These investment vehicles require high minimum investments, set by the insurer.

Multi-currency and portability. The policy can be denominated in several currencies and is not unwound by a change of residence. It follows the policyholder, and the applicable taxation becomes that of the new State of residence, subject to the applicable tax treaty.

What the policy does not change: French taxation

For a policyholder domiciled in France, the place where the policy is taken out has no effect on the tax regime.

• On a surrender: the income is taxed under the French rules applicable to life insurance policies, with the flat rate of Article 200 A of the CGI or the option for the progressive scale, and the allowances linked to the age of the policy.
• On death, for premiums paid before age 70: Article 990 I of the CGI provides for an allowance of €152,500 per beneficiary, then a levy of 20% on the taxable portion up to €700,000 and of 31.25% above that.
• On death, for premiums paid after age 70: Article 757 B of the CGI refers to gift and inheritance duties, under the conditions it sets.

Luxembourg law gives a French resident no specific tax advantage. What sets the policy apart is protection and management, not tax.

A worked example

A policyholder domiciled in France holds a Luxembourg policy of €1,200,000, funded by premiums all paid before age 70. The policyholder has named their two children as beneficiaries in equal shares.

• On settlement upon death: each child receives €600,000. After the €152,500 allowance of Article 990 I, the taxable portion comes to €447,500, subject to the 20% levy, i.e. €89,500 per child, €179,000 in total.
• For comparison, outside life insurance: a transfer of €600,000 per child in the direct line, after the €100,000 allowance, would bear duties of around €98,194 per child at the rate of Article 777 of the CGI.
• The Luxembourg policy changes neither of these calculations: they would be identical with a French policy.

The relative gain comes from the life insurance regime, not from the country where the policy is taken out.

Penalties for failing to report

An unreported policy exposes you to the fine provided for by Article 1766 of the French Tax Code. Above all, Article L169 of the French Tax Procedure Code (livre des procédures fiscales, LPF) extends the statute of limitations for tax reassessment (délai de reprise) from three to ten years in the event of a breach of the obligations of Article 1649 AA, and Article 1729-0 A of the CGI provides for an 80% surcharge on the duties reassessed in respect of undeclared foreign assets.

Reporting obligations are detailed in our article on accounts and policies held abroad.

What happens to a Luxembourg policy if you leave France?

A change of residence does not unwind the policy. Three consequences follow:

1. the reporting obligation of Article 1649 AA, which accompanies the income tax return filed in France, must be reviewed in light of the policyholder’s new tax situation;
2. the taxation of surrenders becomes that of the State of residence, subject to the applicable tax treaty;
3. the taxation of settlement upon death depends on the conditions specific to Article 990 I, which covers in particular the case where the beneficiary has been domiciled in France for six of the ten years preceding the death, or where the insured person was domiciled there on the day of death.

A policy kept after leaving France may therefore remain within the French tax net solely because of where the beneficiaries are domiciled.

Key points

• The Luxembourg policy is lawful for a French resident and must be reported every year on form 3916-3916 bis.
• Its French taxation is identical to that of a French policy: the advantage lies in policyholder protection and the investment universe.
• Failure to report extends the reassessment period to ten years and triggers an 80% surcharge on the duties reassessed.

FAQ

Can a French resident take out a Luxembourg policy?
Yes. Taking out a policy with an insurer established in another Member State falls under the freedom to provide services. The policy must be reported every year under Article 1649 AA of the CGI.

What does the security triangle provide?
The assets representing the technical provisions are deposited with a custodian bank approved by the Commissariat aux assurances, under a deposit agreement approved by it. The bank undertakes in that agreement to freeze the assets on notification by the Commissariat, in the situations provided for by law.

Is the taxation more favourable?
No. For a policyholder domiciled in France, the tax regime is that of French life insurance: taxation of income on a surrender, Article 990 I for premiums paid before age 70, Article 757 B after that.

What happens if I leave France?
The policy is not unwound. The taxation of surrenders becomes that of the State of residence, subject to the tax treaty. Settlement upon death may remain within the French tax net depending on where the insured person or the beneficiaries are domiciled.

What is the risk if the policy is not reported?
The fine under Article 1766 of the CGI, a reassessment period extended to ten years and an 80% surcharge on the duties reassessed in respect of undeclared foreign assets.

Have your policy reviewed

We check the reporting obligations, the beneficiary clause and how the policy fits with the rest of your assets, in France and if you leave. See our article on the personal holding company, the one on limited tax retroactivity (in French) and protecting your assets before 2027 (in French). Every situation is different and deserves a dedicated analysis.

Official sources

• Article 1649 AA of the French Tax Code (CGI), reporting of policies taken out outside France – Légifrance (in French)
• Article 1766 of the French Tax Code (CGI), fine relating to policies taken out outside France – Légifrance (in French)
• Article 990 I of the French Tax Code (CGI), levy on death benefits – Légifrance (in French)
• Article 757 B of the French Tax Code (CGI), premiums paid after age 70 – Légifrance (in French)
• Article 200 A of the French Tax Code (CGI), flat rate – Légifrance (in French)
• Article 1729-0 A of the French Tax Code (CGI), 80% surcharge – Légifrance (in French)
• Article L169 of the French Tax Procedure Code (LPF), reassessment period – Légifrance (in French)
• Commissariat aux assurances (CAA), “lettre circulaire 16/9 relative au dépôt des actifs représentatifs des provisions techniques” (circular letter on the deposit of assets representing technical provisions) (consolidated version as at 1 February 2026) – caa.lu
• DGFiP (French public finance directorate), form No. 3916 – impots.gouv.fr (in French)

This article sets out the law for general information purposes, verified on the date of publication. Foreign law is set out subject to confirmation by a local adviser. It does not constitute legal advice. Every situation is different and deserves a dedicated analysis. Content compliant with the professional conduct rules of the legal profession.