How is the life annuity taxed for the seller?
The life annuity received by the seller is taxable only on a fraction set by Article 158(6) of the French General Tax Code according to their age at the first payment: 70% before age 50, 50% from 50 to 59, 40% from 60 to 69, and 30% beyond age 69.
A taxable fraction set by age at the first payment
Life annuities set up for valuable consideration, including the annuity of a property viager, are not taxed in full. Article 158(6) of the French General Tax Code includes in the annuitant's taxable income only a fraction of the annuity, determined by their age when the annuity comes into payment, that is, at the first payment. That fraction is then fixed: it no longer changes, even as the seller grows older.
The fraction subject to income tax is as follows: under age 50, 70% is taxable and 30% exempt; from 50 to 59 inclusive, 50% is taxable and 50% exempt; from 60 to 69 inclusive, 40% is taxable and 60% exempt; over age 69, 30% is taxable and 70% exempt.
| Age at the first payment | Taxable portion | Exempt portion |
|---|---|---|
| Under 50 | 70% | 30% |
| 50 to 59 inclusive | 50% | 50% |
| 60 to 69 inclusive | 40% | 60% |
| Over 69 | 30% | 70% |
Portion of a life annuity subject to income tax (Article 158, 6 of the French Tax Code)
The bouquet and capital gains tax
The bouquet is not income: it is not subject to income tax in the seller's hands. However, a viager sale falls under the French capital gains regime for private individuals: the sale price used includes the bouquet and the capital value of the annuity.
As with any sale, the capital gain is exempt when the property is the seller's main residence on the day of the sale (Article 150 U, II, 1° of the French General Tax Code), which is the case for most occupied viagers. Otherwise, the holding period allowances apply under ordinary rules.
Frequently asked questions
Does the taxable fraction change as the annuitant grows older?
No. It is fixed once and for all according to the age at the first annuity payment. A seller whose annuity came into payment at 71 remains taxed on 30% of it, however long it is paid.
How is the annuity taxed when it passes to the surviving spouse?
For an annuity with reversion between spouses, French tax doctrine uses the age of the older spouse when the annuity comes into payment, both before and after the first beneficiary's death (BOFiP, BOI-RSA-PENS-30-20). Outside marriage, the fraction applicable to the reversion beneficiary is in principle determined by their age at the first payment they receive.
Is the bouquet taxable?
Not as income. It does, however, form part of the sale price for the capital gains calculation. If the property sold is the seller's main residence, the capital gain is exempt under Article 150 U, II, 1° of the French General Tax Code.
Do the annuity or the property sold en viager count for the French wealth tax (IFI)?
The annuity itself is not part of the IFI base, which covers only real estate assets. In an occupied viager sold to a third party, the property's value is in principle split between the occupant and the buyer according to the scale in Article 669 of the French General Tax Code (Article 968 of the same code).
Read next
- Code général des impôts, article 158, 6 (Légifrance)
- BOFiP, BOI-RSA-PENS-30-20 : rentes viagères à titre onéreux
- Code général des impôts, article 150 U (Légifrance)
- Code général des impôts, article 968 (Légifrance)
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Social levies and tax return
The taxable fraction of the annuity also bears the social levies on investment income, at an overall rate of 17.2%. The gross amount of the annuities received is reported in boxes 1AW to 1DW of French income tax return No. 2042, broken down by age at entry into payment; the tax administration applies the taxable fraction itself.
This fraction is added to the household's other income and is taxed under the progressive income tax scale. The regime distinguishes the annuity for valuable consideration from the annuity received for free, which is taxed as a pension: the viager annuity does not qualify for the 10% pension allowance, the reduced fraction serving that purpose instead.