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Did you know that redemptions, refunds, advances or maturities of life insurance contracts must be declared to the IRS?

The main purpose of life insurance contracts is to cover the risk of death or survival and thus ensure the return of the capital invested to third parties or to the individual in situations where survival results in disability.

In addition to this type of life insurance, nuptial or birth contracts, life insurance linked to investment funds (unit linked) and some types of capitalisation operations are also considered life insurance.

The positive difference between the amounts received by way of redemption, refund, advance or maturity of the contracts and the respective amounts invested is considered income, when the amount received in the first half of the contract term represents at least 35 per cent of the total amount invested.

However, 1/5 of the income is excluded from taxation if received between 5 and 8 years into the contract and 3/5 of the income if received after the first 8 years of the contract.

Only the part not excluded from taxation will have to be filled in on the tax return, in Annex E, Table 4 A with the code “E20 – Interest and other forms of remuneration referred to in Article 5 of the CIRS”, thus being subject to taxation at 28 per cent.