Do I need to pay personal income tax on the insurance payment?

Are payments for OSAGO and CASCO, property insurance, as well as life and health insurance taxed?

Insurance payment

Insurance benefit is the amount of money that is determined by the law and (or) the insurance contract and is paid by the insurer to the policyholder (an insured person, beneficiary) upon the occurrence of an insured event.

Depending on the type of contract (compulsory or voluntary insurance), the type of payment (on account of insurance compensation or compensation of legal costs), as well as other conditions, the amount of the expected payment by the insured maybe 13% less due to the income tax collected by the insurer (personal income tax) ).

A more sad option is when the entire amount is received by the insured in full, but, after a certain time, a letter comes from the tax service about the need to pay personal income tax from it, as well as penalties and fines.

Income tax (personal income tax)

Personal income tax – personal income tax is regulated by Chapter 23 of the Tax Code of Russia (Tax Code of the Russian Federation) and for the cases under consideration is usually 13% of the amount of taxable income. Moreover, the Tax Code of the Russian Federation refers to such incomes the number of insurance payments received not only from sources in Russia (clause 2, clause 1 of article 208 of the Tax Code of the Russian Federation) but also from foreign organizations outside its borders (clause 2, clause 3, article 208 Tax Code of the Russian Federation).

Often personal income tax is withheld by an insurance organization. At the same time, she is recognized as a tax agent for personal income tax (Article 226 of the Tax Code of the Russian Federation) and is obliged to calculate and withhold tax in the event that the taxpayer has income subject to taxation.

Whether or not it is necessary to pay personal income tax from the insurance payment

In most cases, the insured does not have to pay personal income tax on the insurance payment. This applies to compulsory insurance contracts (subparagraph 1 of clause 1 of Art. 213 of the Tax Code of the Russian Federation), as well as voluntary life insurance (with some exceptions), voluntary personal and pension insurance – but subject to the recipient of income fulfilling the requirements of the Tax Code of the Russian Federation. 

Personal income tax for CASCO and OSAGO

Suppose that the driver has insured his personal car twice under OSAGO and CASCO. There was an accident, the cause of which depends, including the payment of personal income tax.

  1. The insured driver is not at fault. The insurance payment (for car repairs) came to him from the insurance company under the OSAGO policy. There is no need to pay personal income tax from such an amount since OSAGO is a compulsory insurance contract (clause 1 of article 213 of the Tax Code of the Russian Federation).
  1. The insured driver is to blame. The insurance claim (for car repairs) came to him from the insurance company under the CASCO policy. With such an amount, personal income tax must be paid. CASCO is a voluntary property insurance contract. 

In the second case, you need to pay tax, not on the entire amount, but taking into account the specifics provided in paragraph 4 of Art. 213 of the Tax Code of the Russian Federation: with the difference between the amount of insurance payment and the cost of repairs, increased by the cost of the insurance policy.

An example of calculating personal income tax, if the owner of the CASCO policy has committed an accident.

After the insured event was recognized, the insurer credited him with 50,000 rubles to be paid. The car was repaired by an auto repair shop and was documented in the amount of 25,000 rubles. CASCO policy cost 20,000 rubles.

PIT CALCULATION:

RUB 50,000 – (25,000 rubles + 20,000 rubles) = 5,000 rubles.

Personal income tax 13% from the amount of income 5000 rubles. = 650 rubles.

Thus, the policyholder will receive from the insurance payment not 50,000 rubles, but 49,350 rubles.

If the cost of repairs and paid insurance premiums exceeds the amount of insurance payment for CASCO, personal income tax is not withheld ( letter of the Ministry of Finance of Russia dated April 30, 2014, No. 03-04-05 / 20579).

Personal income tax on property insurance

The owner of the apartment turned to the insurance company for payment due to the gulf. He was dissatisfied with the amount of the indemnity and received the indemnity under the judgment. At the same time, the received payment also included reimbursement of expenses in connection with the investigation and determination of the amount of damage, court costs, as well as other expenses incurred in accordance with the current legislation and the terms of the property insurance contract. 

In this case, the calculation of personal income tax becomes more complicated, since not all received amounts are taxed:

  1. Personal income tax from the amount of insurance pays for damage to the insured property is determined on the terms of clause 4 of Art. 213 of the Tax Code of the Russian Federation: from the difference between the amount of the received payment and the expenses necessary for the repair of this property (if the repair was not carried out), increased by the amount of paid insurance premiums.
  2. Since the insured confirmed the validity of the repair costs by the relevant act of an independent expert (appraiser), incurred expenses related to investigating the circumstances of the insured event and establishing the amount of damage, paid legal costs, the insurance company reimburses him these amounts, which should not be taken into account as his income ( i.e. personal income tax is not paid from them).

If by a court decision, in addition to the listed amounts, the insurance company also paid a fine and a penalty (for violation of the payment deadline), then personal income tax will have to be paid from such amounts ( letter of the Ministry of Finance of Russia dated 03.03.2016 No. 03-04-05 / 12259).

Personal income tax under voluntary life insurance contracts

For personal income tax purposes, income in the form of insurance payments for voluntary life insurance (with some exceptions) is not taken into account, but provided that insurance premiums for them are paid by the taxpayer and (or) members of his family and (or) close relatives in accordance with the Family Code of the Russian Federation …

The exception is voluntary life insurance contracts provided for in paragraphs. 2 p. 1 art. 213 of the Tax Code of the Russian Federation, voluntary pension insurance contracts provided for in paragraphs. 4 p. 1 art. 213 of the Tax Code of the Russian Federation.

In cases of termination of such contracts (with the exception of termination for reasons beyond the control of the parties) and payment of a monetary (redemption) amount to the insured person, the income received by him is reduced by the amount of the paid insurance premiums and is subject to taxation at the source of payment – an insurance company.

In the event that the insured person (taxpayer) submits a certificate issued by the tax authority at his place of residence, confirming the non-receipt of the social tax deduction specified in paragraphs. 4 p. 1 art. 219 of the Tax Code of the Russian Federation, the insurance organization does not withhold or adjusts the amount of personal income tax

In addition, income in the form of insurance payments on voluntary life insurance is not taxed only if the amounts of insurance payments do not exceed the amounts of insurance premiums paid, increased by the amount according to a special calculation, taking into account the term of the contract and the amount of the average annual rate in force during this period. refinancing of the Bank of Russia.

Otherwise, the difference between the indicated amounts is taken into account when determining the tax base and is subject to taxation at the source of payment (subparagraph 2 of paragraph 1 of article 213 of the Tax Code of the Russian Federation), which in this case will be an insurance company (article 226 of the Tax Code of the Russian Federation).

As you can see, there is no definite answer to the question of the payment of personal income tax from insurance payments. However, with the correct application of the legislation to the selected type of insurance, its taxation can be optimized without negative consequences from the regulatory authorities.

 

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