Life policy and medical packages for employees in the employer's costs

One of the elements of non-wage motivating employees are undoubtedly medical packages or life insurance policies bought by the employer. Check if you, as an entrepreneur, can include them in your tax costs!

Employee life insurance in tax deductible costs

The possibility to classify as tax costs the expenses of contributions paid for employee life policies was dependent on certain conditions. First of all, the insurance contract concluded with the employee must refer to the risk of one of the groups: 1, 3 and 5, section I, or 1 and 2, section II, listed in the appendix to the Act of May 22, 2003 on insurance activities.

In section I of the above-mentioned appendix containing life insurance, these contracts include: group 1 - life insurance, group 3 - life insurance, if related to an insurance capital fund, and group 5 - accident and sickness insurance, if they complement the two above-mentioned ones. In section II (other personal and property insurance): group 1 - accident insurance, in this case at work and occupational disease (one-time benefit, recurring benefits, combined one-time and repeated benefits, passenger transport) group 2 - sickness insurance (one-off benefits, recurring benefits, combined benefits).

In addition, pursuant to the provisions of the Office for Foreigners (Article 23 (1) (57)), the employer may include the premium paid for life insurance policies for employees as tax deductible costs, if the employer is not entitled to the benefit, and the insurance contract over a period of five years, counting from the end of the calendar year in which it was concluded or renewed, excludes:

• payment of the amount constituting the value of withdrawal from the contract,

• the possibility of incurring obligations against the rights arising from it,

• payment for reaching the age specified in the contract.

To sum up, in order for the employee life insurance premium financed by the employer to be classified as tax deductible costs, the following conditions must be met:

• an insurance contract has been concluded,

• the insurance contract related to the risk of one of the above-mentioned groups,

• the contract was concluded in compliance with the conditions set out in Art. 23 sec. 1 point 57 updof.

In addition, it should be noted that what will be the cost of the employer in this case will also be the income of the employee for whom the contributions are paid. In other words, the employer's life insurance contribution will be income for the employee from the employment relationship. This income is subject to income tax and forms the basis for the assessment of social and health insurance contributions.

Attention! Expenses on a life policy for the entrepreneur himself are already considered a personal expense, which is not tax deductible.

Medical packages for employees at company costs

Paying your employees additional medical packages can also be a tax deductible cost. The condition is, however, demonstrating the relationship of the expenditure incurred with the achievement of revenues or the preservation or securing of the source of revenues.

Providing employees with private medical care in accordance with the position of tax authorities is an activity related to, for example, preventing possible employee illness. The related absenteeism from work may prevent the entrepreneur from running a business, and as a result deprive the entrepreneur of income.

As in the case of the additional life insurance policy, they will not be, however, the fees related to the medical package purchased for the employer himself - the owner of a sole proprietorship. Additionally, a medical certificate which is an employer's tax deductible cost is also the employee's income and is subject to income tax and ZUS contributions.