Expenses for the policy and medical packages in the costs of the entrepreneur
It often happens that entrepreneurs purchase medical packages or group insurance in order to motivate employees. Can the entrepreneur include expenses for the policy and medical packages for employees as company costs? Find out by reading our article!
Policy expenses in company costs
Expenses for an employee's policy may be included in the costs provided that the policy concluded with the employee relates to the risk listed in group 1, 3 or 5 in section I or group 1 and 2 in section II, which are listed in the appendix to the Act on Insurance Activity .
Life policies under the first section of the Act on Insurance Activity cover:
- group 1 - life insurance,
- group 3 - life insurance, if they are related to an insurance capital fund,
- group 5 - accident and sickness insurance, if they complement the two above-mentioned ones.
Under heading 2, the risks listed in:
- group 1 - accident insurance, including accident at work and occupational disease (one-time benefit, recurring benefits, combined one-off and repeated benefits, passenger transport),
- group 2 - sickness insurance (one-off benefits, recurring benefits, combined benefits).
Pursuant to Art. 23 sec. 1 point 57 of the Personal Income Tax Act, tax deductible costs may include the premium for the life insurance purchased for employees, if the person entitled to receive the benefit is not an entrepreneur. Additionally, the insurance contract for the period of 5 years from the end of the calendar year in which it was concluded excludes the possibility of:
- payment of the amount, which is the value of withdrawal from the contract,
- incurring liabilities against the rights arising therefrom,
- payment of funds for reaching the age specified in the contract.
Expenses related to the payment of premiums for a life insurance policy purchased for employees may be included in the costs if 3 conditions are simultaneously met:
- the insurance contract has been concluded,
- the concluded contract covers the risk listed in groups 1, 3, 5 of chapter I or 1, 2 of chapter II,
- while concluding the contract, the conditions set out in Art. 23 sec. 1 point 57 of the Personal Income Tax Act.
Life policy as an employer's expense and employee's income
Expenses for the insurance policy, which have been included by the entrepreneur in company costs, will also constitute the employee's income. The value of the contribution paid by the employer for group insurance should be added to the salary earned by the employee for a given month and the total amount of the employee's income in a given month should be calculated and the advance tax deducted. In addition, the amount of contributions paid by the employer should include each employee in the calculation basis for social and health insurance contributions.
A life policy purchased for an entrepreneur is considered a personal expense and cannot be counted as corporate expenses.
Medical packages for employees and tax deductible costs
Medical packages purchased by the employer for the benefit of employees may also be included in company costs. However, it is necessary to indicate the relationship between securing, preserving or obtaining a source of income.
Private medical care is an activity preventing and counteracting possible diseases, and thus long absences of the taxpayer at work. This gives the opportunity to run a business in a more comfortable way than in a situation in which the employee would be sick often. Confirmation of this position can be found in the individual ruling with reference number IBPBI / 2 / 423-1065 / 13 / PC, issued by the director of the Tax Chamber in Katowice on November 8, 2013.
The medical package, which will be considered as the employer's expense, will be treated on the part of the employee as income subject to tax with respect to the income tax and the calculation of health and social contributions.
Importantly, however, not every employee benefit may be classified as tax deductible for the employer. The employer may include in tax deductible costs only those expenses for employees that are related to his business activity and the income he earns, provided that these expenses are not included in the catalog of non-tax deductible expenses contained in Art. . 23 sec. 1 of the Personal Income Tax Act.
A medical package purchased by the entrepreneur for himself cannot be included in the company's costs. Such an expenditure is treated as an expenditure of a private nature.