Personal Income Tax
Life insurance with savings is not just an opportunity to invest your free resources, but it also helps you get back your personal income tax from the state. Life insurance premium payments are not subject to taxation.
You get back 20% of your insurance premium payments from the state if the total amount of premiums per taxation year does not exceed 10% of your gross income (max EUR 4000).
At the maturity of the contract when the savings are paid out to you, you do not need to pay personal income tax in the amount of 20 % from the amount of savings. Only the capital tax in the amount of 20% (which is not an income from the capital) from the income is calculated. It is calculated as a margin between the total amount of premium payments and the received savings.
This is an opportunity to receive 20% from insurance premiums apart from investment returns, which makes life insurance with savings one of the most profitable ways of investing, even if you have chosen a low-risk investment solution. In addition, the insurance premiums which are paid in the policyholder’s agreement will not be taxed even they are paid in by its spouse.
Conditions for receiving a tax benefit:
- Period of the contract should be at least 10 years;
- To receive tax benefits for the following insurance years after 10 years have passed, no partial surrender from the contract is allowed;
- The policyholder and the insured person should be the same person.
How to get a tax benefit:
- You need to submit to the SRS your annual income declaration with the income and the total amount of the premium payments you made into your life insurance contract with savings in the previous year.
- You do not need to submit any additional documents proving premium payments, because this information will submitted to the SRS by Mandatum Life,
- After submitting the annual income declaration, the SRS will calculate the tax benefit and transfer the money to your bank account by the due date required by law.
Capital Income Tax
Life insurance contracts with savings are subject to taxation of the income earned on capital, which is other than the growth of capital. The income earned on capital is a percentage of made investments and it is calculated as a margin between the total amount of investments made and the total accumulated savings.
Regardless of your chosen investment solutions, the tax from earned income is 20%. Mandatum Life charges this amount when paying out the accumulated capital.
When making changes in your investment portfolio during the contract period, there is no need to pay capital income tax on the transactions made.
To get more information about tax benefits, please do not hesitate to contact us.