Do I need to pay personal income tax on insurance payments?

 Do I need to pay personal income tax on insurance payments?

When signing an agreement (receiving a policy, applying for insurance) with an insurance company, the client expects that in the event of an insured event, it will pay compensation and cover part of the damage in accordance with the terms of the insurance agreement. This happens when applying for CASCO and OSAGO, as well as other types of insurance. It is important to know that sometimes when receiving an insurance payment, you need to pay personal income tax (hereinafter referred to as personal income tax). You will learn about in which cases it is charged and in which it is not, in our article.

In what cases are compensations subject to personal income tax?

The procedure for calculating and paying personal income tax under insurance contracts is regulated by the Tax Code of the Russian Federation (Chapter 23, Article 213). The tax rate is set at 13%, including in relation to the income of individuals received in the form of insurance payments. The exception is payments received for:

OSAGO policy, as it refers to compulsory types of insurance;

voluntary life insurance;

voluntary personal insurance contracts providing for payments in case of death, injury to health and (or) reimbursement of medical expenses of the insured person (except for payment of the cost of sanatorium and resort vouchers);

voluntary pension insurance.

The insurance company, as a source of payment, is a tax agent and is obliged to either withhold the tax or inform the tax authority and the individual about the impossibility of withholding the tax. If it is impossible for the insurer to deduct personal income tax from the amount of the insurance payment, the obligation to pay such tax rests with the owner of the car.

Personal income tax for payments under CASCO and OSAGO

OSAGO is a contract of compulsory civil liability insurance, according to which, in accordance with Article 213 of the Tax Code of the Russian Federation, the amount of payments is not subject to personal income tax. If the policyholder got into an accident that happened through no fault of his own, the repair is carried out under the CMTPL policy of the culprit. This compensation of losses subject to compensation by the insurer is not subject to taxation.

CASCO is a voluntary insurance that allows you to protect your car from a wide range of insurance risks. Insurance payment is made already minus personal income tax (clause 4 of article 213 of the Tax Code). Under a CASCO agreement, the taxable income of an individual is determined in the following cases:

damage to the insured property as the difference between the amount of the insurance payment received and the costs required to repair (restore) this property (in the event that the repair was not carried out), or the cost of repair (restoration) of this property (in the event that the repair was carried out), increased by the amount insurance premiums paid for the insurance of this property.

The insurance indemnity is intended to compensate for losses from an insured event and situations where the insurance indemnity exceeds the received damage occur infrequently.

Personal income tax for payments under voluntary property insurance

Personal income tax is not subject to the amount of compensation to the insurer for expenses, if provided for by the terms of the insurance contract, incurred in connection with:

appraiser services;

investigation of the circumstances of occurrence of an insured event;

lawsuits.

You need to pay personal income tax only if the insurance compensation turned out to be more than the cost of the destroyed / damaged property, its restoration and the cost of insurance. If the difference is 0, then there is no taxable income. If, in addition to compensation for the damage caused, the insurer, by a court decision, paid the client a penalty and a fine, then the insurer is obliged to withhold personal income tax from the amounts paid.

Personal income tax for fines and penalties

If the insurance company did not satisfy the requirements of the insured and paid compensation that does not cover the damage caused, or refused to pay, the insured has the right to go to court.

If the policyholder filed a claim for compensation for moral damage caused by the organization, then, in accordance with the Tax Code of the Russian Federation (Article 217), the compensation is not subject to taxation. The Supreme Court of the Russian Federation believes that fines and forfeits are income, but compensation for moral damage is not. This principle does not only apply to claims from insurers. It also applies to violations of consumer rights.

Even if an insurance company, a private organization or an individual entrepreneur acts as a defendant in court, the plaintiff sometimes has to pay tax on his own. The defendant is obliged to inform both the tax authority and the plaintiff that personal income tax was not withheld, no later than March 1 of the next year.

Contact SberInsurance

LLC IC Sberbank Insurance is engaged in all types of insurance, including land transport insurance, civil liability of transport owners, medical and property insurance. Products have been developed for individuals, within the framework of which it is possible to insure a house, apartment, mortgage agreement, personal belongings and financial interests when traveling abroad. For information about all types of insurance company services.