At a glance - Tax treatment of insurance premium
| Nature of insurance policy for which the premium is paid by employer |
Taxable / Not taxable |
| 1 |
Insurance where employees are entitled to the payout contractually.
Examples
- employee is the named beneficiary of the policy
- there is no named beneficiary but policyholder (employer) is under contractual obligation (e.g. as provided in the employment contract) to disburse the insurance payout to the employee, employee's nominated beneficiaries or employee's next-of-kin
|
The employee is taxable on the premium as he receives benefits in the form of an insurance protection.
In the event of a claim, the insurance payout is not taxable as it is a capital receipt.
|
| 2 |
Insurance where employees are not entitled to the payout contractually.
Examples
- employer is the named beneficiary of the policy
- there is no named beneficiary and payout from the insurance policy would be paid to the policyholder (employer) who has a choice to decide whether he wants to disburse the payouts to the employee, employee's nominated beneficiaries or employee's next-of-kin
|
The premiums are not taxable as no benefits-in-kind are granted to employees.
If the employer subsequently disburses the insurance payout to its employees, the payout is taxable as additional remuneration, unless it is received by way of death gratuity or as consolidated compensation for death or injuries (which is exempt under the law).
More information available
|
| 3 |
Medical insurance - Group, where the benefit is available to all staff |
From Year of Assessment 2008, the premiums are not taxable.
Prior to Year of Assessment 2008, the premiums were taxable.
|
| 4 |
Travel insurance covering the period of business travel |
Not taxable |
| 5 |
Workmen compensation insurance |
Not taxable |
Insurance premium paid
Q1 How do I find out who is the beneficiary?
Please refer to the policy document or check with the insurance provider.
Q2 If the employer pays the insurance premium for group insurance policy, how should the employer account for the benefits enjoyed by individual employee?
The premiums are not taxable if the beneficiary is the employer or if the employer has a choice to decide whether he wants to disburse the insurance payout from the group insurance policy to the employee or his next-of-kin subsequently.
Where the beneficiary is the employee or the employer is under contractual arrangement to give the insurance payout from the group insurance policy to the employee or his next-of-kin, the employee will be taxed on the amount of premium attributable to him.
Attribution can be done using average premium per staff.
In case of staff turnover, premium attributable to an employee can be prorated based on his length of service in the calendar year.