When insuring movable/immovable property, their own life or other risks, few people think about whether payments will be taxed upon the occurrence of an insured event. However, in some cases, these amounts can be regarded as income, which means that payment of personal income tax becomes inevitable. But this measure is used in exceptional situations. It is necessary to distinguish between compensation for damage incurred and profit. Only in the second case, income tax in the amount of 13% will be withheld from the transferred insurance amount.
What does the law say?
Legislative taxation norms are set out in the Tax Code of the Russian Federation. On the basis of this regulatory act, the insurance recipient may be subject to the mandatory payment of personal income tax.
Part 1 of Article 208 of the Tax Code of the Russian Federation states that insurance payments are recognized as income that is subject to taxation. But in Part 4 of Article 213 an important explanation is given that tax is levied only on profit, and not on the entire amount transferred by the company.
That is, when compensating for damage, it is important to determine its actual cost. If a house was damaged by a fire for 3 million rubles, and the insurance company paid 3.5 million, then personal income tax is paid on the difference of 500 thousand rubles. The remaining 3 million is not income, as it was spent on the restoration of real estate.
The general rule concerns:
- Mandatory types of insurance, such as compulsory motor liability insurance, etc.
- Voluntary life insurance.
- Voluntary pension insurance.
During judicial collection of insurance, personal income tax may be collected from amounts that are calculated in excess of the established damage, but do not constitute compensation for moral damage.
OSAGO Accounting and Tax Accounting
The expenses recorded on account 97 are written off to the debit of accounts 20 “Main production”, 23 “Auxiliary production”, 25 “General production expenses”, 26 “General business expenses”, 44 “Sales expenses”, etc.
Changes in clause 65 of the Regulations of Order of the Ministry of Finance of the Russian Federation dated December 24, 2021 N 186n did not cancel the use of account 97 for the purpose of accounting for expenses incurred by the organization in the reporting period, but relating to the following reporting periods.
Are insurance payments income?
Income is money received by an individual or legal entity as a result of performing some activity over a certain period of time. Activity does not always mean performing some actions. For example, rent or lottery winnings are also considered income. But reimbursement of previously incurred expenses does not apply to this.
To understand the difference, you can consider two types of auto insurance - OSAGO and CASCO. OSAGO is mandatory for registration. Under this policy, the car owner is compensated only for the damage actually incurred, but no more. CASCO offers different insurance packages and, if desired, the car owner can insure it for a larger amount, which may entail a payment in excess of the damage received. The difference between the actual losses and the funds received is considered income.
Accountant's Directory
Property insurance during its transportation is carried out in connection with the following types of risks: shortages, damage, loss or destruction. Most often, the buyer becomes the policyholder in such cases. However, this is determined by the terms of the purchase and sale agreement, where the risks are distributed. The main thing is that the insurance contract contains the period of its validity, the type of property, the nature of the insured event, and the amount of the amount to be compensated.
This operation can be carried out only with the consent of the policyholder (based on an application certified by his signature). Example No. 1. 06/08/2021 between the insurance company and the individual Korolev N.L. an insurance agreement was concluded for personal property (apartment), according to which Korolev pays monthly insurance premiums in the amount of 2,880 rubles. On 10/05/2021, an insured event occurred with Korolev, as a result of which material damage was caused to the apartment. Based on the incident, an insurance certificate was issued for compensation in the amount of 57,850 rubles.
What are the features of taxation?
Taxation of individuals and legal entities pursues several goals:
- on the one hand, this allows us to stimulate socially significant types of insurance;
- on the other hand, it makes it possible to prevent the receipt of unjustified benefits.
When collecting taxes on insurance payments, the following are taken into account:
- Tax base determined by the insurance contract.
- Availability of social deductions for the costs of purchasing the policy.
- Refund or reinstatement of previously withheld or unpaid tax.
The payer himself must monitor the payment of personal income tax. It is he who is responsible for late paid or incorrectly calculated personal income tax. But it often happens that the insurer sends a warning about the need to make a payment. He is a tax agent and, in accordance with paragraph 5 of Article 226, is obliged to notify the taxpayer in writing of the need for personal income tax deductions.
For ordinary citizens
Citizens who do not conduct business activities pay personal income tax on insurance payments:
- exceeding the amount of actually established damage. Insurers rarely pay the insured more than the actual losses incurred, so this situation is the exception rather than the rule;
- upon termination of the contract on voluntary pension insurance and payment of the redemption amount, provided that it is greater than the insurance premiums;
- fines and penalties that are paid by the insurer by court decision are also income and therefore subject to income tax calculation.
Please note that compensation for legal expenses and moral damages of the insured is not subject to personal income tax.
Features for legal entities
Legal entities are required to pay income tax on the amount obtained as a result of calculating the difference between income received and expenses incurred.
Article 250 of the Tax Code of the Russian Federation establishes that compensation for losses is non-operating income. And Article 251 provides a list of cases when income should not be taken into account when calculating the tax base. In particular, no accounting is made if the amount of compensation is missing.
In other cases, the amount received from the insurance must be taken into account as income. In this case, all funds spent on restoring the damage caused are included in the expense item. The positive difference is taxable.
Accounting
In accounting, reflect calculations for insurance premiums (contributions) for property insurance on account 76-1 “Calculations for property and personal insurance” (Instructions for the chart of accounts).
On the date of payment of the insurance premium (contributions), reflect in the accounting the issuance of the advance:
Debit 76-1 Credit 51 – insurance premiums (contributions) have been paid.
The payment of the insurance premium does not affect the calculation of VAT, since insurance costs are not subject to this tax (subclause 7, clause 3, article 149 of the Tax Code of the Russian Federation).
Insurance expenses should be recognized in accounting from the date the insurance contract comes into force. If such a date is not provided for in the contract, then it is considered to have entered into force at the time of payment of the insurance premium. This follows from Article 957 of the Civil Code of the Russian Federation.
If the contract is concluded for a period exceeding one month, make the following entry every month when writing off the insurance premium as expenses in accounting:
Debit 20 (23, 26, 44...) Credit 76-1 – the cost of the insurance premium for the current month is expensed.
If the term of the insurance contract does not exceed one month, then include the insurance premium as part of the costs in the month when the insurance contract came into force (the insurance premium was paid):
Debit 20 (26, 23, 44...) Credit 76-1 “Calculations for property and personal insurance” - the cost of the insurance premium under the insurance contract is expensed.
If the insurance contract is not valid from the first day of the month, calculate the amount of expenses to be written off in proportion to the number of remaining days of the month.
This order follows from the Instructions for the chart of accounts (accounts 20, 23, 26, 44, 76).
Situation: is it necessary to include property insurance costs in the cost (initial cost) of new goods, materials (fixed assets) in accounting?
The answer to this question depends on whether insurance costs are directly related to the acquisition (creation) of new property.
Insurance costs, as a rule, are not directly related to the acquisition, manufacture and creation of new property. Therefore, they do not need to be taken into account in the initial cost of the property (clause 8 of PBU 6/01, clause 6 of PBU 5/01). Apply this rule, for example, when new property is insured in case of damage or theft after its receipt.
At the same time, in practice, situations are possible when insurance premiums (contributions) can be regarded as costs directly related to the acquisition, manufacture and creation of new property. For example, if the buyer insures the goods in case of damage during transportation from the supplier. In this case, include insurance costs in the initial cost of the property (clause 8 of PBU 6/01, clause 6 of PBU 5/01).
Do I need to pay personal income tax?
Non-payment of taxes entails the imposition of administrative measures to combat non-payers - the imposition of a fine. An individual will have to not only pay the required 13% of the income received, but also compensate for the established fine.
You can determine whether you need to pay personal income tax or not on your own or by consulting the nearest tax office. In most cases, insurance payment does not entail the obligation to pay personal income tax. However, there are rare exceptions to this rule.
Important note!
- This article provides basic information, but each case is different.
- In 92% of all situations there are important nuances that can affect the outcome of the entire case.
- An experienced lawyer will study all the materials of the case and indicate in which direction to move.
Therefore, our website employs on-duty legal consultants who delve into each case and are aimed at solving it.
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What payments are not subject to personal income tax?
Most insurance payments are not subject to income tax, since they are not a source of tax base formation. Such payments include:
- Compulsory vehicle insurance.
- Personal real estate insurance.
- Voluntary life and health insurance.
- Pension voluntary insurance.
Payments for these types of insurance do not entail the payment of personal income tax if their amount does not exceed the established damage.
When will personal income tax still have to be paid?
Obtaining insurance by court order is most often accompanied by a written notice of the need to pay tax. It is not necessary to pay personal income tax on all amounts. The bulk of the damages recovered are not subject to taxation. But you will have to pay tax for:
- a penalty that is awarded for missing the due date for insurance payment;
- a fine issued as punishment for failure to comply with a pre-trial claim.
If the insured is awarded compensation for moral damages, then this money is not considered income and therefore not subject to taxation.
Procedure for organizations
The tax will need to be paid if the losses from the accident are less than the amount of compensation. However, in this case, 20% must be deducted not from the entire amount, but only from the part that exceeded the expenses. For example, if the insurance company paid 50 thousand rubles. as compensation for a broken car that belonged to the enterprise, and it took 43 thousand to repair it, then 20% of 7 thousand rubles, which turned out to be unnecessary, must be allocated to the budget. The tax payment in this case will be 1,400 rubles.
Payment must be made in the same way as for other income. It must be done after the compensation amount has been credited to the current account or while still at the waiting stage as an advance payment.
Tax rate
Individuals who are residents of the Russian Federation calculate personal income tax at a rate of 13% of the amount of income received. If the insured does not have Russian citizenship and is not recognized as a resident of the country, then upon receipt of insurance recognized as income, he is obliged to pay 30%.
Don’t forget about the possibility of obtaining tax deductions. Thus, when applying for voluntary pension insurance, a citizen has the right to receive a deduction in the amount of 13% from an amount not exceeding 120,000 rubles per year. A personal income tax refund is possible only if you have official employment.
In case of early termination of the pension insurance agreement, the policyholder automatically withholds the tax deduction amount for each reporting year. If the policyholder has not received compensation, it is necessary to take a certificate from the tax office and provide it to the insurer so that deductions are not made.
I received a letter with taxes - can I not pay and what are the consequences?
You can always not pay, but you must understand that this will be a tax offense for which liability is provided. The amount of the penalty will depend on whether you filed a tax return or not, and can be up to 30-40% of the tax amount. But paying a fine does not relieve you from the obligation to pay the tax itself, so possible “losses” must be summed up.
The deadline for filing a tax return is set until April 30 of the following year, and the tax on this return must be paid no later than July 15. If you miss these deadlines, but still decide to pay the tax, the main thing is to do it before the tax authorities discover the non-payment, then you can avoid a fine.
This topic is becoming more and more relevant, because in a situation where there is less and less money in the treasury, they remember all the debtors of the state.
