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IRAS Updates Guide To Tax Treament Of Insurance Premiums

by Mary Swire, Tax-News.com, Hong Kong

26 December 2013


The Inland Revenue Authority of Singapore (IRAS) has updated it website to explain the responsibilities of employers on the tax treatment of group insurance policies, for which the premiums are paid by the employers and employees are entitled to a contractual payout.

The updated advice relates to instances where an employee is the named beneficiary of the group insurance policy (for example, group term life insurance or group personal accident insurance); or where the employee is not the named beneficiary, but the payout would be paid to the employer, who, however, is still under a contractual obligation (for example, as provided in the employment contract) to disburse the insurance payout to the employee, the employee's nominated beneficiaries or the employee's next-of-kin.

In that case, in an administrative concession with effect from the 2013 assessment year, an employer, who is not an investment holding company, tax exempt body or service company that adopts the cost plus mark-up basis of tax assessment, can elect not to claim a tax deduction for the group insurance premiums in the corporate/business tax filing, so that the group insurance premiums will be exempt from tax in the hands of the employees.

On the other hand, in the case of a group insurance policy where the employee is not the named beneficiary, and the employer 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, premiums are not taxable as no benefits-in-kind are granted to employees.

Under such policies, 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 compensation for death or injuries (which is tax-exempt under the tax code).

TAGS: individuals | tax | business | insurance | employees | corporation tax | Singapore | tax breaks | individual income tax

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