International practice shows that it is possible to stimulate a “long” life insurance agreement through tax breaks. In Europe, “entry” and “exit” incentives are used. The “entry” benefit is a tax deduction from the insurance premium amount. Thus, in Germany the tax deduction amount increased to 7%, in France and Russia to 13%.
“Previously, the return that was used to purchase an endowment insurance policy was subject to individual income tax (IIT) at a rate of 10%. Since January 2021, the amendments to tax legislation have come into force, and clients have the right to reduce the tax base for calculating personal income tax. If you have an endowment insurance policy, smaller amounts are deducted from wages, and the saved amount is received along with return or wages,” explains Oleg Khanin, Chairman of the Board of LIC Kommesk-Omir.
It is important to note that insurance benefits under insurance contracts are not considered as income and for this reason are not subject to income tax. “In other words, when an insured event occurs, the clients receive the benefit from the insurance company without having to pay any taxes. Besides, there are tax deductions aimed at carrying out measures to improve housing conditions, applied by an individual resident of the Republic of Kazakhstan for expenses on paying interest on mortgage housing loans received from housing construction savings banks,” reported the press service of IC Eurasia.
If person’s salary is 500,000 tenge, and there is the endowment agreement concluded for a period of 3 years or more with a payment schedule of 100,000 per month.
500,000*10%=50,000 tenge (MPC);
500,000-50,000 (MPC) -10,000 (CSHI) -51,688 (14 MCI standard deduction) -100,000 (adjustment of income under endowment agreement) = 288,312*10%=28,831.2 (Individual Personal Income)
“Thus, if you apply an adjustment to the taxation of the Payroll Fund, you can save the personal income tax of 10,000 tenge. The adjustment will be applied to the tax period, in which the insurance premium has been paid, that is, if according to the schedule the insurance premium has been paid in December, the adjustment will be applied in December,” clarifies Azamat Yerdesov, Chairman of the Board of LIC Freedom Life.
Retirement annuity
Tax deductions apply to retirement annuity agreements. “In the amount of 14 times the monthly calculation index established by the law on the national budget and valid on the date of accrual of income in the form of insurance benefit, for each month of accrual of income in the form of insurance benefit for which the insurance benefit is made. In 2024, the deduction is 51,688 tenge,” explains the Halyk Life press service.
The Tax Code does not provide for separate deductions for self-employed people or individual entrepreneurs.
Algorithm of actions
Complete application for tax deductions by indicating the necessary information (full name, IIN, etc.);
Prepare supporting documents, for example, copies of documents on payment of insurance premiums and others that may be required in accordance with the tax code;
Provide certified copies of supporting documents at the place of work, human resources department or tax authority, depending on the requirements and procedures established by tax legislation.
It is important to note that the above steps are general guidelines, and for complete and accurate instructions it is necessary to refer the detailed provisions and requirements of tax legislation, taking into account the specifics of each case and type of tax deductions. It is also recommended that you consult with a tax professional for specific advice and instructions.
Photos are from open sources.
