Recently, life insurance has become increasingly popular in Russia, and especially its accumulative types, when payments occur not only in the event of death, but also upon reaching a certain age or other events.
From January 1, 2015, to stimulate life insurance, an additional benefit appeared in the Tax legislation - a tax deduction on insurance premiums paid.
According to the legislation of the Russian Federation (Article 219 of the Tax Code of the Russian Federation), when paying insurance premiums under a voluntary life insurance agreement concluded for a period of at least five years, you can receive a tax deduction and get back part of the money spent on life insurance - up to 13% of the expenses incurred for life insurance .
In what cases can you get a tax deduction for life insurance?
You can take advantage of the social tax deduction for life insurance and get part of your expenses back under the following conditions:
1. A voluntary life insurance contract is concluded with an insurance organization for a period of at least five years.
Example: In 2021 Dorogina S.V. entered into a life insurance contract for a period of 1 year. Due to the fact that the contract was concluded for a period of less than 5 years, S.V. Dorogina received a social deduction for the costs of paying insurance premiums. will not be able to use it.
Example: Platonov G.A. entered into a life insurance contract in 2021 for a period of 7 years. For insurance premiums that Platonov G.A. pays annually, he will be able to receive a tax deduction.
2. The contract was concluded to insure one’s own life or the following relatives:
- spouse (including widows, widowers),
- parents (including adoptive parents),
- children (including adopted children under guardianship (trusteeship)).
Please note: unlike the deduction for treatment/education, there are no restrictions on the age of children, that is, a deduction can be obtained even for the costs of life insurance for your adult children.
3. You officially work and pay income tax. At its core, a tax deduction is the portion of income that is not subject to tax. Therefore, you cannot get back more money than you transferred to the income tax budget. This is about 13% of the official salary. If you do not officially work and do not pay income tax, then you will not be able to take advantage of the deduction.
Life minus
This is our great achievement in the field of legislative initiatives. It is clear that now everything is superimposed on the difficult macroeconomic situation that has formed in our country, however, this is a good foundation for the further development of the industry.
For several years in a row, our sector has shown one of the highest growth rates among all financial markets in the country. According to the Bank of Russia, the volume of premiums collected by Russian life insurance companies for 9 months of 2014 increased by 27% compared to the same period last year - to 74.83 billion rubles. But even despite such rates of development, the market volume and its share in GDP are still at a very modest level compared to Western and Eastern European countries. In most countries, it was the introduction of a stimulating tax regime that became an extremely important driver for the formation and accelerated development of life insurance.
From January 1, 2015, all clients who received policies for a period of five years or more are entitled to receive a social tax deduction. The maximum deduction is 13% for a contract in the amount of 120 thousand rubles. How it works? A person enters into a life insurance contract with an annual payment, for example, 100 thousand rubles. At the end of the year, he submits a declaration, applies for a tax deduction and receives 13 thousand rubles from the state.
If the policy is for 120 thousand rubles, then he receives 13% of this amount. If the policy is for 200 thousand rubles, then he still receives 13% of 120 thousand rubles. In addition to life insurance, according to existing legislation, social tax deductions apply to expenses for charity, education, treatment and purchase of medicines, non-state pension provision and voluntary pension insurance, and the funded part of the labor pension.
We will now clarify some technical issues, but, according to our interpretation, the new procedure can also apply to already concluded long-term life insurance contracts, but applies only to contributions received from January 1, 2015. Payments are made exactly from the first of January. They can be quarterly, monthly and annual. An important factor is that the contract cannot be concluded by any insurance company, but only by a company specializing in life insurance. This agreement must be concluded for a period of five years or more. The contract can be concluded in favor of the policyholder, spouse, parents and children.
There are two ways to receive a tax deduction. The first is to file a declaration at the place of residence, and the second applies only to those who took out a policy through an employer, in which case a tax deduction can also be received through the employer.
The importance of the law cannot be overestimated, since there are two factors in the development of the life insurance market throughout the world. The first is rates of return that are comparable or even higher than rates on deposits. We cannot afford this yet, especially now. The second is tax deductions. The state, therefore, says to citizens: thank you for long-term investments, we are ready to introduce an accumulating regime for you for this. In Russia, none of these factors have existed until now, and yet accumulative insurance, investment life insurance, has been developing. Now one of the conditions has appeared. Here, of course, it’s not like in the West, where 40% is returned, we have much less, but, nevertheless, this is still a very good factor. A tax refund can also be perceived as an additional profitability for the client in the amount of 13%. However, in case of early termination of the contract, the client will be obliged to reimburse the amount of social tax deduction so that there are no fraudulent schemes. This will not happen only if the client brings a certificate from the tax office stating that he did not take advantage of the deduction.
It is difficult to predict now how the law will spur the development of the life insurance market. A couple of months ago I would have been ready to do this, but now, in light of the changes that are taking place, it is difficult to isolate the effect of this innovation from other effects. In the situation that we had just six months ago, one could say with confidence that tax breaks would have accelerated the development of the market by one and a half times. But now any clear forecasts are impossible.
As for the impact of the fall in the ruble exchange rate on the fate of long-term ruble life insurance contracts, everything is more or less clear. The agreements, of course, continue to be valid. It is clear that when market rates rise and the insurance company earns more investment money, the policyholder should not remain on the sidelines either. According to the rules of many companies, 90% of the investment money earned is distributed to the policies in force that year. Accordingly, if the company earns more than the nominal ruble income, 90% of the income will be distributed among the policies in force that year. A certain part of contracts have historically been concluded in euros and dollars. In this case, the profitability will most likely be reduced according to the value of this money at the current moment. Internal defense mechanisms exist. Every year the company announces real profitability. On average, a company retains 10-15% of investment income, more often 10%.
If a company complies with the principles of matching assets and liabilities and acts not opportunistically, but strategically, then it must have long-term securities and sufficient foreign exchange reserves in its portfolio. The average term of endowment insurance on the market is 12-15 years, not as long as in the West, where the term is 25-30, but still long enough for our country. Accordingly, life insurers have approximately 50-60% of their portfolio in long-term securities. Typically these are government securities or corporate bonds, most often quasi-government ones. In accordance with the principles of international financial reporting, if a company holds these securities under existing policies, then they are held until maturity, and they are not revalued at market value, no matter what the market value is today, what is important is the rate that is fixed in the contract. We are currently negotiating with the regulator about a solution that will allow insurers not to violate the rules, and we really hope for understanding.
Amount of tax deduction for life insurance
The amount of tax deduction for life insurance is calculated for the calendar year and is determined by the following factors:
1. You can return up to 13% of the costs of insurance premiums , but not more than 15,600 rubles . This is due to the restriction on the maximum deduction amount of 120,000 rubles (120,000 rubles * 13% = 15,600 rubles).
Example : In 2021 Savelyev O.A. entered into a life insurance agreement with an insurance company for 5 years. In 2020, the amount of insurance premiums was 75,000 rubles. For 2021 Savelyev O.A. earned 400,000 rubles and paid income tax of 52,000 rubles. Thus, for 2021 he will be able to return 9,750 rubles (75,000 * 13%).
Moreover, the limit of 15,600 rubles applies not only to the deduction for life insurance, but to all social deductions. The amount of all social deductions (training, treatment, medicines, pension contributions) should not exceed 120 thousand rubles, that is, you can return a maximum of 15,600 rubles for all deductions. In other words, the maximum limit of 120,000 rubles limits the total aggregate amount of all types of social deductions.
Example : In 2021 Belkina A.A. entered into a life insurance agreement with an insurance company for a period of 5 years. In 2020, she paid insurance premiums in the amount of 45,000 rubles. Also in 2021 Belkina A.A. paid for her own training in the amount of 100,000 rubles. For 2021 Belkina A.A. earned 600,000 rubles and paid income tax of 78,000 rubles. Since in total for all types of social deductions the maximum limit is 120,000 rubles, then Belkin A.A. will be able to claim only 120,000 rubles. Thus, for 2021 she will be able to return 15,600 rubles (120,000 * 13%).
2. You cannot get back more money than you transferred to the income tax budget (about 13% of the official salary).
Example : In 2021 Zaitseva O.A. entered into a life insurance agreement with an insurance company for 5 years. In 2020, the amount of insurance premiums was 60,000 rubles. In 2021 Zaitseva O.A. worked for one month (due to maternity leave), and her salary was 40,000 rubles, from which 5,200 rubles of income tax were withheld. Thus, for 2020, O.A. Zaitseva will be able to return only 5,200 rubles (40,000 * 13%) despite the fact that insurance premiums were paid in the amount of 60,000 rubles. The balance of the tax deduction cannot be carried forward to subsequent years and will expire.
3. Receiving a deduction is possible only for life insurance premiums. When concluding a combined contract, which includes, in addition to voluntary life insurance and insurance against accidents and illnesses, a social tax deduction in accordance with paragraphs. 4 paragraphs 1 art. 219 of the Tax Code of the Russian Federation can be provided under such an agreement only in the amount of insurance premiums related to voluntary life insurance. More details below.
What additional debt service costs can be recovered?
The bank not only charges interest on loans, but also charges additional fees for debt servicing, including insurance to cover risks. Refunds are possible subject to certain rules.
Insurance return
Insurance when applying for a loan is a voluntary procedure that you can refuse. Refusal sometimes causes an increase in the interest rate on the loan. Often, insurance is provided by default, and the borrower learns about its availability only after carefully reading the details of the signed contract for the house. The insurance premium may be included as a bonus in the lending program or simply added to the loan repayment schedule.
IMPORTANT!
Within 14 days from the date of registration of the loan, and with it the insurance contract, the borrower can terminate the insurance. The amount will be returned to the client's account and can be used to pay off loan obligations.
If refusal of insurance entails an increase in the interest rate, the condition must be clearly stated in the loan agreement. Before giving up, it makes sense to weigh which option will be profitable.
Income tax refund
The state provides for a refund of 13% of income tax paid by a citizen subject to the following conditions:
- funds are returned on the mortgage loan;
- presence of an official place of employment where personal income tax is calculated;
- The deduction is due once within the established amount - 13% from 2 million rubles.
To apply for a deduction, you need to submit 3-NDFL to the territorial office of the Federal Tax Service.
A tax deduction is also provided for those who take out an education loan. The condition is that the university has a license from the Ministry of Education of the Russian Federation. In a year, a citizen can return 15.6 thousand rubles spent on training. The deduction for paying for contracts for children is 5 thousand rubles.
Refund of additional commissions
The law prohibits charging additional fees from the borrower for early repayment of a loan, opening an account and issuing a loan. If any have been paid, the payer has the right to demand a refund from the creditor. If the financial institution refuses to return the money, a lawsuit is filed.
Other return options
The bank negotiates all stipulated loan payments with the borrower before signing the agreement. The law allows you to return illegal payments. You can act independently or with the help of a lawyer.
An insurance contract must be concluded for only one type of loan - a mortgage. In other cases, the bank does not have the right to force the purchase of an insurance policy. The borrower can refuse insurance even after signing the loan agreement. There is a period of two weeks for this. The bank is obliged to return the money spent by the borrower on insurance.
Is it possible to get a deduction for insurance when lending?
When applying for a mortgage, one of the conditions of the lending bank is often the conclusion of a mixed insurance agreement, including insurance of life, health, and property interests for the period of repayment of the mortgage. According to paragraph 4 of paragraph 1 of Article 219 of the Tax Code of the Russian Federation, when paying premiums under a life insurance contract (if it is concluded for a period of 5 years or more), you can receive a tax deduction. In this regard, the question arose: is it possible to receive a deduction in such a case? Some taxpayers have even already received a deduction for life insurance costs under such contracts.
However, the Ministry of Finance of the Russian Federation in its letter dated August 17, 2016 N 03-04-05/48235 clarified that when concluding this type of agreement, the deduction cannot be used, since the beneficiary is the bank, and not the persons who paid the insurance premiums.
Example: In 2021 Novikov A.V. To purchase an apartment, a mortgage loan agreement was drawn up, and at the request of the creditor bank, a mixed insurance agreement was concluded, including life insurance, health insurance, property interests and title insurance. Due to the fact that, in accordance with the terms of the insurance contract, the beneficiary of the amount of the insurance payment is the bank, receive a tax deduction for life insurance expenses Novikov A.V. can not.
How to conclude an agreement
When purchasing insurance, you must make sure that your contract contains the essential terms of the DSG:
- information about the policyholder;
- information about the nature of insured events;
- term of the agreement;
- insurance amount.
You can register for a residence permit at any time convenient for you – even in the middle of the year. The main condition for receiving the corresponding deduction remains the duration of the contract for a period of at least five years.
To obtain insurance, you must contact an insurance company convenient for you, where they will provide you with a list of necessary documents. Once you have collected all the paperwork, the agent will issue an insurance policy with you. Please note that when insuring a third party (spouse or parent), that person's consent and signature will be required.
Documents required to apply for a tax deduction for life insurance
The Tax Code of the Russian Federation does not provide a list of these documents. However, they can be identified based on the available explanations from regulatory authorities:
- declaration 3-NDFL;
- voluntary life insurance contract;
- payment documents confirming payment of insurance premiums;
- documents confirming the paid income tax (certificate 2-NDFL).
You can view the full list of documents here: Documents for tax deductions for life insurance
When and for what period can I receive a tax deduction?
You can only get your life insurance money back for those years in which you directly paid the premiums . Let us note that the right to deduct the amount of insurance premiums under voluntary life insurance contracts has been granted to taxpayers since January 1, 2015 (clause 4, clause 1, article 219 of the Tax Code of the Russian Federation).
However, you can submit a declaration and return the money only in the year following the year of payment . For example, if you paid insurance premiums in 2021, you can return the money in 2021.
How to get a deduction and what documents are needed
Life insurance deductions can be obtained not only through the tax office, but also through the employer.
Tax office
You can receive a deduction through the tax office the following year after the year in which the payment for insurance was made. That is, if you pay for insurance in 2021, the deduction can only be received in 2022.
To do this, you will need to submit to the inspection (paragraph 2, subparagraph 4, paragraph 1 and paragraph 2 of Article 219 of the Tax Code of the Russian Federation) the following documents:
- Declaration 3-NDFL;
- Certificate 2-NDFL;
- Insurance contract;
- Insurance license, if its details are not specified in the contract;
- Payment receipts;
- Birth/marriage certificate (if necessary).
The period for conducting a desk audit will be up to three months from the date the taxpayer submits a tax return. And it will take another month to transfer funds.
You can get a tax deduction without leaving your home! To do this, you need to register on the State Services website and confirm your identity (account). After that, go to the tax office website. Click on the “Personal Account” link. We log in through government services (USIA) to the taxpayer’s personal account, check everything, get acquainted with the functionality. Next, in the “Profile” section, you need to obtain an electronic signature verification key certificate, which will allow you to sign and send documents to the tax authorities electronically.
After receiving an electronic signature, you can submit 3-NDFL through the “Life Situations” section. And fill out an application for a deduction there.
The convenience of your personal account is that you can always track the status of work on your application. The completed declaration remains in your account, and next year you will not have to search for the necessary data for a long time.
Employer
It is possible to receive a deduction through an employer before the end of the tax period (in the same year in which the insurance was paid) by submitting a written application to the employer with an attached notice of the right to receive a deduction issued by the tax office.
In this case, the following documents are submitted to the tax office:
- Insurance contract;
- Insurance license, if its details are not specified in the contract;
- Payment receipts;
- Birth/marriage certificate (if necessary);
- Application to confirm the taxpayer’s right to receive social tax deductions.
Filing 3-NDFL is not required. The taxpayer's right to receive the specified deduction must be confirmed by the tax inspectorate within a period not exceeding 30 calendar days from the date the taxpayer submits to the tax authority a written application and documents confirming the right to receive the deduction.
The deduction will be provided by the employer starting from the month in which the taxpayer applied to him to receive it.
That is, starting from the month of submitting a written application, the employer will not withhold personal income tax from you in the amount of the deduction due to you.
