Regulations on taxes when buying life insurance for employees

Corporate life insurance for employees was born based on the actual needs of business owners who want a smart solution to retain talent. And when participating in Life insurance for employees, leaders need to pay attention to below things to know when buying life insurance for employees so that it is both a complete financial solution and a worthy reward for their talented employees.

1.  Regulations on taxes when buying life insurance for employees

When participating in life insurance for employees, businesses need to carefully understand the types of taxes to ensure the benefits they receive:

1.1. Corporate income tax

Regulations on deductible and non-deductible expenses when determining corporate income tax
According to Article 1.6b, Article 4, Circular No. 96/2015/TT-BTC dated June 22, 2016 of the Ministry of Finance guiding corporate income tax, the expenses not considered reasonable expenses include:

“Workers' compensation inclusion, bonuses, and life insurance expenses for employees that are not specifically stated in terms of eligibility and level of eligibility in one of the following documents: Labor contract; Collective labor agreement; Financial regulations of the Company, Corporation, Group; Bonus regulations prescribed by the Chairman of the Board of Directors, General Director, Director according to the financial regulations of the Company, Corporation”.

Thus, the conditions for purchasing employment insurance package to reduce corporate tax costs include:

• Having full invoices and legal documents
• Buying life insurance must specifically state the conditions and additional voluntary benefits options in one of the following documents: Labor contract, Labor agreement, Company financial regulations, Bonus regulations...
• Enterprises must participate in compulsory insurance for employees: Social insurance, Health insurance options, Unemployment benefits coverage
• The cost of purchasing life insurance for employees must not exceed 3 million VND/person/month. 

Life insurance for employees in Vietnam newest information

1.2 Personal income tax

According to Clause 3, Articles 11, 12, 14 of Circular 92/2015/TT-BTC dated June 15, 2015, it is stipulated that:

• The type of life insurance subject to personal income tax is a product with accumulated insurance premiums.
• The type of life insurance exempted from personal income tax is the product without accrued insurance premiums (such as health insurance, death insurance).

2.    Regulations on the responsibilities of the employer and the insurance company:

If participating in life insurance with accrued insurance premiums of an insurance company established and operating under the provisions of Vietnamese law, then when the contract matures, the insurance company will be responsible for deducting personal income tax at a rate of 10% on the corresponding accrued amount.

If participating in life insurance with accrued insurance premiums of an insurance company not established and permitted to operate under Vietnamese law, the employer is responsible for deducting tax at a rate of 10% on the purchased insurance premium.
Thus, employees only have to pay personal income tax when the insurance product has accrued insurance premiums. And the tax obligation will be paid by the enterprise or the insurance company on a case-by-case basis.

Life insurance paid for employees will be considered a reasonable expense when the enterprise fully pays insurance according to regulations and the cost of paying life insurance for employees does not exceed 3 million VND/person/month.

3. How to buy social insurance, health insurance for employees?

Social insurance, health insurance, unemployment insurance are mandatory contents that employers must pay for employees at the correct deduction level according to regulations. This is one of the basic regimes that businesses are required to implement to ensure benefits for employees.

Therefore, participating in life insurance for employees does not replace compulsory insurance but helps to improve and perfect the welfare regime for employees. In order to achieve long-term, sustainable goals for the company's development.
 

Employee wellness benefits is important in corporate environment

4. Factors that businesses need to clearly identify when buying life insurance for employees

When participating in life insurance, businesses need to rely on the following factors to ensure Employee wellness benefits for the unit as well as suit the actual needs of the business/insurance participants.

• In order for the cost of insurance for employees to be considered a reasonable cost, the enterprise needs to specify the beneficiaries, the level of benefits and the conditions for benefits in one of the following documents: Labor contract, Labor agreement, Company financial regulations, Company bonus regulations in accordance with the provisions of Article 4, Circular No. 96/2015/TT-BTC dated June 22, 2016 of the Ministry of Finance.
• Enterprises need to clearly define the purpose of purchasing life insurance for employees, to find a product that suits the actual needs of employees in the company. Specifically:
• The purpose of protection against major risks such as death, disability insurance provisions, serious illness or even health care benefits, hospitalization...
• Retirement plan contributions or financial benefits after many years of contribution.
• Payment period is also one of the important factors that business owners need to consider when participating in life insurance. With a variety of time periods of 5, 10, 15,.. years or until the employee retires, businesses will choose a reasonable payment period and Paid time off (PTO) benefits depending on each specific case. When clearly identifying the above factors, businesses will choose a life insurance package for employees that suits the needs of the business - while still ensuring maximum benefits for their unit.

>>>Read more: Benefits of using Employee Self Service

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