Written by: Emanuela Nespoli, Lorenzo Gelmi, Toffoletto de Luca Tamajo
The tax remedy of insurance coverage premiums paid by employers on behalf of workers varies in Italy relying on the first objective for the fee. Different nations method the difficulty in another way.
The pandemic has made folks extra danger averse and, in parallel, employees are more and more viewing insurance coverage protection as a fascinating incentive. On this article, we offer a abstract of the laws and alternatives related with insurance coverage advantages.
With particular reference to insurance coverage insurance policies, the Italian administrative authorities have recognized ‘taxable circumstances’ (i.e. these which are handled as earnings from work). They’ve clarified that premiums for well being, life and non-occupational accident insurance coverage paid by the employer are topic to taxation. Conversely, quantities regarding occupational accident insurance coverage are excluded from taxation.
The Italian authorities have additionally specified that to find out the proper tax framework that applies to those advantages, it’s mandatory to differentiate the idea on which the fee in query is made. They’ve said that if the fee derives from fulfilling an obligation below a contract, settlement or firm regulation, the contributions are thought of an integral a part of remuneration and, due to this fact, a part of the worker’s earnings.
If, alternatively, the contract, settlement or firm laws solely impose an obligation on the employer to supply sure welfare advantages (e.g. public indemnity due within the occasion of an accident), the employer can freely select to supply cowl for these funds via insurance coverage or look ahead to the occasion to happen and bear your complete related value. The authorities have clarified that:
‘within the first case, signing an insurance coverage coverage or enrolling in an entity or fund responds to an unique curiosity of the employer and any fee of the premium or contributions, not constituting a wage aspect, should not contribute to forming the earnings of workers.’
Specifically, funds made solely within the employer’s pursuits should not taxable. If the employer’s obligation is imposed by legislation or by the employment contract, establishing a coverage in favour of workers is among the strategies that the organisation could select to fulfil its obligations (once more that is within the unique pursuits of the employer, which might in any other case be known as upon to pay, immediately or not directly, for the damages triggered and/or suffered by the worker).
Primarily based on the authorized provisions and administrative interpretation described above, as a way to perceive which insurance-related sums should be included in an worker’s earnings, it’s mandatory, within the first occasion, to differentiate between:
- items or providers that the employer offers to the worker for its personal profit or curiosity, which aren’t a part of the worker’s earnings;
- items or providers that the employer offers to the worker for the worker’s profit or curiosity, that are included within the taxable base for calculating the worker’s earnings.
In apply, just about an accident coverage, as a way to assess the tax remedy to be utilized to the premium, it’s mandatory to grasp the aim for which the coverage is taken out. If its objective is solely to serve employer’s pursuits, the fee of the premium could not represent a wage aspect and wouldn’t be a part of worker earnings. Conversely, if the fee is for the worker’s profit, it might contribute to worker earnings.
Due to this fact, for instance, an accident coverage for skilled causes the place the employer insures itself in opposition to the chance of damage to the worker for causes related with the employment relationship would fall throughout the first class: the overriding profit to the employer could be decisive in establishing these premiums should not taxable for the worker.
However, insurance coverage cowl for non-professional dangers offering the worker with compensation or reimbursement of bills incurred within the occasion of accidents that occur outdoors the working surroundings which are solely within the worker’s pursuits, may fall throughout the worker’s taxable base which means the worth of the premium ought to be topic to tax and social safety contributions for each the corporate and the worker.
Staff’ elevated curiosity in these types of profit in addition to the financial effectivity of this method recommend these reward mechanisms will proceed to show well-liked, and may act as an essential lever for the attraction and retention of expertise.