When providing financial benefits, the employer should pay attention to the first tax. For example, if the company contributes to life insurance for employees, or has a so-called collective insurance. When is it necessary for employees to deduct income tax from the provided benefit?

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Taxation of private life insurance

Among the incorrect procedures for the tax contribution to private life insurance include, for example, the procedure. The employer adds a contribution to the life insurance, which exceeds the amount of 1,000 crowns per month, employees each month immediately from January or from the first month during the year when the contribution was granted.

The correct tax rate is running immediately, ie from the moment when the sum of the employer’s contribution exceeds twelve thousand crowns in the current year. The employee could first claim the employer, for example, in the event of a premature departure or in the event that the employer’s contribution in a given year does not reach the employer’s contribution of 12,000 crowns.


The company has been contributing to the life insurance in the amount of 1,500 K since 2005 and is adding employees to the salary of 500 K. This procedure is unjustified, or a sum of 6,000 K was paid in the first year in 2005, which is less than the final limit in the amount of 12,000 K ron.

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The manner of taxation varies depending on the circumstances. For example, on the frequency of payments made (whether the insurance is paid annually or monthly) or on whether the insurance expires even when the employee leaves the company.

The different possibilities of taxation can be illustrated by the example of collective life insurance, which is not associated with tax benefits as in the case of private life insurance.

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The employer paid in January 2006 for the employees the insurance for collective life insurance for the year of delivery (for the period from 1.1.2006 to 31.12.2006 inclusive). The employer must then add the insurance premium paid to this insured employee, either once when the benefit is provided, or gradually when drawing on this benefit. The second way is based on the fact that the income flows to the employee at the moment when the insurance employer is not only paid, but at the same time when the employee receives a specific benefit from the insurance contract.

If an employee leaves the company, there are two options:

1) The insurance continues until the end of the insurance period for which the insurance was paid

  • if the insurance company was taxed to the employee once when the benefit was provided, it is not necessary to supply or return anything so-called
  • if the insurance employee was taxed gradually during the benefit, it is necessary to leave the remaining insurance, which has not yet been taxed, to the employee to deliver

2) Insurance termination upon termination of employment of the employee

  • if the insurance tax was taxed once upon the benefit of the employee once the benefit was provided, the employee may request a refund of the current income tax surcharge
  • if the insurance tax has been tested, it is not necessary to supply anything and the employer will receive a premium overpayment from the insurance company.

The above procedure is only a narrow impact of the chosen method of taxation. For other types of binders, such as managerial life binders, the views are connected to the tax often often diametrically different. Therefore, we warn the employer that the insurance company is not responsible for the correct taxation and often this area is not with the employer.

Although the responsibility for the correct taxation lies with the employer, not with the insurance company, he believes that tax advice should be part of the service provided by the employer in the event of financial employee benefits.