𝐌𝐲 𝐜𝐨𝐦𝐩𝐚𝐧𝐲 𝐢𝐧𝐬𝐮𝐫𝐚𝐧𝐜𝐞 𝐜𝐚𝐧 𝐠𝐞𝐭 𝐭𝐚𝐱 𝐝𝐞𝐝𝐮𝐜𝐭𝐢𝐨𝐧 ?

𝐘𝐨𝐮 𝐚𝐬𝐤 : 𝐌𝐲 𝐜𝐨𝐦𝐩𝐚𝐧𝐲 𝐢𝐧𝐬𝐮𝐫𝐚𝐧𝐜𝐞 𝐜𝐚𝐧 𝐠𝐞𝐭 𝐭𝐚𝐱 𝐝𝐞𝐝𝐮𝐜𝐭𝐢𝐨𝐧 ?

𝐈 𝐚𝐧𝐬𝐰𝐞𝐫

According to Income Tax Act 1967 Section 33(1), where the expenses are wholly and exclusively incurred in the production of income is allowable as a tax deduction. These may include car insurance, fire insurance, term loan insurance & etc.

Insurance paid on behalf of employees

It is Tax deductible as long as for business purpose.

If an employer pays the annual insurance premium for an insurance scheme in which the employee’s relative is appointed as the beneficiary to the policy, the amount of annual premium is a perquisite to the employee and shall reported in employee Form EA.

However, group insurance premiums to cover workers in the event of an injury or accident, airline Travel Insurance for employees for coverage of employees for travelling on official duty are not treatment as perquisite.

Insurance paid for foreign worker

It is Tax deductible as long as for business purpose as it is an obligatory for foreign workers as a replacement to SOCSO contributions

Key-Man Insurance

The premium on the policy is deductible if the insurance has no element of investment and the insurance is taken on the life of a “key-person” whose absence would result in a reduction in the profits of the employer or the company according to PR 2/2003 “Key-man” Insurance.

Fire insurance, burglary insurance and etc. for company

Tax deductible as long as for business purpose. If the premium paid is wholly and exclusively to recover moneys that would replace a loss on the happening of the event insured against, would be allowable as a deduction against the gross income of a business.

𝐒𝐨𝐮𝐫𝐜𝐞

Section 33(1) of Income Tax Act 1967 - Wholly and exclusively incurred in the production of income

No.11 of Dialogue between LHDN and CTIM on 25.03.2015 - Expenses incurred on Public Liability and Money-In-Transit Policy can be allowed as deduction if the taxpayer’s business is constantly under potential risks. For example a Karate expert training his students faces risks of injuries.

Paragraph 5.2 of Public ruling 2/2003 Key man insurance - The premium payable on a term life policy or an accident policy of a “key-man” insurance is allowable as a deduction against gross income from a business if the policies that have no element of investment and at the end of the insured period there is no return on the premium paid if the insured person lives or is not injured.

Paragraph 5.3 of Public ruling 2/2003 Key man insurance - A whole life policy and an endowment policy have elements of investment and are therefore regarded as capital assets of a company.

So, it is not allowable in arriving at the adjusted income from a business of a company.

Paragraph 7 of Public ruling 2/2003 Key man insurance - In the case of a controlled company, premium paid for a “key-man” insurance policy on the life of a director or an employee who owns shares in the company is not an allowable deduction as there are other motives for the purchase of the insurance policy.

Other than providing a cover for the risk of loss of business income, it is also for the advantage of the director or employee in their capacity as shareholders of the company.

Similarly, premium paid on “key-man” insurance policy on the life of a partner or sole-proprietor is not allowable.

Paragraph 8.2 of the Public Ruling 12 Year 2018 : Income from Letting of Real Property - The direct expenses which are wholly and exclusively in the production of income under subsection 33(1) of ITA 1967 are deductible for the income of letting of real property under paragraph 4(d) of ITA 1967.

Example: assessment and quit rent, interest on loan, fire insurance premium, repair and maintenance and etc.

Paragraph 7.3 of Public Ruling No 1 Year 2019 : Professional Indemnity Insurance - The PII premium incurred by a company are allowed for deduction against the gross income of the company if the company allowed the employee to perform the profession and the company are carries on the business related to that profession.

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𝐌𝐲 𝐜𝐨𝐦𝐩𝐚𝐧𝐲 𝐢𝐧𝐬𝐮𝐫𝐚𝐧𝐜𝐞 𝐜𝐚𝐧 𝐠𝐞𝐭 𝐭𝐚𝐱 𝐝𝐞𝐝𝐮𝐜𝐭𝐢𝐨𝐧 ?

taxKtp KtpNovember 17, 2020insurance, keyman insurance, PII, public ruling