How does it benefit me to give private health insurance to my employees?
The hiring, by the company and in favor of the workers of a private medical insurance is a benefit that both the workers and the entrepreneur himself take advantage of.
How does it benefit the company to pay private health insurance to its workers?
In addition to the benefit of keeping your employees happy and reducing the time spent on medical visits (it is assumed that a private health insurance gives more flexibility to have an appointment outside working hours or, where appropriate, to make the service faster ), on the part of the employer, providing employees with private health insurance is considered a higher personnel expense (higher remuneration), and consequently a greater deductible expense in the Corporation Tax.
How does it benefit workers to have private medical insurance set by the company?
On the part of the worker, the perception of said private medical insurance supposes a remuneration in kind for the same ones, reason why it is subject to taxation (entrance to account in what it talks about during the year, and greater income received at the moment of the statement of income). The advantage that exists for employees is the exemption of the first $500 for the worker and each of their family members for private medical insurance (or $1,500 for workers or family members with disabilities). This exemption has its regulation in the IRPF Law:
The following income from work in kind will be exempt:
- Premiums or fees paid to insurers for sickness coverage, when the following requirements and limits are met:
- That the coverage of the disease reaches the worker himself, and may also reach his spouse and descendants.
- That the premiums or fees paid do not exceed $500 per year for each of the persons indicated in the previous paragraph or $1,500 for each of them with disabilities. The excess over this amount will constitute remuneration in kind.
That is to say, if the medical insurance costs the company an expense of $750 per year, the company can take that expense of $750 in its corporate tax, and the worker, in addition to receiving that service, will have the advantage that, at the time of making your income statement, only tax for $250 (the first $500 are exempt, so only tax applies to the remaining amount, $250 in this case). Bill age is the management program for the self-employed.
What requirements must be met to obtain this tax benefit?
It must be borne in mind that for the correct application of these tax benefits, this provision of the company in favor of the employee must meet certain formal requirements, since otherwise it could be considered a liberality and, therefore, not considered deductible for the company nor exempt for the worker. These requirements, basically consist in that this benefit is a worker’s right (i.e., as agreed to pay them, for example, $18,000 per year, that his salary is $18,000 per year plus private health insurance for him and his spouse, for example) and that is paid directly by the company to the insurance company (otherwise, income in kind would not be considered, but monetary remuneration). For this, it would be convenient to prepare a document that includes the “increase of benefits” of the worker, granting said right and specifying in said document what the new benefit will consist of and the conditions of the same, so that both company and worker can keep this document as proof of the application of the tax benefit for the case of tax verification.
Can it hurt me, as an entrepreneur, to give this benefit?
In this regard, and as a collateral comment, bear in mind that the granting of this benefit implies an increase in the remuneration of workers and, consequently, may imply a higher contribution to Social Security and greater compensation. It should also be borne in mind that, as remuneration in kind, in the part that is not exempt, income on account must be applied (withholding of income in kind), so that such deposit can be assumed by the worker (lower net salary) or by the company (higher remuneration in kind, and consequently, greater remuneration in kind). This is an issue that should also be clarified in the document in which the worker agrees to grant said benefit.
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