No VAT on insurance
You do not pay VAT on insurance premiums. Insurance is covered by an exemption for financial services. The insurer therefore does not charge VAT. Because there is no VAT on the premium, you cannot reclaim VAT via your VAT return either. For your administration, this means that insurance costs do not count as input VAT. The premium you pay is the final amount. This applies to both business and private insurance.
What is insurance tax?
Instead of VAT, you pay insurance tax with many insurance policies. This is a separate tax levied on the insurance premium. The rate is 21%. You will usually see this tax listed separately on the policy or premium statement. The insurer collects this amount and remits it. Insurance tax is not VAT and you cannot reclaim it. Not all insurances are subject to this. For instance, health insurance and disability insurance are exempt.
Is insurance deductible?
You may include business insurance as a business expense. The premium reduces your profit and therefore you pay less tax. This only applies to insurances directly related to your business. As there is no VAT on them, you only deduct the premium. Insurances that protect your private income, such as disability insurance, are not business expenses. So you do not deduct that premium from your profit. The purpose of the insurance determines whether it is deductible.
Types of business insurance
As a self-employed person, you can take out different business insurance policies depending on your activities and risks.
- Professional liability insurance
Covers financial losses due to mistakes or wrong advice in your work. - Business liability insurance
Covers damage to persons or belongings of others during your work. - Legal expenses insurance
Provides legal assistance in conflicts with customers, suppliers or clients. - Inventory and property insurance
Covers damage to your business inventory, stock or equipment.
Which insurance suits you depends on your profession and the risks you face. You choose only what is necessary for your situation.
