No VAT on insurance
You do not pay VAT on insurance premiums. Insurers fall under an exemption for financial services. The insurer therefore does not charge VAT. Because there is no VAT on the premium, you also cannot reclaim VAT via your VAT return. For your records, this means that insurance costs do not count as input tax. Check the premium statement: in addition to the premium, there may be insurance tax and charges. Separate other services are not automatically exempt from VAT. 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 can claim business insurance as operational expenses. The premium lowers your profit and as a result you pay less tax. This only applies to insurance that is directly related to your business. In the case of business insurance, insurance tax and associated business costs can also reduce your profit. Example: €100 premium + €21 insurance tax = €121 business expenses and €0 deductible VAT. See the explanation of insurance tax. Insurances that protect your private income, such as disability insurance, are not business expenses. Therefore, you do not deduct those premiums from your profit. An AOV (disability insurance) with periodic payouts can, under certain conditions, be privately deductible as an expenditure for income provisions. The periodic payout is then, in principle, taxable. Read more about Disability insurance and tax deduction. The purpose of the insurance determines whether it is tax-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.
Before choosing, read about insurance policies suited to your work. For help with the administration, check out our accounting package.
