Nasty surprise for life insurance policies: new savings tax applies to most of the older policies too
"The Association of Hungarian Insurers has asked the Ministry of Finance to comment on the new ad hoc payments on existing contracts. According to the position paper received from the Ministry of Finance, the yield on the contingent premium paid after 30 June 2023 on insurance contracts concluded before 1 July 2023 is subject to social contribution tax," Allianz informed its customers, according to Bank360.hu. As with premiums for single-premium life insurance policies, case payments will become exempt from social contribution after 5 years.
A life insurance policy taken out before 1 July for savings purposes is therefore exempt from social contribution tax in all cases, except for occasional premium payments made after 1 July. And a life insurance policy taken out after 1 July for savings purposes becomes exempt from social contribution tax
- if it is maintained for 5 years in the case of single-premium life insurance policies
- and for at least 10 years in the case of regular-premium life insurance policies.
If a life insurance policy taken out after 1 July should still be terminated earlier,
- half of the tax - 7.5% personal income tax and 6.5% social contribution tax, totalling 14% - will be due after 6 years and before 10 years for regular premium life insurance policies. However, if the payout is made in the first 6 years of the contract, the tax burden is 15% personal income tax and 13% social contribution tax, for a total of 28%.
- For single-premium life insurance policies and ad hoc premium payments, if the insurance payout occurs between the 3rd and 5th year, the tax burden is 7.5% personal income tax plus 6.5% social contribution tax, for a total of 14%. If the payment is made before the 3rd year, the personal income tax is 15%, plus social contribution tax of 13%, i.e. a total of 28% on the interest income.
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