The Lagos State Internal Revenue Service (LIRS) has issued a public notice (the Notice) to clarify the treatment of savings element on insurance premium.
The Notice states that Section 33(4)(d) of Personal Income Tax Act only allows as tax relief the insurance premiums paid during the year preceding the relevant year of assessment (YOA) and highlights the following compliance requirements:
- Only the insurance premium relating to the life insurance or deferred annuity on life are deductible in computing personal income tax.
- Any savings scheme element which sometimes forms part of the life insurance premium or contract should not be included in the deduction.
- For any life insurance policy to
qualify for tax relief, it must include;
- a cover for the death of the insured or their spouse or;
- it must not include or anticipate a payment to the insured before the age of 50.
- Deferred annuity contracts are tax exempt where the holder has no control over funds
- Every employer/taxpayer is required to submit the Claims for Allowances and Relief (Form A) for each relevant tax year detailing the life assurance and qualifying deferred annuity contributions.
- Taxpayers will be required to submit a life insurance certificate specifying the portion of the premium relating to death policy and the portion relating to savings element.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.