New Tax Guidelines for Health Insurance Premium Contributions

The Department of Taxation has issued a new circular (3/2024) providing clear guidance on the tax treatment of premium contributions to Health Insurance Plans from individuals and employers covering their employees. These are the key highlights of the Circular:

Income Tax Exemption:

    • According to Article 9(1)(g) of the Income Tax Law, there is an exemption from taxable income for the annual contributions made by individuals and employers to approved Health Insurance Plans.
    • Article 14(5) allows for an exemption from special contributions on such premium contributions.

Applicable Plans and Granting of Exemption:

    • Health Insurance Plans covered under this provision are designed to cover medical expenses for employees and their families.
    • From the tax year 2023, the following provisions apply:
      • Tax deduction of up to 1.5% of the gross income of individuals for their contributions to approved plans.
      • Employers may also claim deductions for their contributions to such plans up to 1.5% of the employee’s gross income.

Tax Years from 2024 Onwards:

    • Continued tax exemptions for both employer and employee contributions.
    • Deduction limits set at 2% of the employee’s gross income.
    • Exemption applies to the total premium contributions made annually.

Eligibility for Exemption:

    • The exemption applies to contributions covering medical expenses for both current and retired employees.
    • The tax exemption also extends to benefits provided in-kind by employers, provided these do not exceed 50% of the total premium contribution.

Single Employer Contributions:

    • If an employer contributes more than 50% towards an employee’s health insurance premium:
      • The employer can claim a tax deduction for the entire amount paid.
      • The employee receives an in-kind benefit that is also exempt from tax up to 50% of the total premium.

Income Excluded from Exemption Calculation:

    • Exemptions do not apply to income from dividends, interest, or rental income not subject to income tax.
    • It does not apply to amounts deducted as personal contributions.

Important Notes:

  • These guidelines are effective from the 2023 tax year and continue into subsequent years.
  • The circular does not apply to closed tax cases. For unresolved issues, taxpayers are advised to consult the Department of Taxation.

How can we help?

For further clarification and advice on how these new guidelines may impact your tax planning strategies, please do not hesitate to contact our office.

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