How to Reduce Taxes and Attract Talent with Company-Paid Health and Life Insurance

Paying for health and life insurance for your employees can mean significant tax savings and improve your salary proposals:

• On the one hand, for your employees, it brings access to health and safety at no extra cost;
  
  
• On the other hand, attracting and retaining talent is a clear competitive advantage that your competitors may not be taking advantage of!

In this guide, we'll explain the tax benefits that your company reaps from this policy, from the IRS exemption for employees to the strong arguments for taking out insurance. A straightforward, practical and jargon-free article, designed for entrepreneurs and decision-makers.

Shall we?

Health and Life Insurance: Tax Benefits for the Company

The proposed State Budget for 2025 introduced a 120% increase in the cost of health and sickness insurance taken out by companies. This means that, for tax purposes, the company can deduct more than what it actually spent.

In practice, for every 100 euros paid in insurance, the tax authorities recognize 120 euros as a cost. This surcharge only applies if the insurance is general, i.e. it is available to all the company's permanent employees.

In addition, the policy must be uniform within each professional category and the charges must be correctly recorded in the company's accounts. The deduction remains limited to 15% of total personnel expenses.

Practical example:

A company with €100,000 in wage costs can deduct up to €15,000 in insurance. With the 120% surcharge, this deduction becomes €18,000, which significantly reduces the taxable profit.

In short, to be entitled to the bonus:

• Apply a limit of 15% of personnel expenses;
• Ensure generality (cover all open-ended contracts);
• Use uniform policies for each professional group;
• Proper recording of accounting charges.

Health and Life Insurance: Tax Benefits for Employees

When the company offers general insurance, the amount paid is not considered taxable income for the employee. There are also no Social Security contributions on this amount.

However, it is mandatory to declare this benefit in the Monthly Remuneration Statement (DMR), using code A23, which identifies "income not subject to withholding".

If the insurance is only offered to certain employees, or has discriminatory conditions, it loses its general character. In such cases, the value of the insurance is taxed as income in kind.

What you should keep:

• The exemption only applies if the insurance is offered on a general and equal basis;
• The company must declare the amount monthly in the DMR (code A23);
• Selective insurance can penalize employees fiscally.

Health and Life Insurance: Commercial Advantages and Retention

In addition to the tax impact, company-paid health and life insurance work as a tool for retaining and attracting talent. They are valued by employees and make the salary package more competitive.

The flexibility of the covers allows the insurance to be adapted to the company's profile. We often find cover that includes:

• Medical consultations;
• Hospitalization;
• Stomatology;
• Mental health;
• And even retirement solutions!

There is a wide range of options available: from a contracted network with controlled costs to reimbursement systems that give employees freedom of choice. There are also mixed options that combine the two models.

Companies with more employees are able to negotiate more advantageous conditions with insurers: better plafonds, volume discounts and the possibility of including employees' immediate families.

In short, the main commercial advantages of this type of advantage are:

• Attracting qualified talent in competitive markets;
• Retain more motivated and productive teams;
• Customize the benefits package to the company's reality;
• Negotiating better conditions with insurers by volume;
• Reduce absenteeism with easier access to health care.

Health and Life Insurance Benefits: Practical example

But let's get down to specific figures.

Imagine a company with 10 employees, all on permanent contracts. The company takes out annual insurance for €1,800 per person, which totals €18,000.

With the 120% surcharge, this expense will be considered as €21,600 for tax purposes. Applying a corporate income tax rate of 20%, the tax saving will be €4,320:

• Total cost of insurance: €18,000
• Amount deductible in IRC (120%): 21 600 €
• Tax savings (20%): €4,320
• Actual net cost: 13 680 € (1 368 € per employee)

Step-by-Step Guide to Implementing Health and Life Insurance in Your Company

Reaping the rewards of this type of benefit requires planning and compliance with tax rules. The process is simple, but requires rigor. Where to start?

Start by evaluating your company's internal framework and identifying employees with open-ended contracts. Choose an insurance company with experience in the business market and propose a general and uniform policy model.

Ensure that the accounts are correctly recorded and confirm that the communication to the Tax Authority is up to date, namely through the DMR.

Essential steps to implement:

1. Check which employees have open-ended contracts;
2. Choose the types of cover (health, life, retirement, etc.);
3. Negotiate a uniform policy for all eligible workers;
4. Record expenses correctly in the accounts;
5. Declare the benefit monthly in the DMR (code A23);
6. Inform employees about the benefit and how to use it.

FAQs

1. Is health and life insurance exempt from IRS and Social Security?
Yes - if it is granted generally to all permanent workers, the amount is not seen as taxable income or subject to TSU.

2. How to declare insurance in the DMR?
It must be included in the Monthly Remuneration Statement with code A23, even without withholding tax.

3. What risks arise from selective insurance?
If it is not general, it is considered income in kind (category A). This triggers IRS taxation and possible social security charges

4. Can I include employees' family members?
Yes - expenses for family members can be covered, as long as the insurance is the same for all employees and meets the legal criteria.

5. And who has a fixed-term contract?
Only workers with open-ended contracts count towards the general criterion. Fixed-term contracts can participate in the policy, but do not increase eligibility.

Conclusion

Implementing company-paid health and life insurance essentially brings three types of benefits:

• Tax: higher IRC deduction (120% of the amount paid), effective reduction of the tax burden;
  
• Employees: exemption from IRS and Social Security on the value of the insurance, at no additional cost;
  
• Strategic: strengthening the salary offer, attracting talent and reducing absenteeism.

Adopting these measures requires rigorous structuring: general insurance, uniform policies, accounting records and correct declaration in the DMR. All this ensures tax compliance and maximizes the benefits.

If we are efficient in this process, the return is clear: tax savings and better protected employees, in a model that boosts your company's competitive advantage.

Talk to your accountant now to structure this solution correctly. And if you need us, remember that we 're here to help you implement it - safely and with more savings for your business!