Why life insurance is not tax-deductible

Life insurance has existed on the Romanian market for over ten years, but so far companies have not managed to obtain tax deductibility, while in Western countries, it has been implemented for a long time. In contrast, contributions to voluntary private pensions, launched a year ago, have since the very start been deductible from the employee’s income tax, and from the employer’s profit tax. Starting next year, the deductible sum will double, to reach 400 euros for the employee and the same amount for the employer. Although life insurance is a similarly strong saving instrument to voluntary private pensions, it is still not deductible. The Ministry of Finance, the institution that could change this situation, says the Romanian fiscal system does not allow the introduction of such incentives. “The low flat tax levied on individual employees’ incomes promotes the principle of eliminating deductions. The 16% flat tax is meant to encourage simplicity and objectivity, as well as create the premises for economic growth, so that the remaining income of the taxpayer can be directed towards investments or consumption, including in the life insurance system. The introduction of life insurance deductibility would mean a return to the former global income tax for individuals, and giving up the objectives of the current system,” say officials from the Finance Ministry.