Will life insurance claims and dividends be taxed?

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Will life insurance claims and dividends be taxed?

Are life insurance benefits taxable

Many domestic and foreign customers are very concerned about this issue. Ms. Wang from China bought high-value life insurance. The beneficiary is her daughter who holds a US green card. If she settles a claim or withdraws an annuity, will her daughter be taxed?

1. Can life insurance avoid “inheritance tax”?

There is no inheritance tax in my country

Many people believe that life benefits are an “inheritance” for their children. If in the future, our country starts to collect inheritance tax, this money will be taxed.

Objectively speaking, although there is no inheritance tax in our country, the inheritance tax has been brewing since the founding of New China.

In 1985, the “Inheritance Law of the People’s Republic of China” (draft) mentioned the issue of the establishment of the estate tax: some estates are now large in amount and tend to increase, and the issue of estate tax collection needs to be studied. “

In 1997, the report of the 15th National Congress of the Communist Party of China formally proposed to “adjust excessive income, gradually improve the personal income tax system, adjust consumption tax, issue inheritance tax, etc.”, which provided a legal basis for my country’s inheritance tax law.

In 2004, there was news that the “Provisional Regulations on Inheritance Tax” (draft) had also been reported to the State Council.

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A new document was issued in 2010, the draft content was revised, and new content was added.

2. Inheritance tax, whether or not to issue a letter of credit is currently on hold.

If the estate tax is issued, will domestic life insurance funds be subject to estate tax? Judging from the current insurance law, the collection is unlikely.

Article 24 of the “Insurance Law”, after the death of the insured, under any of the following circumstances, the insurance money shall be regarded as the estate of the insured, and the insurer shall be obliged to pay the insurance money in accordance with the provisions of the “Inheritance Law of the People’s Republic of China”:

(1) The beneficiary is not designated, or the designation of the beneficiary is unclear and cannot be determined. (2) The beneficiary dies before the insured, and there are no other beneficiaries.

(3) The beneficiary loses the right to benefit or gives up the right to benefit according to law, and there is no other beneficiary

If the beneficiary and the insured die at the same time, and the order of death cannot be determined, the beneficiary is presumed to die first.

Except for the above three situations, life insurance does not belong to inheritance. From this point of view, there is little chance that life insurance will be subject to estate tax.

Regarding inheritance tax, in response to the questions raised in the article, we should also focus on analyzing the overseas situation.

1. It is Hong Kong. Hong Kong has abolished the inheritance tax.

2. Canada is the country with the largest number of Chinese immigrants. There is no inheritance tax in Canada, but when high-net-worth individuals in Canada pass away, they often have a heavy tax burden, mainly “capital gains tax”. When a Canadian tax resident dies, the tax office will count all their property. , the cost and current price are determined, and the value-added part is subject to a profit tax of up to 50%. However, in Canada, life insurance compensation is not included in the estate tax, so it is exempt from tax.

3. It is the United States. The United States has a high inheritance tax. The large-value insurance policies of Americans can only be tax-free when combined with irrevocable life insurance trusts, which is special. But if the beneficiary holds a US green card and the insured is in the country, do they need to pay taxes?

If the decedent is a non-US tax resident, the insurance money is the property gifted to the US by the foreign insurance company and is not subject to estate tax.

3. Whether life insurance claims need to be included in personal income tax

In China, according to Article 4, paragraph 5 of the Individual Income Tax, insurance compensation is exempt from individual income tax. This of course includes life insurance claims.

1. In Hong Kong, China

The indemnity from life insurance with the death of the insured as the subject is not the taxable income of the beneficiary and does not need to be subject to personal income tax in Hong Kong.

2. In the United States, in Canada

Life insurance income claims are not taxable income of the beneficiary.

3. Whether the annuities and dividends of life insurance should be included in personal income tax

Life insurance not only has insurance claims, but also has cash value, such as annuity insurance, endowment insurance (called savings and participating insurance in Hong Kong), and universal insurance and investment-linked insurance.

4. Are these gains subject to taxation?

In China, do individuals need to pay personal income tax on insurance dividends? There is no complete conclusion yet. However, in the actual operation of the insurance company, the beneficiary of the policy does not need to pay personal income tax when receiving annuity and dividend income. Of course, some provincial tax authorities have proposed to life insurance companies to withhold and pay, but there have been disputes.

Unlike China, in the United States, after the insurance annuity and dividends exceed the exempt amount, individual income tax is required.

Whether universal insurance and investment-linked insurance need to be included in personal income tax

In China, the investment income of universal insurance and investment-linked insurance is not subject to personal income tax for the time being, but there are disputes.

In the United States and Canada, the cash value received by universal insurance and investment-linked insurance needs to be included in the personal income tax income of the year and will face taxation problems.

Welcome to pay attention to the investor Ali. The WeChat ID is: 962568716 (gxali888), Ali pays attention to Hong Kong financial information, and Hong Kong Insurance Ali provides you with tailor-made Hong Kong insurance and financial solutions to escort your investment and financial management.

By aamritri

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