You pay the premium for the group term life insurance to Zwitserleven. The premium for a maximum of three months’ wages upon the employee’s death must not be added to the gross wages. If you have insured more than three months' wages in the event of death, the premium intended for the excess is part of your employee's taxable wages. Wage tax should in principle be withheld on it. In that case, the premiums must be split into a part that does not and a part that does belong to the employee's taxable salary. It is important that you tax the premiums properly. If you fail to do so, the one-off payment may be fully taxed upon the employee’s death. Please contact your (tax) adviser in this respect.
The one-off payment upon death is 12 times the monthly salary. The premium for this employee amounts to €200 per year. Of this premium, €50 (3/12th) is earmarked for a one-off payment of 3 times the monthly salary upon the employee’s death. This €50 is exempted and is not part of your employee's taxable wages. €150 (9/12th) of this premium is part of your employee's taxable wages. You withhold wage tax on this part. Therefore, no wage tax will be withheld from the amount that the partner and/or children receive upon the employee’s death.
The advantage of a net pension benefit
In the examples above, the surviving dependants do not pay any wage tax on the benefit. This is a big difference with a surviving dependant’ pension. In the case of a surviving dependants’ pension, the premium is not taxed for the employee, but the benefit is.
The partner and/or children of the deceased employee must, however, declare the one-off payment in the context of inheritance tax. Certain exemptions from inheritance tax apply to partners and children. If the one-off payment upon the employee’s death is more than this exemption, inheritance tax will be due.
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