{"id":695,"date":"2012-12-14T12:31:23","date_gmt":"2012-12-14T03:31:23","guid":{"rendered":"http:\/\/tk-tax-accounting.com\/?p=695"},"modified":"2024-05-25T02:17:56","modified_gmt":"2024-05-25T02:17:56","slug":"english-life-insurance-for-corporate-tax-and-income-tax","status":"publish","type":"post","link":"https:\/\/www.tkpartners.or.jp\/en\/english-life-insurance-for-corporate-tax-and-income-tax\/","title":{"rendered":"Life insurance for Corporate tax and Income tax"},"content":{"rendered":"

Case 17<\/p>\n

<Question>
\nBusiness is getting better, so I am thinking of acquiring\u00a0life insurance. I am Canadian and my family in Canada advises me<\/span> to use a Canadian life insurance company as they know the Canadian life insurance system.\u00a0 I have not decided whether I should make the contract in my own name or under the company name so please tell me the tax impact for both Corporate tax and Income tax.<\/p>\n

<Answer>
\nWhen insurance is being acquired, a key consideration is whether it should be owned personally or through a corporation. Tax and other implications should always be reviewed as part of the decision making process.<\/p>\n

\u00a0<\/strong><\/p>\n

Corporate tax
\n<\/span><\/strong>There are multiple situations in which a corporation may acquire an interest in a life insurance policy. While the corporation may \u201cown\u201d the policy, a separate decision still needs to be made with respect to the beneficiary designation. It is not uncommon to have a party other than the corporation (e.g., shareholder or employee) be the beneficiary under the policy. Common applications for corporate-owned insurance include the funding for buy-sell agreements, paying taxes at death, funding of post-employment benefits and for the provision of key-person protection. Needless to say, corporate ownership is considerably more complex than personal ownership.<\/p>\n

 <\/p>\n

(1)\u00a0 Endowment insurance
\nEndowment insurance is a type of funding insurance, and is payable to the insured \u00a0if he\/she is still living on the policy’s maturity date , or to a beneficiary otherwise.<\/span><\/p>\n\n\n\n\n\n\n\n\n
Insurance beneficiary<\/td>\nInsurance premium<\/td>\n<\/tr>\n
Death payout<\/td>\n\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 Pure endowment<\/td>\n<\/tr>\n
Corporate<\/td>\n\n

Asset capitalization<\/p>\n

\n<\/td>\n<\/tr>\n

Employees\u2019 bereaved\u00a0\u00a0 family<\/td>\n\n

\u00a0Employees<\/p>\n<\/td>\n

\n

Salaries\u00a0\u00a0 to assured persons<\/p>\n<\/td>\n<\/tr>\n

Employees\u2019 bereaved\u00a0\u00a0 family<\/td>\n\n

Corporate<\/p>\n<\/td>\n

\u00a01\/2\u00a0 =Inclusion in deductible expenses<\/td>\n\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a01\/2 = asset\u00a0\u00a0capitalization<\/td>\n<\/tr>\n
<\/td>\n<\/td>\n<\/td>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

(2)\u00a0 Term life insurance
\nTerm life insurance is an insurance which offers no refund payment and provides coverage at a fixed rate of payments for a limited period of time.<\/p>\n\n\n\n\n\n
\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Insurance beneficiary of death payout
\n(No pure endowment exisits)<\/td>\n		\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Insurance premium<\/td>\n<\/tr>\n
Corporate<\/td>\nInclusion in deductible expenses<\/td>\n<\/tr>\n
zEmpolyees’ bereaved family<\/td>\nInclusion in deductible expenses\u00a0*1<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

*1 If the insurance is not contracted for all employees, the insurance premium is treated as salaries to the employees.<\/p>\n

(3) Endowment insurance with term life insurance<\/p>\n

    \n
  • \u00a0Insurance premium for endowment insurance
    \nBase upon endowment insurance rule.<\/li>\n
  • Insurance premium for term life insurance
    \nBase upon term life insurance rule.<\/li>\n
  • Unclear about classification of each insurance
    \nBase upon endowment insurance rule.<\/li>\n<\/ul>\n

     <\/p>\n

    Income tax
    \n<\/span><\/strong>Insurance premiums are not included in deductible expenses for income tax purposes. Instead, up to JPY 40,000 isdeductible from income. Insurance premiums are categorized as life insurance, individual pension plans, \u00a0and nursing care. The nursing care premium will be set up from 2012, January 1, and the deductible amount of each insurance premium is JPY 40,000 or less, the total deductible amount is up to JPY 120,000. (before 2012, January 1, the classifications\u00a0for insurance premiums were only life insurance and individual pension plans. Each deductible amount was up to JPY 50,000, and the total amount was up to JPY 100,000)<\/p>\n

    (1)\u00a0 New insurance contract after 2012, January 1<\/p>\n\n\n\n\n\n\n\n
    Insurance premium<\/td>\nDeductible amount<\/td>\n<\/tr>\n
    Lessa than JPY 20,000<\/td>\nPaid insurance premium is deductible<\/td>\n<\/tr>\n
    JPY 20,001 – JPY 40,000<\/td>\nPaid insurance premium \u00d7 1\/2 + JPY 10,000<\/td>\n<\/tr>\n
    JPY 40,001 – JPY 80,000<\/td>\nPaid insurance premium \u00d7 1\/4 + JPY 20,000<\/td>\n<\/tr>\n
    Over JPY 80,000<\/td>\nJPY 40,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

    (2)\u00a0 Old insurance contract before 2012, January 1<\/p>\n\n\n\n\n\n\n\n
    Insurance premium<\/td>\nDeductible amount<\/td>\n<\/tr>\n
    Less than JPU 25,000<\/td>\nPaid insurance\u00a0premium is deductible<\/td>\n<\/tr>\n
    JPY 25,001 – JPY 50,000<\/td>\nPaid insurance premium \u00d7\u30001\/2 + JPY 12,500<\/td>\n<\/tr>\n
    JPY 50,001 – JPY 100,000<\/td>\nPaid insurance premium \u00d7\u30001\/4 + JPY 25,000<\/td>\n<\/tr>\n
    Over JPY 100,000<\/td>\nJPY 50,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

     <\/p>\n

    Foreign insurance company
    \n<\/span><\/strong>Insurance premiums contracted in foreign countries are not\u00a0deductible. Insurance companies in Japan have to be licensed by a Financial Services Agency, and the insurance premiums by the licensed companies are deductible. Therefore, if the insurance is acquired by foreign invested insurance companies in Japan which are licensed, the insurance premiums are deductible.<\/p>\n

     <\/p>\n

     <\/p>\n

    By Certified Public Accountant (CPA)\u00a0& Tax Accountant, Koji Takahashi,
    \n<\/em>Tokyo & Yokohama<\/em><\/p>\n

     <\/p>\n","protected":false},"excerpt":{"rendered":"

    Case 17 <Question> Business is getting better, so I am thinking of acquiring\u00a0life insurance. I am Canadian and my family in Canada advises me to use a Canadian life insurance…<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[38],"tags":[],"class_list":{"0":"post-695","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-news-2"},"_links":{"self":[{"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/posts\/695","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/comments?post=695"}],"version-history":[{"count":1,"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/posts\/695\/revisions"}],"predecessor-version":[{"id":6931,"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/posts\/695\/revisions\/6931"}],"wp:attachment":[{"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/media?parent=695"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/categories?post=695"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/tags?post=695"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}