Yield Income and Yield Tax

The yield income after the 1st of September 2006:

Yield income occurs if object, personal and temporal validity, and temporary conditionals (bullet points 1-3) are jointly fulfilled, and the payment does not belong to other income.

1. The object validity of yield income:

The range of insurance products:

• life insurance
• life annuities

Payment titles under tax:

• Surrender (non-forfeiture options), which is the cancellation of the policy before maturity, and part surrender (withdrawal which are not benefits)
• Benefit of the maturity: sum assured in case of life insurance policy if the term is less than 10 years
• Benefit of the maturity: sum assured in case of life annuity policy if the term is less than 3 years

2. The personal validity of yield income:

The personal validity of yield income includes only individuals; therefore yield tax occurs only if an individual is eligible for yield income.

In terms of the yield tax, the individual who is eligible for yield income is:

• the beneficiary in case of maturity
• the individual policy-holder in case of surrender
• the individual policy-holder in case of partial surrender

3. The temporal validity of yield income:

The rules of yield tax for life insurances are due if the risk commencement date is after the 31st of August 2006. The life insurance policies, based on insurance proposals signed by the policy-holders until 31st of August 2006, are not under the rules of yield tax as well as premiums of certain policies paid in the future. It is valid until the present rules of yield tax law are modified by the Hungarian Parliament.

The method of tax yield calculation

Base of the yield tax = Sum assured concerned the individual beneficiary (gross claim), declined with the sum of those premiums, which were paid and are allowed to decline the gross claim

Yield tax = Base of the yield tax is multiplied by 20%

Net amount of money paid for the individual beneficiary = Sum assured concerned the individual beneficiary (gross claim), declined by the measure of yield tax

The amount of the yield tax is calculated, deducted and paid to the Hungarian Tax and Financial Control Administration by the insurance company. Returning and paying engagements of the individuals arise only if the insurance company cannot deduct the amount of yield tax for some reason.

Attention!

The sum assured paid out for the insurance benefit is invariably tax-free, except the benefit of the maturity sum assured of the life insurance policy if the term is less than 10 years or if the life annuity policy term is less than 3 years. Yield income may occur from these policies if the risk commencement date is after 31st of August 2006 and if the sum assured concerned with the individual beneficiary (gross claim) exceeds the sum of premium paid.

Examples of Yield Tax Calculations>>> (in Hungarian)