Tax Rebate in 2007
Similarly to the past years, the updated regulations of the law on personal income tax, which are based on the premium payment of endowment policies, give our clients a chance for a tax rebate, with the requirements of: a minimum 10 years insurance term and a premium payment for at least a 3-year-term pension insurance product.
The measure of the tax rebate:
20% of the premium paid in the certain calendar year, added with 10% of the increase in premium payment compared to the premium paid in the previous year.
Example:
Total premium payment in 2006: 100,000 HUF
Total premium payment in 2006: 120,000 HUF
The amount of the tax rebate in 2007:
(120,000*20%) +((120,000-100,000)*10%) = 24,000 + 2,000 = 26,000 HUF
The amount of the tax rebate:
The maximum limit of the tax rebate is 100,000 HUF, which is available under the following two conditions:
1. Amount limit:
The total amount of the tax rebate cannot exceed 100,000 HUF, other available rebates included. The following is a list of possible tax rebates:
- A rebate due to a tuition in a university or college
- Certain rebates from the social security system and the mandatory pension funds (certain contributions for social security system, premium for mandatory pension fund and additional premium paid by MPF members)
- A rebate for charity donations A rebate for life insurance policies
- A rebate based on community service
- A rebate for adult-training costs from the previous year (it was cancelled, but is acceptable under certain conditions)
2. Income limit:
Up to total income of 3,400,000 HUF in the calendar year, a 100,000 HUF rebate is available. In case of total income between 3,400,000 HUF and 3,900,000 HUF, the higher income proportionally results in a lower rebate. The maximum amount of 100,000 HUF tax rebate is decreased by 20 % of the surplus income over 3,400,000 HUF, therefore the rest of the rebate is enforceable as the maximum amount of tax rebate.
Example:
In case of 3,60 0,000 HUF total income, the maximum amount of tax rebate is: 100,000 – ((3,600,000-3,400,00)*20%) = 100,000 – 40,000 = 60,000 HUF.
For a total income over 3,900,000 HUF, the right for a tax rebate is not acceptable.
The total income of the individual in a calendar year is the income under the aggregated tax-base and the so-called separately taxed income collectively.
With the exception of: an individual entrepreneur, who uses the method of the personal income taxing for an entrepreneurship, the entrepreneurial withdrawal and the entrepreneurial dividend are also calculated collectively, as an income of the activities of the entrepreneurship,
The income of an individual derived from selling real estate is not taken into consideration.
Who enforces the tax rebate?
In case of individuals, the policyholders are entitled to a tax rebate. The official document of this right is created by AEGON Hungary for the individual who is the policyholder at the time of premium payment.
In case of legal entities, the official document of this right is delivered to the insured individual, but with the amount of tax rebate where the sum of the premium paid belongs to the chargeable income of the insured.
Exercising the right of disposition:
In case the policyholder previously had a tax rebate(s) and exercises the right of disposition within 10 years from the date of making the policy, then the total amount of tax rebates of the premium payments in the previous 3 calendar years increased by 20% must be returned and paid back to the Hungarian Tax and Financial Control Administration.
Exercising the right of disposition within 10 years from the date of making the policy is as follows:
a) The cancellation of the life insurance policy
b) The surrender of the policy (including regular withdrawal and part surrender, as well)
c) Contract modification, except those where the individual policyholder or the new individual policyholder is entitled to a tax rebate henceforward after the contract modification. The exceptions are the following (they are not considered as exercising of the right of disposition:
- Changing the beneficiaries
- Changing the amount of the premium or the sum assured
- Changing the policyholder to another policyholder or the insured, with the fact that the modification of the policyholder does not belong to the method of exercising the right of disposition, only when the parties have declared in the policy that the total amount of the tax rebates of the all former policy-holders (in the last three years), which can be returned by the Hungarian Tax and Financial Control Administration.
d) Taking on at least a one-year long policy loan
e) Taking on a policy-loan, which is not longer than a year, more than once
f) In case a benefit of a life annuity policy is paid out decreasing the amount of the annuity or the maturity sum assured within 10 years from the risk commencement date of the policy, except the bullet points a)-c) occur because of the death of the insured.