Many people think that tax must always be paid on the benefit from a term life insurance policy. That is not true. Tax is not always levied on the benefit. In specific situations, term life insurance does have tax consequences: for income tax and inheritance tax. On this page we show you what information we provide about the tax consequences of the term life insurance.

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Income tax

A benefit from a term life insurance usually does not count as income and is therefore not taxed for income tax purposes.

Exception

There is an exception to this general rule. Your term life insurance premium may be income tax deductible. In that case, it must be a death insurance policy for a survivor annuity: a supplement to the income of your surviving dependents in the event of your death. If the premium has been deducted, the survivor’s annuity benefits are taxed.

Capital yield tax

In addition, the recipient of a benefit from a life insurance policy from that moment on may have more assets than is exempt in box 3. For example, a life insurance policy can lead to extra income tax. You can read more about these topics on the page Term life insurance and income tax.

Inheritance tax

In addition to income tax, there are many more taxes in the Netherlands. This is how we know the inheritance tax: tax that must be paid on inheritances. The payment of a term life insurance policy can also be (partly) subject to inheritance tax. We explain this to you on the page Term life insurance and inheritance tax.

  • If the declaration has not yet been sent on time, a fine will follow. Anyone who cannot do anything about the fact that a declaration has not been made or not filed on time will not be fined.
  • People who do not send a declaration at all will receive an assessment. The tax authorities then make an estimate of the amount on which tax must be paid.
  • Tax authorities expect a few hundred thousand returns on Wednesday and Thursday. 

Offense fine

Anyone who has deliberately failed to file a report or made an incorrect or incomplete report on purpose can be fined.

In case of intent, the fine equates to half of the tax that had to be paid on the undisclosed amount. If it is gross negligence, the fine will be 25 percent. For example, there is gross negligence if someone has been reprehensibly careless or seriously negligent.

Savings

People who deliberately do not or incorrectly declare income from savings and investments in box 3 must pay a fine of 150 percent. In case of gross negligence, the fine is 75 percent. The person who is fined can lodge an objection. This can result in a lower fine or a remission. Correcting the declaration in time can also prevent a fine. Incidentally, reporting is not mandatory for everyone. This only applies to people who have received a letter about this, who have done paid work or have assets without the knowledge of the tax authorities.

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