Voluntary health insurance (further – health insurance) contributions paid by the company for the benefit of employee may be exempt from Personal Income Tax (further – PIT) and Social Security Contributions (further – SSC) if:
· health insurance contributions during a tax period do not exceed 25 percent of the salary calculated for the employee during the tax period and
object of insurance is the payment of health care services.
Amended official commentary on Part 14 and Part 14-1
of Article 17 of the Law on PIT provides examples of services that can be
classified as health services. The list is not exhaustive, but it is important
to note that exemption may be applied for the health insurance contributions
paid by the employer for the benefit of employee when healthcare is provided
by hospitals, clinics as well as other public institutions providing health care
services such as pharmacies, physiotherapy offices, dentists, nursing
homes, therapeutic massage rooms, opticians and other licensed health care institutions.
It is important to note that health insurance contributions paid by the employer are considered to be paid for health care if all three of the following conditions are met:
1) there are specified health care services in the health insurance agreement concluded by the employer for the benefit of the employee which must be paid by insurance company in case of insured event, i.e. when the insured person applies to a health care institution or a licensed person for health problems, medical conditions or in order to prevent illness, strengthen health, etc. forming the basis for providing health care services indicated in the health insurance agreement;
2) contributions are paid for health care services provided by a person entitled to provide health care services;
3) the purpose of health care services is to diagnose,
care for and treat illnesses and disorders, prevention of illnesses, diseases,
to help in the recovery as
well as to ensure services and material welfare to regain health.
It is important to note that the exemption does not apply to the contributions for “other services/goods” paid by the employer for the benefit of the employee for:
· sports activities in sports and wellness clubs,
· SPA treatments,
· cosmetic, plastic procedures (operations),
· non-therapeutic massages,
· sunglasses purchased for non-medical purposes without the appointment of a healthcare professional,
· care products, accessories for eyeglasses,
· cosmetics purchases,
· transportation of rehabilitation measures,
· reimbursement of transport costs to/from a medical institution, including parking costs, taking children to school in case of incapacity, etc.
We would like to point out that the companies should review their health insurance agreements, since exemption is applicable only if the health insurance agreement, annexes to the health insurance agreement or payment document (invoice) clearly distinguish the amount committed to health care services and “other services/goods” i.e. exemption is not applicable to the amount committed to “other services/goods” and this part is subject to PIT and SSC. Otherwise, total amount of health insurance contributions should be treated as benefit in kind and subject to PIT and SSC.
Should you have any questions, please do not hesitate to contact Leinonen Tax team and we would be happy to provide you tax advices related to PIT and various employees’ benefit taxation which may be relevant to Your business and your employees.
Information above was prepared by Leinonen Lithuania Tax Team.
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