Tax advantages of insurance policies for companies

Insurance policies are a strategic tool for companies, allowing them not only to protect company assets and key figures, but also to obtain significant tax advantages. The tax treatment of the premiums paid varies depending on the purpose of the policy and the legislation in force, which distinguishes between policies taken out in the interest of the company and those for the benefit of directors or employees.

It is important to emphasise that premiums paid by the company to the insurance company for policies in the interest of the company do not constitute remuneration for the director and are therefore not taxable to the director.

Deductibility of policies for companies

Insurance policy for catastrophic damages (mandatory by 31 March 2025)

Introduced by the Budget Law 2024 (Art. 1, paragraphs 101-112, Law no. 213/2023) and confirmed by the Milleproroghe Decree (DL 202/2024), this policy is compulsory for all companies with registered offices in Italy or with a permanent establishment in Italy, with the exception of agricultural companies and those with unauthorised buildings (no sanctions are envisaged). The obligation starts on 31 March 2025, with an extension to 31 December 2025 for fishing and aquaculture companies.

• Cover → Protection against direct damage to property, plant, machinery and industrial and commercial equipment caused by catastrophic events such as Earthquakes
  • Floods
  • Landslides
  • Floods
  • Floods
• Deductibility: 100% deductible as a business expense as it is compulsory by law pursuant to Art. 99(1) TUIR – ‘Taxes and charges compulsory by law are deductible in the year in which payment is made’
• Implementing rules → They will be defined by a MIMIT decree, which will establish risk-proportional tariffs and incentives for companies that adopt security measures.
• IVASS portal → An online portal will be created to compare different insurance offers.

Practical example: A manufacturing company suffers €200,000 in damage due to a flood. The policy fully covers the restoration costs. The annual premium of €3,000 is 100 per cent deductible, while the compensation received is not taxable if it is used to rebuild the company’s assets.

Credit Protection Insurance (CPI) policy

The Credit Protection Insurance (CPI) policy protects the company or director in the event of inability to repay a loan due to unforeseen events such as death, disability or loss of employment.

• Deductibility for the company: 100% deductible if linked to company financing, in application of the principle of inertia (Art. 109(5) TUIR)
• Beneficiary administrator → If linked to personal mortgages, the premium is deductible at 19%.
• Taxation of the indemnity → Not taxable if used to discharge the debt.

Practical example: A company enters into an ICC to cover a loan of €200,000. The director suffers a permanent injury. The indemnity extinguishes the debt without taxation. The annual premium of €2,000 is fully deductible.

Cyber Risk policy

This policy protects the company against damage resulting from cyber attacks, theft of sensitive data, business interruptions and ransom demands by hackers.

• Deductibility for the company: 100% deductible as a cost inherent to the activity in application of the principle of inherency (Art. 109, paragraph 5, TUIR), as it protects against risks specific to the business activity
• Cover → Damage from cyber attacks, data breach, business interruption.
• Indemnification → Taxable as contingent assets pursuant to Article 88(3)(a) TUIR.

Practical example: A ransomware attack blocks a company’s systems for 5 days, causing €50,000 in damage. The policy covers the costs of recovery. The compensation is taxed as a contingent asset, while the premium of €1,500 is fully deductible.

Business Interruption Policy

The Business Interruption policy provides financial support to compensate for financial losses suffered by the company due to a forced business interruption caused by events such as fire, natural disasters or technical failures.

• Deductibility for the company: 100% deductible as a cost for the year in application of the principle of inherence (Art. 109(5) TUIR), since it protects the continuity of the company, a typically entrepreneurial risk
• Coverage → Loss of profit due to business interruption.
• Indemnification → Taxable as business income in the year of accrual.

Practical example: A fire stops production for 3 months, causing a loss of €300,000. The policy indemnity covers the loss, but is taxed as business income. The annual premium of €2,500 is deductible.

Key Man Policy

This policy protects the company in the event of the death or serious injury of a key director or manager, reducing the economic impact and allowing the company to continue as a going concern.

• If beneficiary the company:
  • Deductibility: 100% deductible in application of the principle of inherence (Art. 109(5) TUIR), as it protects the company from the risk of losing a key figure in the company’s activities
• Whether the beneficiary is the administrator or the heirs:
  • Deductibility: Not deductible for the company
  • Treatment for director: Taxed as fringe benefit under Art. 51(1) TUIR – Employee/assimilated income
• Taxation of the indemnity → If received by the company, it is a taxable contingent asset. Compensation for director’s death or permanent disability intended for the director or heirs does not constitute taxable income under Art. 6, TUIR.

Practical example: the CEO of a company dies suddenly. The Key Man policy guarantees an indemnity of €500,000 to manage business continuity. The indemnity is taxed as a contingent asset if received by the company, while it is exempt from taxation if it goes to the heirs. The premium of €1,000 per year is deductible.

Third part liability (D&O) policy

The Directors & Officers (D&O) policy protects directors and officers against claims for financial loss caused to third parties in the performance of their duties.

• Deductibility for the company: 100% deductible in application of the inertia principle (Art. 109(5) TUIR), as it protects the company’s interest by protecting the directors from risks associated with their office
• Director’s allowance: Does not constitute fringe benefits as it protects occupational risks
• Compensation → Does not constitute taxable income for the administrator, being reimbursement for professional liability (Art. 6, TUIR)

Practical example: An administrator is sued for €200,000 for detrimental management decisions. The D&O policy covers the amount without the indemnity being taxable to the administrator. The annual premium of €1,200 is deductible.

All Risks Policy

The All Risks policy provides cover against a wide range of unforeseen events that could cause damage to company assets, such as fire, theft or catastrophic events.

• Deductibility for the company: 100% deductible if inherent to the business activity in application of the principle of inherent nature (Art. 109, paragraph 5, TUIR), as it protects instrumental and corporate assets
• Beneficiary director → If personal, the bonus is taxed as a fringe benefit.

Practical example: A theft causes damage of EUR 30,000 in a company warehouse. The All Risks policy covers the full amount. The indemnity is taxed as a contingent asset. The annual premium of € 2,000 is deductible.

Health Policy

This policy provides cover for medical, hospital and pharmaceutical expenses for the administrator or employees.

• Deductibility for the company: 100% deductible as personnel costs
• Treatment for the administrator:
  • Up to EUR 258.23 per year: does not constitute fringe benefits
  • Over EUR 258.23 per year: taxed as a fringe benefit pursuant to Article 51(2)(f) TUIR

• Compensation → Not taxable as reimbursement of expenses incurred (Art. 6, TUIR)

Practical example: A director incurs medical expenses of €1,500, which are covered by a health insurance policy. The premium of €500 per year is deductible, but the excess over the €258.23 is taxed as fringe benefit.

Long Term Care (LCT) policy

The Long Term Care (LTC) policy guarantees an annuity or reimbursement of long-term care expenses in the event of a director’s or employee’s loss of self-sufficiency.

• Deductibility for the company: 100% deductible as personnel costs
• Treatment for the director: may be taxed as a fringe benefit if the policy is nominative within the meaning of Article 51(2) TUIR
• Compensation → Not taxable as reimbursement of expenses incurred (Art. 6, TUIR)

Practical example: An administrator loses self-sufficiency. The LTC policy covers care expenses of €30,000 per year. The indemnity is not taxed, while the premium of €800 per year is deductible.

Pension Policy (PIP and Supplementary Pension Funds)

Pension policies are an important tool for companies wishing to offer long-term benefits to their directors and employees. They are individual or collective pension plans aimed at supplementing the state pension.

• Deductibility for the company: Deductible up to EUR 5,164.57 per beneficiary per year pursuant to Article 10(1)(e-bis), TUIR
• Treatment for the director: The sums paid by the company do not constitute fringe benefits up to the deductibility limit and are not taxed until the pension is received.
• Taxation of the pension benefit → The amount received on retirement is subject to preferential taxation at a rate between 9% and 15%.

Practical example: A company pays €3,000 per year for the supplementary pension of a director. The amount is deductible up to € 5,164.57. The pension received will be taxed between 9% and 15% (depending on the years of membership in the pension fund).

General principle of deductibility

For all policies, the general principle of deductibility is based on:

1. Inherence: Link with business activity
2. Accrual: Correct temporal allocation of cost
3. Documentation: Presence of adequate supporting documentation
4. Beneficial owner: Distinction between policies in the interest of the company and policies for the benefit of third parties

VAT aspects of insurance policies

Premiums paid for insurance policies are exempt from VAT pursuant to Article 10(1)(2) of Presidential Decree 633/72. This exemption applies to insurance, reinsurance and life insurance transactions.

Ancillary services → Any ancillary services provided separately from the insurance, such as specialist advice or technical assessments, are subject to VAT at the standard rate.

Commissions → Commissions paid to insurance intermediaries are also exempt from VAT when they are strictly related to the activity of insurance mediation.to intermediaries. 

Numerical examples of tax advantages for corporate insurance policies

Below are concrete examples of tax savings for an SME taking out different types of insurance policies, based on average market premiums for each type.

Scenario: SME with 10 employees and 2 directors, turnover €2,000,000 

Conclusion: Why rely on Taxdry

Managing corporate insurance policies is an important strategic lever for optimising costs and maximising tax benefits. However, it is crucial to understand in detail the applicable tax regulations, limitations and real savings opportunities to avoid misjudgements.

TAXDRY offers specialised consultancy for:

• Analysing the regulatory and tax environment of corporate insurance policies.
• Optimise tax deductibility according to your company’s specific needs.
• Assess the economic impact of each insurance solution.
• Working with insurance brokers to find the most advantageous solutions.

We invite you to contact us for a personalised consultation and find out how to make your insurance strategy even more effective and tax-efficient.