An insurance premium can reduce an entrepreneur's tax, but only where the policy protects the business: its assets, its liability to clients or its ability to generate revenue. Policies that primarily protect the owner's life, health or private budget are generally not a tax-deductible cost. Below we explain how to assess a specific contract, which limits apply to a passenger car and when costs are not settled at all.
What decides whether a policy is a cost
The PIT Act does not contain a separate list of insurance policies that can be booked as costs. The general rule in Article 22(1) applies: a cost is an expense incurred to generate revenue or to maintain or protect its source, provided it is not listed in the exclusions in Article 23. Insurance rarely generates revenue directly, so in practice the second part of the definition matters — protecting the source of revenue.
For every policy it is worth asking three questions:
- What is covered? Equipment, premises, inventory or liability for services point to a business link. Life and health of the owner point to a personal purpose.
- Who is the policyholder and who is entitled to the pay-out? A contract concluded in the company's name, with its NIP, makes defending the expense easier.
- Does the cover follow from a contract with a client? If the counterparty requires a policy as a condition of cooperation, the link to revenue is particularly easy to show.
The label "company policy" alone decides nothing. In an inspection it is the scope of risks described in the general terms and conditions that matters.
A review of typical entrepreneur policies
| Type of insurance | Cost in principle? | Points to watch |
|---|---|---|
| Professional liability (errors in service, for example faulty code, misconfigured system) | Yes | Scope should match the services actually provided |
| General business liability (damage caused to third parties, for example at a client's office) | Yes | Policy must not cover mainly private life |
| Insurance of equipment, furnishings and business premises | Yes | Equipment should be used in the business, ideally in the fixed-asset register |
| Protection against IT attacks and data leaks | Yes | Covers the company's data and systems and those of its clients |
| Business-trip insurance | Yes, where the trip is for business | Evidence of the trip's purpose is needed |
| Insurance of a company car | Yes, with limits | PLN 150,000 cap for premiums based on the car's value |
| Life, private health, loss-of-income policies | Usually not | Protects the person, not the business |
Insuring a computer or monitor is a natural complement to how the equipment itself is accounted for.
Personal policies: why the tax office challenges them
Life insurance, a private medical package, an accident policy or a policy paying benefits for long illness all share one feature: the pay-out goes to the entrepreneur personally and compensates their personal loss. Such expenses are in principle treated as private, even if the entrepreneur argues that without health there is no revenue. The reasoning is that a similar risk affects everyone who works for a living, regardless of the form of employment.
The situation is different when the company funds insurance for its employees. Such an expense can in principle be a cost for the employer and, for the employee, is usually revenue from the employment relationship. This, however, is a separate issue to be considered together with HR and payroll support.
Mandatory ZUS contributions should not be confused with commercial policies. They are governed by their own deduction rules and are not the subject of this article.
Passenger car: the PLN 150,000 cap
Most of the detailed rules concern passenger cars. Under Article 23(1)(47), the part of the premium that exceeds the proportion of PLN 150,000 to the car's value adopted for insurance purposes is not a cost. The cap therefore matters only for cars that the insurer values above that amount. The rule covers insurance premiums for cars and is felt most strongly on autocasco (comprehensive insurance), where the premium depends on the vehicle's value.
Worked example
- Vehicle value on the policy: PLN 200,000.
- Annual autocasco premium: PLN 4,000.
- Proportion: PLN 150,000 / PLN 200,000 = 0.75.
- The cost is PLN 4,000 × 0.75 = PLN 3,000; the remaining PLN 1,000 must be excluded from costs.
If a passenger car serves both business and private purposes, Article 23(1)(46a) excludes 25% of the vehicle's running expenses from costs, but according to KIS interpretations this does not apply to insurance premiums – only the limit in point 47 applies to them. Under leasing, insurance premiums are settled under the same rules, separately from the instalments themselves.
When to recognise the premium and how to document it
An insurance premium is an indirect cost — not tied to a specific revenue. Such expenses are deducted on the date they are incurred. If, however, the cost covers a period beyond the tax year and the part attributable to the given year cannot be determined, Article 22(5c) provides for proportional settlement over the length of that period. For a policy running, say, October to October, it is worth agreeing with the accountant what share of the premium to allocate to each year.
Evidence of the expense is usually the policy or another document issued by the insurer, together with proof of payment. The VAT Act exempts insurance services from VAT (Article 43(1)(37)), so an active VAT taxpayer does not deduct tax on the premium and books the full amount paid in costs.
It is also worth remembering the other side of a policy. Compensation for damage to a business asset is not exempt from PIT and constitutes revenue of the firm. Under the tax scale and the flat tax, a pay-out from such a policy increases revenue.
Ryczałt, scale and flat tax
Everything above applies under the tax scale and the flat tax. An entrepreneur on ryczałt (lump-sum tax on recorded revenue) pays tax on revenue, with no deduction of costs, so an insurance premium does not affect their income tax. If the business requires high, regular expenses — insurance included — it is worth comparing forms of taxation before the new year. A review of the rates is in our article on ryczałt and its rates.
The texts of the provisions can be checked in the consolidated text of the Personal Income Tax Act and on biznes.gov.pl.
How Good Balance can help
We will review the scope of your policies and assess which premiums can safely be booked as costs, and we will correctly settle the car cap and premiums that straddle the year-end. As part of our simplified bookkeeping we keep the tax book of revenue and expenditure (KPiR) and make sure every expense is documented.