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Effective yield tax for life assurance - 0.453% for 2019
The Swedish Debt Office has announced the Swedish state borrowing rate for 30 November 2018 which amounts to 0.51%. This implies that the effective tax rate for life assurance policies for fiscal year 2019 amounts to 0.453%.
Life assurance policies (non-pension) have since the introduction in 1994 been subject to a standardised annual yield tax. As from 2012 a comparable investment model, the investment savings account (ISK), was introduced with similar standardised taxation.
Both investment models are taxed with standardised taxation based on assumption that the return for the fiscal year is equal to the Swedish state borrowing rate as of 30 November of the previous year. This flat rate is taxed at 30% (Yield Tax/ Capital Income Tax).
From 1 January 2018 the calculation for the base of taxation is equal to the state borrowing rate + 1% for both life assurance and investment savings account. The increase of the base for calculation with the minimum threshold for taxation of life assurance and investment savings accounts was introduced per 1 January 2016 of 1.25% and is still valid.
On 29 November 2018 the state borrowing rate which will be used to calculate the base for taxation for fiscal year 2019 was announced by the Swedish Debt Office amounting to 0.51%.
The effective tax rate for life assurance for 2019 is therefore 0.453% (1.51% x 30%) on the value of the life assurance per 1 January 2019 + full value of premiums paid until 30 June 2019 and half value of premiums paid between 1 July and 31 December 2019.
The state borrowing rate per 30 November 2018 implies a slightly higher effective tax rate of 0.006% for 2019. We still consider life assurance as a very attractive alternative investment model compared to regular portfolio investments especially as Swedish interest rates remain low.
Historical curve of effective yield tax until 2019
Andrea Szymanski
Senior Wealth Planner
Lombard International Assurance
