Is Civil Liability Insurance Deductible?

Can you deduct Civil Liability Insurance?

In this article, we deal with clarifying this issue and commenting, in general, the fiscal framework applicable in this type of insurance products.

The fiscal framework of Civil Liability Insurance

As a rule,  Civil Liability Insurance is usually contracted by autonomous professionals to cover their interactions with third parties.

Yes, it is deductible, although, yes, it should associate with the professional activity itself to qualify as tax-deductible.

Based on the latter, the insurance-linked to the business or professional activity are those whose scope is not limited to the private life of the worker but protects against eventualities arising from work development.

Examples of insurance-linked to professional activity

A clear example of this type of insurance can be a policy contracted by the regent of a cafeteria to safeguard the physical integrity of its customers if a fall occurs within the facilities.

Also, if this spills any substance on a garment of the value of a diner, the insurance will be responsible for its restitution or cleaning costs.

Another example is, insurance contracted by a self-employed electrician who compensates his clients if any of his actions disrupt the electricity grid, for example.

Else, one of its facilities subsequently produces an overload, the insurance will take care of the repair of the connected appliances at the time of the failure.

Can the full amount deducted from Civil Liability Insurance?

Well, in this case, it depends.

If it is, in fact, an RC insurance comparable to any other expense derived from the performance of the work activity,  you can deduct its full amount.

Thus, the current taxation understands that the hiring of these related policies is no different from the purchase of office supplies.

It is an expense.

Tax the material insurance of the self-employed person

Finally, the insurance of materials contracted by the self-employed (or companies) to protect their fixed assets are also 100% deductible.

To make it clear to you the nature of these contracts, think of a specific protection framework for heavy machinery or that covers certain tools susceptible to deterioration or under some risk associated with the work.

Both in one case and another case, the tax legality of our country understands that the hiring of this type of insurance is done in pursuit of more reliable performance.

Allowing it to continue in case its means of work have caused a patrimonial detriment in a third.

In short, if you are self-employed and contracted some Civil Liability Insurance, you can deduct it as an expense.

Hence, the nature of the policy aligned with the objectives of professional activity. That is that their hiring complies with labour criteria, not personal ones.