Lump-sum compensation to children and young people for personal injury or loss of provider
Favourable tax rules apply to children and young people who receive payments from compensation or insurance because of personal injury or loss of provider.
Does this apply to me?
This applies to children and young people up to 22 years of age who have received payments from compensation or insurance because of personal injury or loss of provider.
Exempt from tax
The following payments to children and young people under 22 years of age are exempt from net wealth tax:
- Lump-sum compensation for personal injury or loss of provider.
- Lump-sum compensation from accident, sickness, or disability insurance in the event of injury, illness or other.
- Lump-sum compensation from accident or life insurance in the event of loss of provider
The net wealth tax exemption applies until and including the income year in which the child/young person reaches the age of 21.
The exemption from net wealth tax applies regardless of how the funds are placed, whether in bank deposits, annuity insurance, real property, cars, etc.
A sufficient connection is required between the compensation/insurance amount and the placing of the funds.
The income and wealth of children under 17 years of age will normally be taxed jointly with the parents.
The wealth and return (interest, etc.) on the compensation amount or insurance amount can nevertheless be assessed separately if this results in lower tax than assessment jointly with the parents.
Separate tax assessment of the interest income will ensure that the child receives his or her own personal allowance in connection with the assessment of income.
If accumulated interest from previous years has resulted in wealth being built up, this will not be covered by the net wealth tax exemption. Such wealth may be assessed separately for the child, who will then have his or her own tax-free amount in connection with the assessment of net wealth tax.
The Tax Administration will perform the calculation that is most favourable. The tax will be stated in the parents' tax assessments and the child should therefore not submit his or her own tax return concerning the compensation/insurance payment.
This is what you must do in the tax return
- The tax return is pre-filled with information regarding lump-sum payments to children. You’ll find the information under “Other circumstances” when you’re logged in to your tax return.
- You must check if the information is correct. If the information about the received compensation amount has not been pre-filled, you must add it yourself.
- To ensure that your tax is correct, you must include an attachment showing which amounts in your tax return that come from the compensation/insurance amount.
Example:
If the amount is placed in a bank, state the bank’s name and account number.
If the amount is placed in property, state the cadastral and property unit number and the relevant ownership share.
You should not delete these amounts from the tax return.
Essential information about the tax deduction card
You should check your tax deduction card if your child has received:
- Lump-sum compensation for personal injury or loss of provider.
- Lump-sum compensation from accident, sickness, or disability insurance in the event of injury, illness or other.
- Lump-sum compensation from accident or life insurance in the event of loss of provider.
You should change your tax deduction card if the information about the child’s wealth/interest income from received compensations is reported on you.