Generally, premiums on insurance policies taken out by an employer on employees are tax deductible if the beneficiaries of those insurance policies are the employees, or if the employer has the contractual obligation to pass the payout to the employees or their next-of-kin. This is on the basis that the premiums paid are a staff benefit.

Where the beneficiary of an insurance policy is the employer and there is
no contractual obligation to pass the insurance payout to the employees or their next-of-kin, the employer will be seen to have taken out the insurance policy to acquire a capital asset and premiums paid on those insurance policies shall not be tax deductible. There are certain exceptions to this rule, for example, where the insurance policy is a keyman insurance to cover loss of profit due to the demise or incapacity of a key employee of the business.

Revised Tax Position
The IRAS recently updated its website to change the tax treatment of premiums paid on group term life and personal accident insurance policies.

With effect from YA 2019, premiums paid on group term life or personal accident insurance policies are tax deductible to the employer even if the employer is the named beneficiary to the policy and there is no contractual obligation to pass the payout to the employees or their next-of-kin.

The IRAS made this revision after having received feedback from businesses that group term life and personal accident policies are usually purchased as staff benefits and employers are named as beneficiaries only for administrative convenience. Given that there is no contractual obligation to pass the payout to the employees or their next-of-kin, any payout received by the employer from the above-mentioned group insurance policies will be taxable in full to the employer. However, the employer will be allowed a tax deduction on the insurance payout to the extent it is disbursed to the employee. Such payouts received by the employee will be taxable to him or her unless specifically exempted under the Income Tax Act. In the same update by the IRAS, premiums paid on group insurance which provides for a cash surrender or investment/ saving value was included in the list of examples of insurance premiums that are capital in nature and not deductible.