Trinidad And Tobago Mulling Life Insurance Tax Overhaul
by Mike Godfrey, Lowtax.net, Washington
10 January, 2018
Trinidad and Tobago is seeking support to develop a new tax regime for life insurance firms.
Trinidad and Tobago's Ministry of Finance said it is seeking the assistance of an appropriately qualified firm to support its efforts to strengthen insurance taxation.
The consultation is due to changes in how insurance companies must make provision for potential liabilities on policies. The territory's Insurance Act 1980 provided that "every company carrying on long-term insurance business in Trinidad and Tobago shall place in trust in Trinidad and Tobago assets equal to its liability and contingency reserves with respect to its Trinidad and Tobago policyholders as established by the balance sheet of the company as at the end of its last financial year." The Insurance Bill 2016 proposes the removal of the requirement for life insurance companies to have statutory funds.
The Ministry of Finance explained: "Currently, taxation of the long-term insurance business for an insurance company is calculated by the profits of the long-term insurance business derived from Statutory Fund investments. Hence, the removal of the Statutory Fund [requirement] eliminates the tax basis for long-term insurance business."
Requesting input on potential tax policy options, the Ministry explained: "The taxation of the insurance industry, particularly the life insurance industry, has long been one of the more problematic areas of income taxation for tax policy makers. The industry is developed under a separate regulatory regime from other financial institutions. Its accounting systems are based on complex actuarial computations due to the lags between the assumption of liabilities and payments, and so it is difficult to apply appropriate accrual taxation principles to the calculation of insurance income. As a result, the taxation of this industry varies widely across countries and insurers often face a tax regime which is quite different from that applied to other industries in a country."
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