The Finnish Central Tax Board ("CTB") gave on 18 May
2011 a preliminary ruling (KVL:034/2011) regarding the duty
to pay tax in connection with transfers of investments in life
insurance saving agreements and capitalisation agreements where the
taxpayer has the right to decide on which assets the policy funds
are invested in.
Life insurance saving agreement refers to a life insurance
policy that combines life insurance with the features of a savings
and investment account. The gains from the investments ac-cumulate
tax-deferred. Capitalisation agreement refers to an
investment-linked insurance with no insured person, which is
usually concluded for a fixed period of time and often used by
enterprises for medium and long term investments. Like in life
insurance saving agreements, also in capitalisation agreements
gains from investments accumulate tax-deferred.
In the matter before the CTB, the taxpayer was planning to conclude
either a life insurance saving agreement or a capitalisation
agreement with an insurance company. In said agree-ments, the
premium paid to the insurance company could be invested in
different types of assets. The insurance company was the owner of
the assets. It had the right to choose where the assets were
invested in and also change their allocation. However, based on the
contract terms it was possible to grant the policyholder an
independent right to decide on the transfers and investments during
the term of the policy.
The assignment of investments linked to the life insurance saving
or the capitalisation agreement by the insurance company during the
term of the policy was not considered to be a taxable transfer in
taxation of the policyholder. The policyholder did not receive
taxable income from said transfers nor did any tax-deductible loss
arise although he or she would be entitled to decide on the
investments independently.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
