Highlights of the Circular include:
- Reserves for unexpired risks will now be determined on a time-apportionment basis. This means that tax-deduction will only be available for reserves relating to the relevant year.
- Estimated claims and outgoings can now be deducted in each year. This includes verified but unpaid claims and an estimate for unverified claims received in the period. Such estimated claims deducted will be treated as taxable in the following year. Effectively only the net movement in estimates is taxable or deductible.
- Insurance companies are to keep supporting documentation like detail policies or risks accepted and the associated unexpired risks.
- Minimum tax will apply at 0.5% of gross premium. Gross premium is defined as total premium received or receivable (excluding premium returned to the insured).
Life Insurance Business
- Taxable "investment income" is restricted to income derived from investment of shareholder funds.
- Minimum tax will apply at 0.5% of gross income. Gross income is defined as all investment income, fees, commissions and income from other sources or assets.
Further details available in our alert and a copy of the FIRS Circular below:
Originally published 14 May, 2020
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