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Publications

Establishment & Tax Benefits and Incentives

Our experienced tax professionals within the dedicated Insurance Group assist life and non-life insurance undertakings with all aspects of taxation in Ireland. The Irish tax environment is summarised below for your convenience and please contact a member of the Insurance Group should you need further information on tax in Ireland.

The taxation treatment of insurers under Irish tax law varies depending on whether the insurer is engaged in life or in non-life insurance activities.

In general the taxation treatment of general insurance, reinsurance and captive insurance is comparable to the treatment applicable to a normal trading company. Accordingly such companies would get the benefit of the Ireland’s competitive corporate tax rate of 12.5% for trading activities. Corporation tax is charged on the annual trading profits after deduction of allowable expenses.

Irish tax law also provides measures for a tax deduction for certain amounts transferred to equalisation reserves in accordance with insurance regulations. In the past this relief was restricted to amounts transferred to such reserves as required by reinsurance regulations.

Life assurance companies will also be eligible for the 12.5% corporate tax rate. However the method of calculating their trading profits is specifically provided for under Irish taxation law. Essentially at the life assurance company level it is the shareholders surplus which is taxed as trading profits. In addition a portion of the transfer to the Fund for Future Appropriation will also be regarded as shareholders profits with the balance treated as belonging to policyholders.

Normal deductions and capital allowances allowable under Irish tax law will be taken into account. An attractive feature of the Irish taxation regime is that a gross roll up applies at the policyholder level so that where an assurance company makes a payment or a deemed disposal (a deemed disposal will occur on the ending of an 8-year period beginning with the inception of the life policy and each subsequent 8-year period beginning when the previous one ends) to a policyholder; it will be required to deduct tax at source. However, in this regard tax is not deductible in the case of a payment by an assurance company to a person who is neither resident nor ordinarily resident in Ireland (subject to compliance with certain formalities). Essentially in the case of non Irish resident policyholders no Irish tax in respect of investment returns should arise throughout the life of the policy in question.

Some other attractive features of the Irish taxation regime that the dedicated Insurance Group advises on include:

  • No Irish stamp duties or premium taxes levied on policies issued by Irish insurance companies relating to risks located outside of Ireland.
  • Provision is made under the Ireland/US double taxation agreement for an exemption from US Federal Excise Tax (“FET”) for Irish insurance companies. FET is generally imposed under US domestic law on policies of insurance or reinsurance covering US risks issued by a foreign insurer or reinsurer who is not subject to US tax.

     

  • O.E.C.D. compliant thin capitalisation rules for insurance operations.
  • Tax pooling available for foreign tax credits in respect of tax paid by foreign branches of Irish companies with the result that in most applicable cases there should be no Irish tax arising on foreign branch profits.
  • Onshore pooling of foreign tax credits relating to dividends from foreign participations with the result that there should generally be no Irish tax payable on foreign dividends.
  • Capital gains participation exemption regime for certain foreign participations.
  • No outbound withholding tax on premiums.
  • Extensive domestic exemption from Dividend Withholding Tax on dividend payment to EU and Double Taxation Agreement states. 
  • Tax exemption under Irish tax law on all dividends received from Irish resident companies and potential exemption for certain foreign dividends on portfolio interests.
  • Remittance basis of taxation possible in respect of employment income of key employees.  
  • An efficient, transparent and internationally recognised taxation system within which to operate.  
     

Life Settlements

Finally, somewhat related to the above, we have seen Ireland being examined and used as a jurisdiction to locate offshore investment vehicles to acquire life policies. In particular we have seen this in relation to life policies insured on US citizens residing in the US so as to avail of the benefits of the Ireland/US Double Taxation Convention (the “Ireland/US Treaty”) to avoid the potential negative US tax issues arising from a US ruling issued by the Internal Revenue Service (Revenue Ruling 2009-14) on 1 May 2009, where there now exists potentially negative US tax consequences for non-US investors who acquire life policies and receive death benefits from a US insurance company on the death of a US citizen residing in the US. Please see our Life Settlements brochure