Revenue Note for Guidance

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Revenue Note for Guidance

CHAPTER 3

Provisions applying to overseas life assurance companies

Overview

This Chapter contains a number of special provisions which affect the tax treatment of overseas life assurance companies. The provisions relating to the interpretation of, and the definition of terms used in this Chapter are found in section 706. The general provisions relating to life assurance companies in Chapter 1 of this Part also apply, in general, to overseas life assurance companies.

726 Investment income

Summary

An overseas life assurance company is an assurance company having its head office outside the State but carrying on life assurance business through a branch or agency in the State. This section provides for the tax treatment of the investment income of such a company.

Details

(1) Investment income of an overseas life assurance company arising from the investment of its life assurance fund (excluding the pension fund, general annuity fund and special investment fund, if any) is, to the extent provided by this section, taxed under Case III of Schedule D.

(2) Investment income of an overseas life assurance company includes distributions from companies resident in the State.

(3) Distributions (including an amount which corresponds to a tax credit) received by an overseas life assurance company from a company not resident in the State is treated as income.

(4) Only a portion of the income from investments of the life assurance fund is charged under subsection (1) for an accounting period. The portion is determined by the formula —

A × B

C

A

is the total world wide investment income.

B

is the average of the liabilities for that period to policyholders resident in the State and to policyholders resident outside the State whose proposals were made to the company at or thought its branch or agency in the State.

C

is the average of the liabilities for that period to all the company’s policyholders.

Neither the income from investments of, nor the liabilities in respect of, the pension fund, the general annuity fund and the special investment fund are included in the amounts which go to make up the formula.

(5) The liabilities of an assurance company attributable to any business is the net liabilities of the company as valued by an actuary for the purposes of the relevant periodical return. The average of any liabilities for an accounting period is 50 per cent of the aggregate of the liabilities at the beginning and end of the valuation period which coincides with that accounting period or in which that accounting period falls.

(6) Where the average of branch liabilities for an accounting period exceeds the mean value for the accounting period of assets to which this subsection applies an amount is included in profits in respect of chargeable gains, such amount being determined by the formula —

A×B

C

A

is the amount which would normally be included in profits.

B

is the average of branch liabilities for the period.

C

is the mean value for the period of those assets.

The average of branch liabilities for an accounting period is the average liabilities of the Irish business for the period being the sum of —

  • the average of the liabilities in respect of the company’s ordinary life business for the period to Irish resident policyholders and to non-resident policyholders whose proposals were made to the company at or through its Irish branch or agency,
  • the average of the liabilities attributable to general annuity business in respect of contracts with Irish residents and with non-residents whose proposals were made to the company at or through its Irish branch or agency, and
  • the average of liabilities attributable to pension business.

The assets involved are all Irish assets, whether or not chargeable to capital gains tax and overseas assets that are used to back the liabilities of the Irish branch.

(7) The single source rule in regard to income chargeable under Case III of Schedule D does not apply to income of an overseas life assurance company from its life assurance fund.

Relevant Date: Finance Act 2021