Taxation of Long-term Insurance Companies
Section 29A(2) states that the taxable income derived by any insurer in respect of any year of assessment commencing on or after 1 January 2000, shall be determined in accordance with the provisions of the Income Tax Act, but subject to the provisions of Section 29A and B.
Purpose
Here you will find the "tools" that will assist you to develop your practical and theoretical knowledge of the vast field of insurance taxation in South Africa.
Please send an e-mail to jjop@mweb.co.za for more information.
Example Curriculum
Laying the Foundation
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- Brief History and Course Introduction
- Purpose of this Platform
- Permission to Learn
- Long-term Insurance Tax - Is it really that complicated, and can it be demystified?
- Definition of Course
- Why will this platform be useful?
- What this platform is not
- Focus area of this Platform
- Lecture Order
- CPD Hours
- Copyright
- Disclaimer
- Contact Details, Comments, Support and Privacy
- Comments and Questions relating to the section "Laying the Foundation"
Glossary of often used Terms
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- Purpose of this Section
- General Terms and Definitions
- Section 29A, SARS and Tax Specific Terms
- Insurance Specific Terms and Definitions
- Terms and Definitions in the Income Tax Act
- Terms and Definitions in the Tax Administration Act (TAA)
- A few often-used Latin words and phrases
- Arrangement of Sections in the Income Tax Act
- Comments and Questions relating to the section "Glossary of Often Used Terms"
Process when Submitting a Tax Return - Quick Reminders
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So, you are part of the Finance/Tax Team
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- Role of the Tax Team
- When dealing with SARS (and others):
- Follow the process, and always keep your details at SARS up to date:
- Can you perform a standard tax calculation for a life insurance company?
- Basic information and documents needed when you perform a Tax Calculation
- SARS Query Resolution Process (Large Business Centre)
- SARS New Online Query System and Complaints Number
- Comments and Questions relating to the section "So you are part of the Tax/Finance Team"
Preparing for an Audit
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Taxation of Long-term Insurance Companies
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- Where does it fit in and how must it be approached?
- Before we get started with Section 29A - What is life insurance business?
- Difficulties when Taxing a Life Insurance Company
- How should profits and investment returns in a "life insurance business" be treated?
- Section 29A in a nutshell
- Underlying Principles of Five Funds Tax
- The Risk Policy Fund
- Comments and Questions relating to the section "Taxation of Long-term Insurance Companies"
Long Term Insurance Tax- Section 29A of the Income Tax Act
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- Taxation of Long-Term Insurers - The Frame
- What does Section 29A and 29B say? (The wording of the Act)
- What does Section 29A and 29B say? (The wording of the Act) w.e.f. 1 January 2023
- How to Establish and Maintain the Separate Funds
- The Simplistic "Goal" when you perform the Five Funds Tax Calculation
- Comments and Questions relating to the section "Long-Term Insurance Tax - Section 29A of the Income Tax Act"
IFRS 17
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- 🆕IFRS 17 - Perspective
- 🆕Brief Comment on IFRS 17
- 🆕 Complexities from a Tax point of view - Brief Comment
- 🆕Adjusted IRFS Definition - Changes
- 🆕In Summary
- Tax Laws Amendment Act - 2022 - IFRS 17 adjustments to section 28 and 29A
- EXPLANATORY MEMORANDUM ON THE TAXATION LAWS AMENDMENT ACT, 2022 - IRFS 17 Adjustments
- IFRS 17 - Statement
- What is IFRS17? - www.IFRS.org - Accounting
- Deloitte Africa Insurance Outlook 2022
- Comments and Questions relating to the section "IFRS 17"
Forms 1 to 7 and the Tax Calculation
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The Forms - Form 1
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- Form 1
- Linking Section 29A to Forms 1 to 7
- Form 1 - Introduction
- Value of liabilities at beginning of year - Form 1 - Line 1
- Before IFRS 17 - Total per Financial Statements - Form 1, Column 1
- IFRS 17 - Total per Financial Statements - Form 1 Column 1 (AFS)
- IFRS 17 - Total per Financial Statements - Form 1 Column 1 (Forms)
- Form 1 - Column 2 - IFRS 17 Adjustments - New Forms
- Adjustments - Form 1, Column 2 (IFRS 4) or Column 3 (IFRS 17)
- Adjusted Total - Column 3
- Allocations per Fund - Make-up of the Five Funds
- Allocations per fund, in principle - Form 1, Columns 4 to 8
- Disregarded Income, Commissions and Premium Adjustments
- Allocation of Premiums and Claims - Form 1, Lines 4 and 9
- Allocation of Investment income, foreign premiums and foreign reinsurance premiums and other Income - Form 1, Line 5
- Allocation of Net accounting REALISED gains (losses) on investment assets - Form 1, Line 6
- Allocation of Net accounting UNREALISED gains (losses) on investment assets - Form 1, Line 7
- Form 1 and BGR 30
- Allocation of Direct Expenses Attributable to Income- Form 1, Line 11
- Allocation of Selling and Administration of Policy Expenses - Form 1, Line 12
- Allocation of Other Expenses - Form 1, Line 13
- Allocation of Taxation - Form 1, Line 14
- Allocation of Dividends Paid - Form 1, Line 15
- Transfer in Respect of Tax Status Changes - Form 1, Line 17
- Changes in Share Capital per Financial Statements - Form 1, Line 18
- Other - Form 1, Lines 20 and 21
- Transfer to or from the Life Fund
- Market Value of Assets at end of year - Form 1, Line 21 and 22
- Deduct: Value of liabilities at end of year - Form 1, Line 24
- Deduct/add Transfer (to)from CF - Form 1, Line 23
- Asset Reconciliation - Form 1 - Note 6 and 7
- Once-off election for transfer of risk policies - Form 1, Line 2
- Form 1 - Conclusion
- Comments and Questions relating to the section "The Forms - Form 1"
Foreign Dividends and CFC's
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The Forms - Form 2
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The Forms - Form 3
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The Forms - Form 4
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- Selling and Administration of Policies Expenses
- Other Expenses
- Capital Expenses and other Add- Backs and Adjustments
- Some Typical Adjustments Made on Form 4
- Expense Ratio - Applicable to IPF and CPF
- Expense Ratio - Corporate Fund
- Expense Ratio - Risk Policy Fund
- Binding General Ruling (BGR) 30
- Short Summary of Expenses
- Comments and Questions relating to the section "The Forms - Form 4"
The Forms - Form 5
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The Forms - Form 6
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The Forms - Form 7
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- Introduction of Loss Limitation Rules
- Calculation of Tax Payable
- Calculation of Policyholder Fund Tax
- Calculation of Risk Policy Fund Tax
- Calculation of Corporate Fund Tax
- Donation Deduction - Corporate fund and Policyholder Funds Tax
- Donation Deductions - General
- Reasonability Check
- Comments and Questions relating to the section "The Forms - Form 7"
ITR14L Tax Return Submission and Assessment
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Provisional Tax and Paragraph 19 (3)
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- What it is and who should pay?
- Interpretation Note 1 - Guidance on the interpretation of the Law relating to Provisional Tax
- SARS Guide - Provisional Tax
- Paragraph 19(3) of the Fourth Schedule and its Applicability to Long-term Insurance Companies
- What to expect when SARS applies Paragraph 19(3)
- Section 6quat rebates
- Comments and Questions relating to the section "Provisional Tax and Paragraph 19(3)"
Questions and Answers - Mostly with a focus on Section 29A
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- Purpose of Q&A
- Is there a difference between the Corporate Fund and the Shareholders' Fund?
- Must a company really establish Five Funds?
- What does "the manner in which its business is conducted" mean?
- How must one apportion expenses to the different Funds?
- What is the tax effect if I get my expense allocations wrong?
- Can an expense form part of the Fund Build-up if it is not tax deductible?
- What does it mean to trade?
- With regards to assessed losses, does the Trade Requirement apply to every Fund of a Life-Insurance Company?
- What is back-solving?
- How must Asset Management Fees be apportioned?
- Does the General Deduction Formula apply to long-term insurers?
- What must be done if the auditors are not satisfied that there is sufficient documentary evidence for expenses?
- What is the main difference between life insurance tax calculation and other companies' tax calculations?
- What is the difference between a Transfer Credit and an Assessed Loss in a PHF?
- How does one utilize an assessed loss in a PHF?
- What is a Special Transfer?
- What is Locked-in New Business Strain?
- Are premiums and claims part of gross income and expenses?
- What is the rationale for a 30% transfer deduction?
- Why can the Risk Policyholder Fund (RPF) deduct 100% selling and other expenses?
- What is an "Annuity"?
- Does dividend withholding tax (DWT) apply to a Policyholder Fund?
- Section 23H and Benefits - Must Selling Expenses be Spread, and if so, How??
- Can a company declare dividends out of a Policyholder Fund or the Risk Policy Fund?
- How much detail must there be on the IT14L with regards to the Five Funds?
- Can a life-insurance company claim wear and tear on assets?
- What is Taxable Income? A Framework
- Assessed Losses and Transfer Deductions
- What does "shall be included" in Section 29A(1)(d)(i) mean?
- Why is "year of assessment" important?
- What does dormant mean?
- Can SARS disallow excessive or unnecessary expenses?
- Must provisional tax be based on best estimates or actual amounts?
- What to do when a tax rate changes - Application of IAS 12
- What is a "Business Day" and why is it important?
- Must a micro-insurer perform a five-funds tax calculation?
- What is the Meaning of SAM in an Insurance Environment?
- If all premiums paid are refunded to a policyholder after 15 years, must the policy be allocated to the IPF or RPF?
IT14SD
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Long-term Insurance - Interpretation Notes (IN)
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- What are Interpretation Notes?
- IN 47 (Issue5) and BGR 7 (Issue 4) - Wear and Tear
- IN 102 (Issue 2) - Classification of Risk Policy - 12 May 2022
- IN102 (Issue 1) - Classification of risk policy and once-off election to transfer policies issued before 2016
- Comments and Questions relating to the section "Long-term Insurance - Interpretation Notes (IN)"
Rulings Issued by SARS
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Long-term Insurance - Binding Class Rulings (BCR)
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Long-term Insurance - Binding General Rulings - (BGR)
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- What are Binding General Rulings (BGR)?
- BGR 30 - Allocation of direct and indirect expenses within and between an insurer's funds - Issue 2
- BGR30 - Allocation of direct and indirect expenses within and between an insurer's funds - Issue 1
- BGR31 - Interest on late payment of benefits
- BGR34 - Management of superannuation schemes
Long-term Insurance - Binding Private Rulings (BPR)
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- What are Binding Private Rulings (BPR)?
- BPR 105 - Single Premium Whole Life Insurance Policy issued
- BPR141 - Transfer of securities - UPF to UPF
- BPR179 - Single Premium Life Insurance Policy Issued by an Off-shore Insurer
- BPR226 - Transfer of the Long-term Insurance Business Partly to a Third Party and Partly Intra-group
- BPR250 - Risk Policies
- BPR251 - Cancellation of reinsurance agreement
- BPR322 - Policy - Equity Linked Note
- BPR358 - Amalgamation of Short and Long-term Insurers
- BPR-402-Transfer of long-term insurance business to a local branch of a foreign reinsurer
- BPR 416 -Transfer-of-reinsurance-business-from-a-resident-company-to-a-local-branch-of-a-foreign
Certain Explanatory Memorandums (EM) and Taxation Laws Amendment Bills (TLAB) relating to Insurance Tax Amendments
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- General
- Explanatory Memorandum and TLAB 2024
- Expanatory Memorandum and TLAB 2023
- Explanatory Memorandum 2022 - IFRS 17 amendments
- Explanatory Memorandum and TLAB 2021 - Definition of Insurer, Expense Ratio Clarification and Short-term Insurance Transfers
- Explanatory Memorandum and TLAB - 2020 - Meaning of Market Value
- Explanatory Memorandum and TLAB - 2019 - Foreign Reinsurance and Phasing-in Rules
- TLAB - 2018
- Explanatory Memorandum and TLAB - 2017 - Valuation Method, DAC and DRL
- Explanatory Memorandum and TLAB - 2016 - Valuation Method
- Explanatory Memorandum and TLAB - 2015 - Risk Policies, Foreign Reinsurance and Micro-Insurance
- Explanatory Memorandum and TLAB - 2014 - Risk Policies and Foreign Reinsurance
- Explanatory Memorandum & TLAB - 2013 - Investment Policies Disguised as Short-term Insurance Policies
- Explanatory Memorandum and TLAB - 2012 - Mark to Market CGT Change and Deduction Formula
- Explanatory Memorandum - 2011 - Employer Owned Insurance Policies
- Explanatory Memorandum 2007 - Long-term insurers and controlled foreign companies
- Explanatory Memorandum and TLAB - 2001 - Amendment of Section 29A and Second Hand Policies
- Explanatory Memorandum 1999 - Introduction Section 29A
- Explanatory Memorandum 1993 - Introduction of Section 29 - Four Funds Approach
Dissertations, Research Papers and Old Documents
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- Relevance of Dissertations, Research Papers and Old Documents
- Taxation of Life Insurance - TE Hartwig
- Taxation of Life Insurance in South Africa - Revisited RJ Clover
- Taxation of Life Insurers in South Africa - Dissertation - Stefan Botha
- Taxation of Long-term Insurers - Dissertation - HD Matthews
- Thesis on Four Funds - Peter Donaldson
- An Analysis of the Proposed Annual Mark-to-Market Taxation of the Capital Gains of Long-term insurance Policyholders - N Johnson
- Capital vs. Revenue - Some Guidance
- The Impact of Solvency Assessment and Management on Life Taxation - CE Pretorius
- The Jacobs Committee Report (1992) - The Full Report
- Jacobs Committee Report - Chapter 5 Dealing with the Long Term Savings Industry
- Old Accounting Statement - AC 121 - Disclosure in the Financial Statements of Long Term Insurers
- IT 18 - Tax Calculation when Section 29 was Introduced
Old FSB Documents and Other Interpretations
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- Usefulness of FSB Documents and Interpretations
- Directive 140.B.ii GAAP and Prescribed Requirements 8 Nov 2014
- Info Letter 1 of 2013 Treatment of deferred tax liabilities for statutory reporting purposes 4 Febr 2013
- SAP104 Calculation Of Assets Liability And CAR Eff 31 Dec 2012
- PGN 104
- The impact of the implementation of the Solvency II 5 May 2012
- Board Notice 169 of 2011 Eff 1 Jan 2012 Short-term Insurance
- LT Tax Directive Current Liabilities Cover Letter Dec 2011
- LT Tax Directive Current Liabilities Eff 9 Dec 2011
- Directive 140.B.iii(LT) Differences AFS and LT 10 March 2006
- Directive 145.A.i Disregard Negative Liabilities 8 Nov 2004
- Info Letter 4 of 2004 Value of Liabilities 26 March 2004
- FSB Directive to Long-term Insurers dated 7 March 2000
- FSB Basic Guide to Long-term insurance
Other Useful Publications
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Legislation and Websites
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