IRD reaches agreement with insurers

The Inland Revenue Department has reached an agreement with the major life insurers on a common approach to calculating their actuarial reserve under the special tax regime for life insurers, in terms of the financial reporting framework and how margin on services can be applied for tax purposes.

The major life insurers comprise the bulk of the life insurance industry in terms of actuarial reserves. Inland Revenue has offered the basis agreed with the major life insurers to all life insurers and plans to discuss this with them early in the year.

Changes from existing practice will generally apply from the 2003 tax year.

The agreed approach is the positive outcome of consultation on a paper issued by Inland Revenue's Corporates Segment in December 2001 and intensive discussions with the main life insurers affected. The agreed approach will result in certainty and consistency in this complex area.

Discussions were facilitated by the life insurance industry association - Investment Savings & Insurance Association.