1. Tax Considerations in the Global Environment: Life Assurance Paul Chater Client Director – European Tax Practice, FiscalReps Joseph Finbow Senior Client Manager – Captive Tax Practice, FiscalReps

2. Agenda What are insurance premium taxes? Life/long-term business How do premium taxes affect life? European Court of Justice (ECJ) case What are the implications? Do you have a premium tax liability? What premium tax rate should be priced into the premium? FiscalReps rate tables Tax authorities What next?

3. What are Insurance Premium Taxes? Two types: 1.Insurance Premium Tax (IPT) 2.Parafiscal tax 94 national taxes in Europe No harmonisation across Europe

4. Life/long-term business EU Life Directive 2002/83/EC (Annex 1) Class 1: Life & Annuity Class 2: Marriage & Birth Class 3: Linked Long-Term Class 4: Permanent Health Class 5: Tontines Class 6: Capital Redemption Class 7: Pension Fund Management Class 8: Collective Insurance Class 9: Social Insurance

5. How do premium taxes affect ‘life’? UK/DE market – no premium taxes on life Specific life taxes: o IE: Levy on life assurance premiums o GR: Private Life Insurance Guarantee Fund (PLIGF)

6. European Court of Justice Case RVS Levensverzekeringen NV v Belgium (Case 243/11) - 21 February 2013 Background 1.A Dutch life assurer sold life (Class 1) insurance to a Dutch resident policyholder 2.Class 1 is IPT exempt in The Netherlands 3.The Dutch resident relocates to Belgium 4.The Belgian tax authorities apply IPT to Class 1 Location of Risk (LoR) rules Static interpretation – Premium tax based on the location of the policyholder at the inception of the policy Dynamic interpretation – Premium tax based on the habitual residence of the policyholder when the premium is made. Habitual residence

7. What are the implications? The life assurer may not be aware that there are premium tax obligations The life assurer needs to consider the premium tax position when pricing individual premiums Under declared premium taxes (interest/penalty charges if applicable) may impact profit margins Increase the administrative burden o Monitor the changes of the policyholder’s habitual residence o Reporting capability The costs of compliance

8. What are the implications? Questions the ECJ did not address: Does the ECJ case cover all nine long-term classes of business? Where is the LoR if an employer takes out a life policy on behalf of its employees who work overseas? Could insurers be liable for unpaid premium taxes, interest and penalty charges before 21 February 2013? Could double taxation arise based on the habitual residence rules?

9. Do you have a premium tax liability? Life companies should register with the relevant tax authority if there is any liability. There are no threshold limits. 15 European countries currently apply premium taxes to life policies AT:IPT BE:IPT CH:SD CY:SD ES:Winding up activity & ER direct damage FR:IPT in specific circumstances GR:PLIGF, IPT & TEAA PAE IE:Levy on life assurance premiums LI:SD MT:SD NL:IPT PT:ISP & INEM RO:Possibly an operating fee SE:Special tax on group life insurance premiums (local insurers only) Sl:IPT

10. What premium tax rate should be priced into the premium? Rates vary… AT 1.0% to 11.0% CH 2.5% to 5.0% PT 0.048% to 2.0% Sl 6.5%

11. FRL rate tables

12. Tax authorities Governance Is there a ‘business owner’ who has day-to-day responsibility for IPT? If yes: o Who is it and how do they see their role? (summary of key responsibilities) o What are the terms of reference regarding their role and identified areas of accountability? Where and how are records of management decision making instructions or key actions retained? How long are they retained for? o What do they do to satisfy themselves that any associated tax risk is being effectively managed? If no: o Then what is the reason for not having a 'business owner'? o Who completes the IPT return? Please state their position within the business

13. What next? Do you have a home or overseas exposure? If yes, are you: o Registered with the relevant tax authority for premium tax purposes o Filing the relevant returns, and o Making payment at the correct times? Are you pricing the premium tax into your premiums? o If not, what are the potential unpaid premium tax(es), interest and penalty charges? Are you compliant? Can you satisfy a tax authority audit?

14. Questions