Paschal Donohoe (Dublin Central, Fine Gael)
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I am advised by Revenue that the Stamp Duties Consolidation Act 1999 (SDCA 1999) provides for the following stamp duties in relation to life insurance policies:

• Section 124B provides for a levy on certain premiums of life assurance. Under this section 1% of the premium is payable by the insurer.
• Section 2 and Schedule 1 provide for Stamp Duty on conveyance or transfer on sale of a policy of insurance or a policy of life insurance where the risk to which the policy relates is located in the State. 0.1% of the consideration is payable by the parties to the transaction.

There are two regimes under which a life assurance policy may be taxed – the “old basis business” regime applies to life assurance policies written before the 1st of January 2001, and the “new basis business” regime applies for policies written on or after that date.

Under the old basis business regime, life assurance companies are taxed on the “Income less Expenditure” (or “I-E”) basis of taxation. The profits calculated under I-E are apportioned between those that relate to the shareholders of the insurance entity and those that relate to the policy holder. The shareholder portion is taxed at 12.5%. The life assurance company is taxed at 20% on the policy holder portion of the profits on an annual basis. The policy holder is not subject to any further tax on the surrender, maturity or assignment of the life policy.

The life assurance company is required to return its profits comprising of the shareholder and the policy holder portions in its corporation tax return. As life assurance companies are not required to provide a breakdown between the shareholder and the policy holder portions of the profits in the return it is not possible to isolate the tax paid on the policy holder portion under the old basis business regime.

The vast majority of life assurance policies in Ireland are now taxed under the “new basis business” regime (also referred to as the “gross roll-up” regime) which was introduced by Finance Act 2000.

Under this regime, the life assurance company is subject to tax at the rate of 12.5% on its shareholder profits, that is the profits which do not relate to investments made on behalf of policy holders. The life assurance company is not subject to tax on its policy holder profits on an annual basis, but rather is required to a “Life Assurance Exit Tax” (LAET) where there is a gain on the happening of a “chargeable event” in respect of policies held by certain policy holders.

A chargeable event generally occurs on the surrender, maturity or assignment of a life policy. A chargeable event also occurs 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. This 8-year deemed disposal was introduced to specifically prevent the indefinite deferral of tax.

The rate of LAET depends on whether the policy holder is an individual (41%) or a company (25%), although a rate of 60% can apply where the policy constitutes a personal portfolio life policy. The personal portfolio life policy legislation was introduced in Finance Act 2002 to address a specific misuse where the policy holder could select or influence the underlying assets of the policy. Life assurance companies are required to make bi-annual tax filings and payments in respect of their LAET obligations for the year. LAET represents a final tax for a policy holder and generally no further tax arises on the surrender, maturity or assignment of the life policy.

I am further advised that the available statistical information in respect of Stamp Duty receipts is published on the Revenue website at www.revenue.ie/en/corporate/information-about-revenue/statistics/capital-taxes/stamp-duty/receipts.aspx

Available statistical information in respect of LAET receipts is published on the Revenue website at www.revenue.ie/en/corporate/information-about-revenue/statistics/receipts/taxhead/index.aspx