Module 3 – Life office taxation – onshore and offshore
Welcome to life office taxation
What type of tax?
Life office taxation – question 1
Summary
Answers to questions in module 3
Welcome to life office taxation
This is module 3 – life office taxation, where we’ll look at the types of tax that affect a life office.
The life office or insurer (in our case AEGON Scottish Equitable or AEGON Scottish Equitable International) may be subject to tax when it writes bonds products. Whether there’s a tax liability will depend on the location where the life office is based.
Life office taxation is divided into two categories - onshore and offshore.
Onshore means subject to corporation tax. Onshore life offices' funds must pay corporation tax. Assets within the funds are taxed by:
*In recognition of this fund taxation, policyholders receive an automatic ‘deemed’ tax credit of 20% of all gains.
Offshore means subject to no internal tax. There’s no internal tax within the funds as offshore life offices base themselves in jurisdictions that tax policyholder funds beneficially. For example, AEGON Scottish Equitable International, which is based in Dublin, doesn’t pay local Irish tax on its life funds. The life fund may receive dividend income, which may have been taxed already. This tax can’t be recovered. Exactly the same principle applies to pension funds.
Life office taxation – question 1
Try this question. Which type of tax applies to AEGON Scottish Equitable’s and AEGON Scottish Equitable International’s onshore and offshore offices? You can find the answer at the end of this module.
A - AEGON Scottish Equitable (onshore)
B - AEGON Scottish Equitable International (offshore)
Option 1 – no internal tax
Option 2 – income tax
Option 3 – corporation tax
In this module you’ve learned that:
Answers to questions in module 3
Life office taxation – question 1
Which type of tax applies to AEGON Scottish Equitable’s and AEGON Scottish Equitable International’s onshore and offshore offices?
A - AEGON Scottish Equitable (onshore)
B - AEGON Scottish Equitable International (offshore)
Option 1 – no internal tax
Option 2 – income tax
Option 3 – corporation tax
Answer
How did you get on? For an onshore life office like AEGON Scottish Equitable, bonds are subject to UK corporation tax. Offshore life office bonds (AEGON Scottish Equitable International) aren’t subject to UK corporation tax and have no internal tax.