GFIA reacts to UN report on income from cross-border insurance

12 December 2023

The Global Federation of Insurance Associations (GFIA) has responded to the United Nations (UN) Co-Coordinators’ Report on the treatment of income from cross-border insurance activities. The report was issued by the Subcommittee on the UN Model Double Taxation Convention between developed and developing countries.

GFIA welcomed the opportunity to share the views of the insurance and reinsurance industry, and proposed modifications.

On cross-border insurance activity carried out through intermediaries, GFIA highlights that insurance:

  • is a highly regulated industry: to sell insurance in a country, the insurer has to comply with local insurance regulation and meet local regulatory capital retention to match local risks;
  • has to stay close to customers due to the nature of the insurance coverage provided (protection, general insurance, life insurance);
  • cannot be assimilated to a passive activity whose income is traditionally subject to withholding tax (e.g., dividends, royalties, interests);
  • is a specific line of services business requiring an estimate of future costs to determine the premium. Insurers collect premiums first and pay expenses later over the duration of the coverage (general expenses, claims). This means that gross premiums are not a measure of the insurer’s actual profit/loss for a given line of insurance business;
  • is usually taxed where the risks lie, through indirect taxes on premiums and/or corporate income taxes on the branch operating in the country.

GFIA also provided comments on other aspects of the UN proposal, notably on reinsurance, impact on premiums for insurance coverage in developing countries, risk for double taxation and the articulation with Pillar Two.

The full document is available here

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