Recently introduced tax regulations require assurance companies to file annual returns with the Irish Revenue Commissioners (“Revenue”) in relation to payments made to policyholders. An annual electronic report, the first of which is due in 2012, is now mandatory in relation to certain types of assurance policies. Additional requirements apply to new investments made on or after 1 January 2013.
Who needs to make the return?
The reporting requirement applies to life assurance companies who make payments to Irish policyholders in relation to certain types of business. As payments to non-Irish resident policyholders do not need to be returned, an insurer should only be affected if it has Irish resident policyholders. Certain types of life assurance contracts are outside the scope of the rules. For example, permanent health insurance contracts, many pension contracts (including annuities) and pure protection policies are exempt.
What payments need to be reported?
Any payment made by a life assurance company in relation to investment-type contracts can become reportable unless it is an “excepted payment”. Examples of “excepted payments” include payments:
- To non-residents that have provided the relevant tax declaration
- Which relate to the protection element of a policy
- Which relate to certificates of deposit, commercial paper or medium-term notes
- To Irish pension schemes and financial institutions
Information required by Revenue
The details required include the payee’s name, address and payment amount. A separate report must be made for each separate policy on which a payment is made. Where an investment is made by two or more persons, a report must be made for each person. If no payment is made to a policyholder then there is no requirement to make a report. Revenue has also issued guidance in relation to the format the reports should take.
Time Limits
The due date for reporting payments made in 2011 is 30 September 2012. In future years, the return date will be 31 March for payments made in the proceeding year.
Obligation to seek tax reference numbers
For new investments being made on or after 1 January 2013, the life assurance company must make all reasonable efforts to seek a tax reference number from the customer. The “customer” in this case is the person in whose name the investment is held rather than the beneficial owner, if different. The life assurance company cannot rely on any document which the company feels might have been altered in such a way as to cause doubt about whether the correct tax reference number has been provided.
Where an intermediary acts on behalf of a life assurance company the intermediary must seek the tax reference number of the customer and this information should then be passed to the life assurance company.
Care must be taken in obtaining and storing the relevant information. For example, a tax reference number collected for the purpose of including it on these returns cannot be used by the life assurance company for any other purpose. Copies of documentation must be retained for five years after the relationship with the customer has ended.
Penalties
There are no penalties where a policyholder does not supply a tax reference number provided the information has been requested and the insurer indicates this in the return. Penalties may apply where there is a failure to comply with the rules e.g. a failure to file proper returns or misuse of data.
Actions
An analysis will be required to determine which policies and payments are within the scope of the new rules. Systems may need to be adapted to ensure the relevant reporting requirements can be met by the 30 September deadline.
Application documentation should be amended for policies to be issued on or after 1 January 2013. Procedures will need to be put in place for verifying the tax references numbers and retaining copies of verifying documents. The storage and use of the data obtained under these new rules needs to be carefully considered.
Contributed by Niamh Keogh.
