Will the Minister explain the purpose of this section which deals with foreign life assurance policies?
SECTION 50.
Question proposed: "That section 50 stand part of the Bill."
Policies of assurance issued by the domestic life industry to Irish resident policy-holders suffer an annual tax on the investment return at the standard rate of income tax. No further charge to tax arises when the policy is encashed or matures in the hands of the policy-holder. IFSC life assurance companies have a separate tax regime since they only sell policies to individuals who do not reside in the State. The investment return on these policies is exempt from Irish tax throughout the duration of the policy and any tax liability on encashment or maturity is a matter for the tax jurisdiction of the policyholder's country of residence.
Section 43 will allow persons holding IFSC policies to retain those policies should they become residents of the State. Section 44 provides the general taxation regime for such policies where they are encashed or mature in the hands of a policyholder who is resident or ordinarily resident in the State. Section 50 addresses the taxation position of a policy held for less than six months before the policyholder comes to reside in the State.
Section 20A of the Capital Gains Tax Act, 1976, provides for the taxation regime for a policy or contract issued by a foreign life assurance company with no trading presence in the State to a person who is resident in the State. Since such a policy does not suffer the annual tax charge imposed on a domestic policy the proceeds of encashment or maturity of the policy, less premiums paid, are liable to capital gains tax. Under section 50 this taxation regime will also be applied to an IFSC life assurance company policy where the policyholder took out such a policy within a period of six months before coming to reside in the State.
Does the section cover a person living in Spain who takes out a policy with an IFSC company and who later comes to live in Ireland?
Yes.
Why was it deemed necessary to table this amendment? Is it envisaged there will be many such cases? Given the limited number of people to which it applies, this provision does not seem necessary.
We have been informed that the IFSC has been marketing such policies to non-residents who were not considered prospective returnees.
That is what I imagined.
However, as a result of marvellous management of the economy many people want to return home. The IFSC would like to be in a position to sell its policies to those people as well.
Can the IFSC sell policies to Irish residents?
No, but it can sell policies to Irish people if they are living abroad.
Many of those people will now look for policies.
That would appear to be the case. These people will be treated in the manner I have outlined.
Question put and agreed to.