POLAND International Comparison of Insurance Taxation January 2005

Transcription

1 International Comparison of Insurance

2 International Comparison of Insurance Poland General Insurance 1 Definition Definition of property and casualty insurance company An entity carrying out property and casualty insurance activities as defined in the Act on Insurance Activities. Ministry of Finance permit required. No tax legislation definition. Insurance Act definition applies. 2 Commercial Accounts/Tax and Regulatory Returns Basis for the company's commercial accounts Prescribed by accounting rules legislated for insurance industry. Based on commercial accounts. Regulatory return Quarterly and annual returns to be submitted to the Commission for Insurance and Pension Funds Supervision. Tax return Generally, monthly tax returns required with annual adjusting return. Under certain conditions simplified method of tax settlements may be applied: no monthly tax returns required; monthly tax payments calculated as 1/12 of tax liability for the previous year (if no tax liability incurred in that year, tax liability for the year before should be applied as a basis); annual adjusting tax return required. 2

3 International Comparison of Insurance Poland General Insurance (continued) 3 Technical Reserves/ Equalisation Reserves Unearned premium reserves (UPR) Regulated by accounting rules specific to insurance industry. Generally calculated on an individual basis. Premiums related to future accounting are deferred. Allowed as per accounting rules. Unpaid claims reported Lump sum basis allowed in the case of high volume of homogenous claims portfolios. Allowed as per accounting rules. Claims incurred but not reported (IBNR) Calculated on experience of actuary or using lump sum method. No detailed rules prescribed. Allowed as per accounting rules. Unexpired risks Calculated on mathematical (statistical) basis or using lump sum method. Allowed on basis of accounting treatment. General contingency/solvency reserves Not specified, allowed if included in the insurer s articles of association May be allowed. Equalisation/catastrophe reserves Equalisation reserve calculated based on specific insurance accounting rules. Catastrophe and other technical reserves may be calculated, if required by the insurers statute Allowed on basis of accounting treatment. 3

4 International Comparison of Insurance Poland General Insurance (continued) 4 Expenses/Refunds Acquisition expenses Charged in full in year incurred. Deferred by recognition of Deferred Acquisition Costs Asset. No clear rules. Generally, allowed when incurred and properly documented. Accruals for acquisition costs constitute, as a rule, non-tax deductible items Loss adjustment expenses on unsettled claims (Claims handling expenses) Charged as incurred for claims paid. Included in technical reserves estimation for claims reserved. Allowed on basis of accounting treatment. Experience-rated refunds When earned. Follows accounting treatment. 5 Investments Gains and losses on investments Taken to technical and general P&L. The difference arising on revaluation of available for sale investments, which are not used to cover the capitalised annuity and bonus reserves, is charged to equity (as a change of revaluation capital). Realised gains and losses are included in the calculation of tax base. Investment reserves Movements taken to reserves. Disallowed Investment income Taken to P&L. Taxable when earned interest when received. Dividends are not included in the tax base withholding tax applies at 19%, creditable against corporate income tax. 4

5 International Comparison of Insurance Poland General Insurance (continued) 6 Reinsurance Reinsurance premiums and claims Premiums deducted from gross premiums. No clear rules. Generally, premiums due to reinsurers tax deductible when incurred and properly documented (invoice). Reinsurers share in reserves is shown separately in balance sheet as negative items. The reinsurance impact on claims is netted in technical accounts with gross payments. Reinsurance commissions due from reinsurers constitute generally taxable revenue when received. Follows accounting treatment. 7 Mutual Companies Mutual companies (All profits returned to members) As defined in insurance legislation. Generally, same rules as for other entities apply. 5

6 International Comparison of Insurance Poland Other Tax Features 8 Further corporate tax features Loss carryovers Five-year carry forward (up to 50% in any one year allowed). No carry-back. Foreign branch income Fully assessed subject to applicable treaty. Double tax relief available (restricted to Polish tax suffered on that income). Domestic branch income Branches of foreign corporations are taxable at 19% on net profit. Where accounting records not accepted or profit difficult to calculate, tax authorities may use the estimates to assess tax profits. Five branches operate in Poland. 9 Corporate tax rate Other tax features Premium taxes 19% Capital taxes Capital contributions and share issues subject to 0.5% civil activities tax. Captive insurance companies No special rules. 6

7 International Comparison of Insurance Poland Life Insurance 1 Definition Definition of Life Assurance companies An entity carrying out Life Insurance activities as defined in the Act on Insurance Activities. Ministry of Finance permit. No tax legislation definition. Insurance Act definition applies. 2 Commercial Accounts/Tax and Regulatory Returns Basis for the company's commercial accounts Prescribed by accounting rules legislated for insurance industry. Follows accounting rules. Regulatory return Quarterly and annual returns to be submitted to the Commission for Insurance and Pension Funds Supervision. Tax return Generally, monthly tax returns required with annual adjusting return. Under certain conditions simplified method of tax settlements may be applied: no monthly tax returns required; monthly tax payments calculated as 1/12 of tax liability for the previous year (if no tax liability incurred in that year, tax liability for the year before should be applied as a basis); annual adjusting tax return required. 7

8 International Comparison of Insurance Poland Life Insurance (continued) 3 General approach to calculation of income Allocation of income between shareholders and policyholders Income is effectively split through its reflection in technical reserves. All elements of income are shown gross in technical account. Shareholders participation in investment income is transferred from technical to general account. Follows accounting no specific tax rules. 4 Calculation of investment return Calculation of investment income and capital gains Included in technical account The difference arising on revaluation of available for sale investments, which are not used to cover the capitalised life reserves, is charged to equity (as a change of revaluation capital). Taxable when earned interest when received. Dividends are not included in the tax base withholding tax applies at 19%, creditable against corporate income tax. 5 Calculation of underwriting profits or total income Actuarial reserves rules define what types of methods should be used. Restrictions on maximum level of Zillmer factor and on the level of technical rate. Follows accounting rules. Acquisition expenses Charged as incurred. Deferred through life reserve (Zillmer) or Deferred Acquisition Costs Asset. Must be amortised using actuarial methods. No clear rules. Generally, allowed when incurred and properly documented. Accruals for acquisition costs constitute, as a rule, non-tax deductible items 8

9 International Comparison of Insurance Poland Life Insurance (continued) Gains and losses on investments Gains and losses taken to technical account. Some are charged to technical reserves through the technical account. The remaining amount (which is not related to investments covering technical reserves) is transferred to general P&L account. Taxed/allowed when realised. Reserves against market losses on investments Disallowed. Dividend income Included in income. Not included in the tax base. 19% withholding tax applies, allowed as tax credit against other corporate income tax due. Policyholder bonuses Covered by policyholder bonuses reserve. Follows accounting treatment. Other special deductions No significant other special deductions. 6 Reinsurance Reinsurance Premiums deducted from gross premiums, claims netted See comments for general insurance companies. 7 Mutual companies/stock companies Mutual companies As defined in insurance legislation. Generally, same rules as for other entities apply. 9

10 International Comparison of Insurance Poland Other Tax Features 8 Further corporate tax features Loss carryovers Five-year carry forward (up to 50% in any one year allowed). No carry-back. Foreign branch income Same rules apply as for general insurer. Domestic branch income Same rules apply as for general insurer. One branch operates in Poland so far. 9 Corporate tax rate Policyholder taxation Deductibility of premiums 19% Non-tax deductible. However, premiums in the amount transferred to capital funds maintained by insurers, constitute tax deductible items when calculating taxable income from investment proceeds paid out to the insured during lifetime. Interest build-up May be taxable. Proceeds during lifetime As a rule, not subject to taxation. However, amounts received by individuals based on an insurance contract with a capital fund (in general, on the basis of unit linked products) are subject to a flat tax rate of 19%. Proceeds on death Not taxed. 10

11 International Comparison of Insurance Poland General Insurance (continued) 10 Other tax features Premium taxes Capital taxes None. Capital contributions and share issues subject to 0.5% civil activities tax. Captive insurance companies No specific rules. 11

12 International Comparison of Insurance Contact information > Jakub Zak PricewaterhouseCoopers Al. Armii Ludowej Warsaw Poland tel: (48) (22) fax: (48) (22)