International Tax Dialogue

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International Tax Dialogue

• Global Tax Conference

Section 6 Taxation of Insurance
Michael Olesnicky, Baker McKenzie, Hong Kong
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What is life insurance?

• Social function
• Special legal rules for insolvency and family
  maintenance
• Special tax rules
• Income tax
• Death duties
• Why is life insurance treated so favourably?
• Issue is this favourable treatment being
  exploited?

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Wrapper products
Premium
Policy- holder
Insurer
Policy
Offshore Company
Belongs to life fund
Asset management agreement
Portfolio
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Advantages of this structure

• Gains not subject to income tax
• Policyholder
• Insurer
• Surrender values and death payouts may be tax
  exempt
• Death duty exemptions

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Where does one draw the line?

• How do you distinguish insurance products from
  financial investment products?
• Segregation of assets?
• Policyholder control of asset management?
• What about investment advice?
• Nature of underlying investment assets?
• Status of the insurer?

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Does this issue deserve attention?

• Establishment of special purpose insurance
  companies
• Segregation of liabilities protected cell
  companies
• US, Hong Kong, Taiwan, Australia, etc
• Should insurance remain preferentially treated?

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International Tax Dialogue

• Global Tax Conference

Section 6 Taxation of Insurance
Michael Olesnicky, Baker McKenzie, Hong Kong