NEW ZEALAND Law and Practice Contributed by: Aaron Sherriff, Tanya Wood and Nick Laing, Duncan Cotterill
2.3 Taxation of Premium General (Non-Life) Insurers
to non-resident general insurers do not apply to pay- ments of premium to non-resident life insurers. Life insurance premiums are exempt from GST, and GST credits cannot be claimed in respect of payments made for claims under contracts for life insurance. 3. Overseas Firms Doing Business in the Jurisdiction 3.1 Overseas-Based Insurers or Reinsurers Overseas-based insurers and reinsurers are able to carry on business in New Zealand if they are licensed by the RBNZ (see 2.1 Insurance and Reinsurance Regulatory Bodies and Legislative Guidance and 2.2 Writing of Insurance and Reinsurance ). The RBNZ must be satisfied that the insurer’s ownership and governance structures are appropriate for the size and nature of its business. The RBNZ’s Governance Guidelines direct it to con- sider, as relevant, beneficial ownership of an insurer and whether the insurer is part of a group. The RBNZ can also consider the personal behaviour, business conduct and judgement of the individuals who ulti- mately own the insurance business (including syndi- cate leads). Lloyd’s of London has a licence with the RBNZ that allows Lloyd’s members to carry on business in New Zealand. Lloyd’s members must comply with some aspects of the IPSA regime. However, the RBNZ has a wide power to exempt these underwriters from IPSA Fronting is not prohibited in New Zealand but is likely to be subject to scrutiny as part of the RBNZ licensing approval process. 4. Transaction Activity 4.1 M&A Activities Relating to Insurance Companies Provided there are no licensing issues and that any mergers will not substantially lessen competition in requirements. 3.2 Fronting
Persons carrying on a general (non-life) insurance business in New Zealand are subject to income tax in the same manner as any other taxpayer in business, although specific rules apply to insurers in relation to timing and recognition of income. General insurance and reinsurance premiums paid offshore to non-resident insurers, with no taxable presence in New Zealand, are taxable at 2.8% of the gross premium amount. Companies or persons pay- ing a premium are treated as being the non-resident insurer’s agent and must obtain a separate Inland Revenue Department (IRD) number and account for the tax on the premium income. Agency obligations also extend to other New Zea- land residents – for example, brokers – who may ini- tially collect premiums for payment to a non-resident insurer. If there is any default, the insured person is responsible for the tax. The following insurers are required to register for and return goods and services tax (GST) at the rate of 15% on premiums charged to persons that are resident in New Zealand, as follows: • general insurers that operate through a fixed estab- lishment in New Zealand and enter into business- to-business and/or business-to-consumer insur- ance contracts; and • non-resident general insurers that enter into business-to-consumer insurance contracts. However, these insurers are able to recover as a credit the “tax fraction” (three twenty-thirds) of any payments made for claims under those contracts of insurance. No GST is payable by GST-registered general insurers on reinsurance premiums paid to non-resident rein- surers. Life Insurers Life insurance income is generally only taxable in New Zealand to the extent that policies are offered or entered into in New Zealand. The 2.8% of gross premium tax rules that apply to payments of premium
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