Excise Tax - Foreign Insurance: Audit Techniques Guide (ATG)
- ISBN-10
- 146637666X
- ISBN-13
- 9781466376663
- Pages
- 80
- Language
- English
- Published
- 2011-09-01
- Author
- Internal Revenue Service
Description
Introduction -Internal Revenue Code § 4371 requires all of the following three elements for the foreign insurance excise tax to apply. They are: 1. A policy of insurance, 2. Insurance of a United States risk, and 3. Policy issued by a foreign insurer or reinsurer. Policy of Insurance -A policy of insurance may include a policy of reinsurance, an indemnity bond, or an annuity contract. Generally, a policy is the printed document issued by the insurer presented to the insured which contains the terms of the insurance contract. This document is sometimes referred to as a treaty. When the insurer transfers the same risks to another insurer, reinsurance has occurred and the second insurer is termed the reinsurer. Indemnity Bond -An indemnity bond is a contract under which the surety party promises to reimburse a third party, called the obligee, for losses it sustained as a result of the failure of the principal party, called the obligor, to perform under its contract with the obligee. Annuity Contract -An annuity contract is a contract that provides for periodic payments starting from a certain date and continuing for a fixed period or for the life of the annuitant. Insurance of a United States Risk United States risk is defined follows: 1. For life insurance, sickness and accident insurance, and annuity contracts, the policy or contract must be with respect to the life or hazards to the person of a citizen or resident of the United States. 2. For casualty insurance or indemnity bonds, the definition depends upon the residency of the insured (in the case of a corporation or partnership, the country in which it is created or organized). * For a United States insured, the policy must cover risks wholly or partly within the United States. * For a foreign insured, the insured must be engaged in a trade or business within the United States and the covered risks must be wholly within the United States. See IRC § 4372.
