A Study of the Issue of Investment-linked Insurance Taxes—Taking Payment by the Insurer as the Core
Date Issued
2009
Date
2009
Author(s)
Huang, Jian-Ming
Abstract
Based on the policy objective of social security, tax benefits are provisioned in personal income tax and estate tax. This has been, for a long time, unchanged legislative principle of Income Tax Act, Estate and Gift Tax Act, Insurance Act, and other relevant laws in our nation. The clauses on insurance tax benefits have generally not been altered although the said laws have been amended many times. In 2001, The Insurance Act was amended to allow insurance proprietors to engage in investment-linked insurance operations. After several years of development, this emerging investment insurance with such additional features has become the mainstream commodity in the market. However, whether or not tax benefits should be enjoyed as a traditional commodity has also led to the discussion of different opinions of the pros and cons. The positive says that according to Article 14 of Enforcement Rules for the Insurance Act, investment-linked insurance should still be considered as insurance. Tax benefits provisioned under the relevant norms should be equally applicable in investment-linked insurance benefits. The negative says that investment-linked insurance is the combination of investment and insurance, and revenues from investments should be taxed. As both say has their basis, no consensus has so far been reached. To clarify the controversy, in one way, the income tax norms of the United States, the U.K., Germany and Japan will be introduced in this paper in order to derive at solution plans; in the other, the nature of investment-linked insurance is clarified and relevant judicial practices are collected and analyzed to seek possible ways to settle disputes under the framework of the existing legal system. fter research, it is found that foreign legislations are indeed unique. However, whether it is applicable for our nation under the economic principle of taxation is still open to debate. Investment-linked insurance is essentially the combination of insurance and trust. Since funds in general account is transacted based on insurance principles, it is without a doubt that in insurance benefits, funds sourced from general account is entitled to tax benefits. In addition, the principle of equality stated in the constitution is not contravened. However, funds sourced from separate account fall under “incomes derived from trust.” The existing laws are believed to be contravened if the said funds are tax-exempted. It is therefore recommended that Article 14 of Enforcement Rules for The Insurance Act be amended to ensure that the legal definitions of investment-linked insurance are consistent with the nature of investment and trust combined. It is also suggested that the norms in tax laws be amended, which stipulates that in insurance benefits, funds not sourced from general account is not entitled to tax benefits in order to ensure fairness in taxation while promoting the healthy development of the insurance industry, and giving full play to its function to protect the community.
Subjects
Investment-Linked Insurance
Variable Insurance
General Account
Separate Account
Tax Benefit
Trust
SDGs
Type
thesis
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ntu-98-P94341023-1.pdf
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