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Depreciation allowances for long term insurers

Thursday, 10 April 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

The answer to this query is based on legislation as at 2014/04/10.

Q: Following the introduction of the mark to market taxation event in 2012 in respect of long term insurers, no depreciation allowances were allowed in respect of real estate assets. Was the omission of depreciation allowances for assets intended to be permanent, and does it also relate to new assets brought into use by the relevant insurance funds post Feb 2013?

A: The prohibition on the deduction of depreciation allowances that you refer to is found in section 29A(11)(h).  It reads as follows:  In the determination of the taxable income derived by an insurer in respect of its individual policyholder fund, its company policyholder fund and its corporate fund in respect of any year of assessment no amount may be deducted by way of an allowance in respect of an asset as defined in the Eighth Schedule.   

There is no indication that this was meant to be a temporary one. When section 29A(11)((h) was amended in 2013 the Explanatory Memorandum stated the following: "Long-term insurers currently may not claim allowances (e.g. depreciation for buildings). This proposed amendment, permits allowances in respect of financial instruments (e.g. bad debt allowances).”  

The prohibition therefore also applies to assets brought into use post February 2013.   



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