The Global Federation of Insurance Associations (GFIA) has written to the U.S Treasury for guidance to assist insurers and their investors in complying with the Passive Foreign Investment Company (PFIC) insurance exemption, as amended by the 2017 U.S tax reform law.
GFIA has said that such guidance would be essential in 2018, since PFIC classification for the year is irreversible.
“Companies need the guidance to determine whether they will be able to maintain their non-PFIC status by meeting the qualifying insurance corporation (QIC) test,” said GFIA.
It added that U.S shareholders will be significantly impacted by PFIC characterisation.
“Guidance is critical as early as possible to provide affected companies sufficient time to make structural and capital related decisions, if necessary, which may affect their QIC status.”
GFIA warned that, without further guidance, a non-U.S parented insurance group may not be able to determine if it is characterised as a PFIC for the current year, and its US shareholders would be the ones subject to US tax consequences, such as higher tax obligations and payment of estimated tax and penalties.
“It is important that non-US parented insurance groups can determine their QIC exemption status, so as to advise their shareholders of a possible PFIC classification. To make this assessment, insurance groups need clarification of the rules for qualifying as a QIC.”
