Singapore: Changes to risk-based capital framework, taxation of insurers

Singapore: Changes to risk-based capital framework

The Inland Revenue Authority of Singapore (IRAS) issued guidelines (as an “e-tax guide”) regarding the taxation of insurers and reflecting changes made to the risk-based capital (RBC) framework.

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The new guidelines were issued following release of the revised RBC framework (also referred to as “RBC 2 framework”) by the Monetary Authority of Singapore. Changes under the RBC 2 framework that may affect the taxation of insurers and in particular concerning the tax treatment of:

  • The amount of policy liabilities as computed under the RBC 2 framework
  • One-off revaluation of policy liabilities of insurance business arising from the transition from the RBC 1 framework to the RBC 2 framework
  • The de-recognition of reinsurance arrangements with foreign head offices

KPMG observation

The RBC 2 framework is part of the Monetary Authority of Singapore’s ongoing review of frameworks, and the release of the guidelines is viewed as providing timely guidance on the tax treatment of insurers transitioning into the RBC 2 framework—in particular, the tax treatment on the one-time tax adjustment required to be made by insurers.

Given that it is mandatory for all insurers to adopt the RBC 2 framework, insurance companies may need to consider the possible tax implications that could arise from the adoption of the new framework. In addition, the Singapore branch office of foreign insurers may need to assess whether it would continue the reinsurance arrangement with its head office because the Monetary Authority of Singapore may “de-recognise” this arrangement and this action, in turn, could create additional tax implications for the Singapore branch office.
 

Read a November 2020 report [PDF 316 KB] prepared by the KPMG member firm in Singapore

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