Controlled foreign companies (CFCs) that are engaged in offshore short-term insurance will be allowed to deduct reserves related to their “short-term insurance business” conducted outside South Africa, once an amendment to the Insurance Act, 2016 is promulgated.
For a CFC to be eligible for this deduction (which is similar to deductions available for domestic insurers), the reserve amounts must:
With enactment of these measures, section 32 of the Short-Term Insurance Act would no longer apply. Consequently, certain “superfluous” subsections in section 28 of the Income Tax Act (intended to equalize the tax treatment of domestic and offshore short-term insurers) would be removed.
CFCs conducting short-term insurance business outside South Africa would claim the deductions using the new provisions of section 28(3) of the Income Tax Act.
Read an August 2015 report prepared by the KPMG member firm in South Africa: Controlled Foreign Companies Conducting Short-Term Insurance Business Outside South Africa
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