Controlled foreign companies (CFCs) engaged in offshore short-term insurance can deduct reserves related to the carrying on of a short-term insurance business outside South Africa.
In order for a CFC to get this deduction, which is similar to the deductions available for local insurers, the amounts must:
With the introduction of SAM, section 32 of the Short-Term Insurance Act will no longer be applicable. Consequently, it is therefore proposed to delete superfluous subsections in section 28 of the Income Tax Act, that were intended to effect equity between local and offshore short-term insurers using the aforementioned section as a basis.
It is proposed that CFC’s conducting short-term insurance business outside South Africa should claim deductions using the new provisions of section 28(3) of the Income Tax Act (see discussion under “Planned introduction of Solvency Assessment and Management for short-term insurers”.)
The amendment will come into operation when the Insurance Act, 2016, is promulgated.