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  • Exemption for an interest in a foreign life insurance company

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    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    The opportunity to invest in a foreign life insurance company without attracting FIF taxation is provided through a specific exemption. [SECTION 506]

    A foreign company is considered to be engaged in life insurance business as defined in the Life Insurance Act 1995 only if:

    • the company is authorised in its country of residence to carry on life insurance business, and
    • the balance sheet of the company shows that at least 50 per cent of the gross value of the company's assets were for use in carrying on life insurance business. [SECTION 507]

    Look-through rule

    The foreign life insurance company may have an interest in a subsidiary company. Accordingly, the measures provide a look-through rule to a 50 per cent owned subsidiary. The subsidiary's assets are looked at to decide whether the foreign life insurance company passes the 50 per cent assets test. [SUBSECTIONS 507(3) to (11)]

    Exemption for an interest in a foreign holding company of a foreign life insurance company

    A company will qualify for the exemption from the FIF measures as a holding company of a life insurance company if the following requirements are satisfied.

    • Approved stock exchange

    You must hold shares in the holding company of a class listed on any stock market of a stock exchange approved in regulation 152N, Schedule 12 of the Regulations. See appendix 1 Approved stock exchanges for more information.

    • Designated a life insurance company

    The holding company is included in a class of companies designated as engaged in life insurance on either:

     
    • Trading requirement
      • The class of shares you have in the holding company must be widely held and actively traded on a regular basis on a stock market of an approved stock exchange during the period in which the exemption applies.
      • If the holding company has only one subsidiary, that subsidiary must be wholly owned and have been principally engaged in the active carrying on of life insurance business.
      • If the holding company has more than one subsidiary, each must be wholly owned and the principal activities of the subsidiaries in the group, taken together as an economic unit, must be the active carrying on of life insurance business.
       

    In each case, the subsidiary or, where there is more than one subsidiary, at least one of the wholly owned subsidiaries must be authorised under the law of its place of residence to carry on life insurance business.

    Whether the subsidiary or subsidiaries were principally engaged in the active carrying on of life insurance business is decided by a balance sheet test. This test requires that at least 50 per cent of the gross value of the company's assets were for use in carrying on life insurance business as defined in section 11 of the Life Insurance Act 1995. [SECTION 507A].

    Last modified: 08 Jun 2005QC 27386