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The Director-General, Nigerian Insurers Association (NIA) Mrs. Yetunde Ilori, has described the new Finance Act as a game changer which will usher in a new lease of life for the insurance sector.
According to Ilori, the various amendments brought about by the provisions of the Act has lifted a huge tax burden off insurance companies which had endured years of excruciating tax burden under Companies Income Tax Act (CITA) 2007. This has failed to place insurance firms at a level playing field with companies in other sectors of the Nigerian economy.
In a statement signed by the Head, Corporate Communications, Human Resources & Administration, Mr. Davis Iyasere, Ilori, who lauded the Federal Government on the speedy assent to the Act noted it would promote reform of tax laws to align with global best practice as it is expected to enhance the industry contribution to the Gross Domestic Product (GDP) and encourage investors whilst entrenching Ease of Doing Business. All these will help the insurance business thrive and attain its full potential.
Giving specific details on how the Act has benefited the industry, she stated that Sections 5 and 6 of the Finance Act 2020 repeals the punitive and outdated provisions of Section 16 of the CITA on the taxation of insurance companies thus resolving significantly tax issues identified in the insurance industry taxation.
“The new Act has eliminated among other things: restriction of tax-deductible claims and outgoings to percentage of total premium, restriction of period to carry forward tax losses to four years, the special punitive deemed profit basis for minimum tax computation, and resolved the issue of computation of deductible unexpired risk by adopting the use of time apportionment basis in line with the Insurance Act.
“The Finance Act has also simplified basis of computation of minimum tax payable by insurance companies as opposed to the 2007 Act which basis differs significantly from that adopted for other Nigerian companies.
Other added values by the Act for the insurance industry, she said, “It also provides an inclusion of proper definition of investment income for life insurance business as ‘income derived from investment of shareholders’ funds’, this will ensure that income attributable to investment of life insurance policy holders’ (insurance customers) funds are not subjected to tax in the hands of life insurance companies. The tax-deductible expenses have been expanded to include additional 10 per cent of estimated figures for claims incurred but not reported.
On a general note she added that, “the Finance Act 2020 has solved the issue of excess taxation on company profits to the effect that no further tax will be paid on any undistributed profit that has already been taxed. It is a major succor for insurers in the on-going recapitalisation exercise and the federal government should be appreciated for the Act which has become a game changer by ensuring the fair taxation of insurance companies”, she expressed.
Further commending the Federal Government on the Act, she expressed delight that insurance companies would now be able to carry forward losses indefinitely like companies in other sectors of the economy as opposed to the four-year restriction previously in place resulting in fiscal equity.
