Key Tax Observations for Insurance IFRS
What you need to consider
- Generally, corporate income tax is based on Profit Before Tax (PBT) per the statutory accounts
- For jurisdictions where income tax is based on PBT, anything that affects the quantum of PBT is likely to have a tax consequence
- Solvency II requires insurers to re-complete deferred tax balances using IFRS rules applied to the Solvency II balance sheet. This doubles up the effects required during closing periods.
- Groups need to consider the impact of changes to the income tax calculation consequential on changes to accounting standards on their systems, processes, metrics, business planning etc
Groups need to be able to understand the impact of the accounting changes to their tax basis and the key drivers of their tax computation.
This will drive the ability to:
- Ensure correct tax reporting and compliance
- Manage tax risk and understand tax volatility
- Make the right tax assumptions in assessing business decisions and in forecasting
- Know whether to lobby for tax transitional rules
- Understand the impact for wider group tax planning
- Changes in policy as a result of changes in IFRSs can result in a shock to the tax profile of a company
- The effect of a tax shock should modelled and fed back into your business profile to support future business decisions, plans, projections etc.