The Nigeria Insurers Association (NIA), has commended President Muhammadu Buhari, for the speedy assent to the Finance Act 2020.
The association described the move as a welcome development which would usher in a new lease of life for insurance companies.
NIA Director General, Mrs. Yetunde Ilori, made the remarks in a statement obtained at the weekend. She also commended the Minister of Finance, Budget and National Planning, Mrs. Shamsuna Ahmed, for taking special interest in matters affecting the insurance industry, noting that her desire to promote the business of insurance was appreciated.
According to her, the various amendments brought about by the provisions of the Finance Act 2020 has lifted a huge tax burden off the insurance companies which had endured years of excruciating tax burden under CITA 2007 which did not place insurance companies at a level playing field with companies in other sectors of the Nigerian economy.
Giving specific details, she stated that Sections 5 and 6 of the Finance Act, 2020 repealed the punitive and outdated provisions of Section 16 of the Companies Income Tax Act on the taxation of insurance companies, thus resolving significantly tax issues identified in the sector.
She also highlighted areas the new act favored the insurers, saying, “additionally, 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.
“The Finance Act also resolved the issue of computation of deductible unexpired risk by adopting the use of time apportionment basis in line with the Insurance Act.”
Expressing delight over the matter, she stated that insurance companies would now be able to carry forward losses indefinitely like companies in other sectors of the economy as opposed to the 4-year restriction previously in place resulting in fiscal equity.
“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,” she added.
“The Finance Act 2020 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,” she explained.