Taxes Consolidation Act 1997 section 594

Foreign life assurance and deferred annuities: taxation and returns

Section 594 withdraws the capital gains tax exemption on life assurance policies and deferred annuity contracts where the policy is issued by a foreign insurer or is an excluded policy issued by an IFSC life assurance company, and imposes a 40% rate of capital gains tax on the resulting gains.

• The normal CGT exemption for life assurance policy proceeds under section 593 does not apply to policies issued on or after 20 May 1993 by insurers outside the charge to Irish corporation tax, or to excluded policies issued by IFSC life assurance companies to persons who were not continuously non-resident for six months from the date of issue.
• Gains on these foreign or excluded policies (known as "relevant gains") are computed without indexation relief, cannot be reduced by allowable losses from other disposals, and do not qualify for the annual small gains exemption.
• The rate of CGT on relevant gains is 40%, and this charge applies equally to the original policyholder and to any person who acquired the policy for consideration — for pre-20 May 1993 policies, only the gain accruing on or after 20 March 2001 is chargeable.
• Specific anti-avoidance rules apply to reinsurance contracts between Irish life assurance companies and foreign reinsurers, ensuring that investment returns embedded in such contracts cannot escape tax by being repackaged as non-chargeable risk benefit payments.