New proposal regarding the taxation of unit-linked life assurance in Norway sent out for public consultation
The Norwegian ministry of finance sent out a proposal to change the taxation of unit linked life assurance for consultation on October 27th.
The new legislation is proposed to enter into force on January 1st, 2018 and the public hearing is open until February 2017.
The purpose of the proposed change is to ensure consistency in the tax treatment of investments held through different investment structures.
According to the proposal, payouts from unit-linked life assurance with life cover less than 150% of the value of the assurance should be taxed as a distribution from an investment fund. At surrender or death, the taxable gain should be calculated as a sale of a participation in an investment fund.
This means that income related to equities will be subject to the higher tax rate 28.75% (2016) whereas other capital income will be taxed at the ordinary income tax rate 25% (2016). Where the shares/other securities are over 80% of the investments, the income will be treated fully as share income/other capital income.
Transitional rules will apply for existing policies. The allocation of shares vs other securities per 1 January 2018 will be used as a basis for the acquisition allocation at realisation.
The proposed rules, if implemented will increase the tax rate applicable to life assurance to the extent the income derives from shares.
On the other hand, this should also mean that the investor has a right to a tax exempt risk free interest available for equity investments and also to a net wealth tax reduction proposed for 2017.
The benefits explained below are why life assurance continues to have many advantages for Norwegian investors despite the increased taxation of shared related income.
Benefits of a unit linked life assurance solution for the Norwegian investor
Tax deferral at policyholder level for all asset classes until payment from the policy
Single flexible wealth structuring solution capable of incorporating a diverse portfolio of assets
The Luxembourg assurance framework offers a broad investment universe well suited for a sophisticated investor
Well suited for succession planning with a possibility to create a legacy to transfer to the next generations
Well known structure benefiting from favourable tax regimes in Europe and beyond
The policyholder benefits from Luxembourg’s policyholder protection regime which is one of the strongest in Europe
Easy reporting - all documentation is provided by Lombard International Assurance, so no need for auditor assistance
Lombard International Assurance is following the developments. For further information, please contact Marjanne Olesen, Country Manager Norway.