Section 61Insurance trade or business

An insurance business shall be taxed as a —

general insurance company, whether proprietary or mutual, other than a life insurance company ; or

life insurance company:

Provided that the profits on which tax may be imposed for an insurance business shall be in accordance with section 6 or 17 of this Act.

The profits on which tax may be imposed —

in the case a general insurance, shall be ascertained in accordance with the provisions of subsection (3) of this section as if the whole premium and investment incomes of the company were derived from Nigeria ; and

in the case a life insurance, shall be ascertained in accordance with the provisions of subsections (4) and (5) of this section as if the whole investment and other incomes were received in Nigeria and all the expenses and other outgoings of the company were incurred in Nigeria.

For a general insurance business, the profit on which tax may be imposed shall be ascertained by taking the gross premium and other income receivable, less reinsurance, and deducting from the balance so arrived at, a reserve for unexpired risks, determined in accordance with subsection (9)(a) and other deductions allowed under subsection (9)(b) of this section and Chapter Two of this Act.

For a life insurance business, the profits on which tax may be imposed shall be the investment income, and other income, less the management expenses, including commission.

Any amount distributed in any form as dividend from an actuarial revaluation of unexpired risks or from any other revaluation shall be deemed to be part of the total profits of a company engaged in life insurance business.

The company shall provide the Service with full particulars of any revaluation carried out, including a copy of the actuary's revaluation certificate, not more than three months after an actuarial revaluation of unexpired risks or any other revaluation has taken place.

Where an insurance company carries on a life class and a general or non-life class insurance business, the funds and books of accounts of one class shall be kept separate from the other as though one class does not relate to the other class, and the annual tax returns of the two classes of insurance businesses shall be made separately.

Each class of insurance shall be assessed separately as life insurance assessment or non-life insurance assessment, and in respect of each class of insurance business, where there are more than one type of insurance in the same class, they form one type of business and the loss from one class shall not be allowed against the income from another class of insurance business, provided that the loss shall be available to be carried forward against the profits from the same class of insurance business.

An insurance company, other than a life insurance company, shall be allowed to deduct from its premium the following reserves for tax purposes —

reserve for unexpired risks, calculated on a time apportionment basis of the risks accepted in the year ; and

for outstanding claims and outgoings, an amount equal to the total estimated amount of all outstanding claims and outgoings, provided that any amount not utilised towards settlement of claims and outgoings shall be added to the total profits of the following year.

An insurance company, in respect of its life insurance business, shall be allowed to deduct the following from its investment income and other incomes —

an amount which makes a general reserve and fund equal to the net liabilities on policies in force at the time of an actuarial valuation;

an amount which is equal to 1% of gross premium earned or 10% of net profits, whichever is greater, to a special reserve fund and accumulated until it becomes the amount of the statutory minimum paid-up capital; and

all allowable business outgoings.

A reinsurance company shall be allowed to deduct the following from its gross profit, to be credited to a general reserve fund —

an amount not more than 50% of the gross profits of the reinsurer for the year, where the general reserve fund is less than the statutory minimum paid-up capital ; or

an amount not more than 25% of the gross profits of the reinsurer for the year, where the fund is equal to, or exceeds the statutory minimum paid-up capital.

An insurance company that engages the services of an insurance agent, a loss adjuster or an insurance broker shall include in its annual tax returns, a schedule showing the name and address of that agent, loss adjuster or insurance broker, the date their services were employed and terminated, as applicable, and payments made to each such agent, loss adjuster or insurance broker for the period covered by the tax returns.

For the purposes of this section —

"gross income" means total income earned by a life insurance business including all investment income, fees, commission and income from other assets but excluding franked investment income, premiums received and claims paid by re-insurers ;

"gross premium" means the total premiums written, received and receivable, excluding unearned premium and premiums returned to the insured ;

"investment income" for the purposes of taxation of a life insurance company under this section means income derived from investment of shareholders' funds ;

"non-life insurance business" means general or other insurance business, other than life insurance business ; and

"other income", for the purposes of non-life insurance businesses, means all the income of the non-life insurance business other than gross premium and franked investment income.