The Ministry of Finance said the government’s plan to impose taxes on investment-linked insurance policies would have limited impact on policyholders, despite opposition from local insurers and foreign trade groups.
The levy on investment gains from investment-linked products would take effect on Jan. 1 and would only apply to new policies signed after that day, the ministry said.
“It will have no impact on existing policyholders,” it said in a statement issued on Friday.
Investment-linked insurance products usually guarantee principal and interests from investments targeted at local and foreign stocks, mutual funds, bonds and currency deposits.
The Tax Reform Committee reached a consensus in July to impose income, gift and inheritance taxes on investment-linked insurance policies as the government aims to separate investment-linked products from traditional insurance policies, while shutting down a legal loophole for tax evasion.
Under the new measure, earnings from investment-linked insurance products — such as dividend income from Taiwanese stocks, interest income from domestic savings and overseas income — would be treated as taxable income, the ministry said in the Friday statement.
This measure has prompted objections from local insurers and foreign trade groups, who say the new insurance tax would be an added burden on policyholders and discourage families from planning long-term investments for financial security and retirement. It would hurt the insurance industry and violate the Income Tax Act (所得稅法), the Insurance Act (保險法) and the Estate and Gift Tax Act (遺產及贈與稅法), they say.
In its statement, the ministry did not address many of the industry’s concerns. Instead, the ministry said interest income of up to NT$270,000 and overseas income of up to NT$6 million (US$185,000) would be tax-free.
At the end of June, investment-linked policies with accumulated premiums of less than NT$1 million accounted for 94.6 percent of all such policies in force, the ministry said, citing Financial Supervisory Commission figures.
Based on an annual return-rate of 5 percent to 6 percent, proceeds from such policies would be about NT$50,000 to NT$60,000 per year — a relatively small taxable income that would have a minor impact on policyholders, the ministry said.
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