Gross Roll-Up Regime
In October 2012, Revenue updated the guidelines for the “gross roll-up” taxation regime for lifeassurance companies. The guidelines now confirm that, as of 1 June 2012, all returns and payments of tax under the Life Assurance Exit Tax (‘LAET’) regime must be made online via the Revenue Online Service. The updated guidelines also confirm the changes in LAET rates which were brought in by Finance Act 2012 and are effective since 1 January 2012. These rates, which apply to a gain, are as follows:
- Where the policyholder is a company, 25% is to be deducted upon a chargeable event occurring. This is a new category of tax rate as previously no distinction was made between a company and any other policyholder
- Where the policyholder is a person other than a company, 33% is to be deducted upon a chargeable event occurring. This is an increase of 3 percentage points on the 2011 tax rate for such policyholders
- Where the gain arises on a “personal portfolio life policy, the standard rate plus 33 percentage points (i.e. 53% in total, based on current rates) is to be deducted upon a chargeable event occurring. This is an increase of 3 percentage points on the 2011 tax rate for such policies.
Ireland currently allows non-taxable entities, such as insurance companies, to join Irish VAT groups. The European Commission has argued that all members of VAT groups should be taxable persons. The Commission requested that Ireland (together with certain other Member States, including the UK) amend its legislation in relation to VAT grouping and referred the issue to the Court of Justice of the European Union (the ‘CJEU’).
The opinion of Advocate General Jääskinen in EC v Ireland (Case C85/11) was published in November 2012. In this opinion the Advocate General concluded that the practice adopted by Ireland of permitting non-taxable (i.e. VAT exempt) persons to be members of a VAT Group does not infringe the VAT Directive.
The opinion states that it is not an anomaly that non-taxable persons can belong to a VAT group. This is because “any taxable person may be engaged in activities falling within the scope of VAT and activities falling outside of the scope of VAT”. In this respect, the opinion states that “from the perspective of fiscal neutrality the inclusion of non-taxable persons in a VAT group makes no difference to the pursuit of the goals of the VAT grouping regime”.
The Irish case was heard at the same time as other similar proceedings brought by the Commission against other Member States. The court asked that just one opinion be produced for those cases as the same point of principle arises in each case. This opinion is therefore equally relevant to the UK where non-taxable persons are also allowed to belong to VAT groups.
While an Advocate General’s opinion is not binding, the CJEU has tended to follow these opinions. This opinion is therefore positive for the Member States, including Ireland, awaiting final rulings and for the insurance industry. A full ruling is not expected until later in 2013.