The revenue procedure released today updates and streamlines existing procedures for the application of U.S. income tax agreements that provide for a qualified waiver of excise duty on insurance premiums. As part of these proceedings, a foreign insurance company may choose to enter into a closing agreement with the IRS with respect to excise duty. Under this conclusion agreement and the required accrediting agent, persons who pay premiums to the foreign insurance company are generally not required to withhold excise duty on premiums. The text of the closure agreements is set out in the annexes to the revenue procedure. Attention: Section 6139 of the Technical and Miscellaneous Revenue Act 1988 (P.L. 100-647) provides that no provision of the income tax agreements between the United States and Barbados, nor the United States and Bermuda (if one or both agreements on the 31st apply of excise duty on premiums covered by insurance coverage for the periods following 31 December 1989. UK insurers will be required to comply with the excise rules of the new UK tax treaty from 1 January 2004. In practice, a person who pays a premium to a UK insurer will normally not be able to know whether, in accordance with the contract, the policy will be paid to an un qualified company. The Internal Revenue Service (IRS) is examining whether it should allow UK insurers to enter into closure agreements with the IRS in order to obtain the Confederation`s excise duty exemption. Such final agreements are likely seen by U.S. brokers as proof that they have taken the right steps with respect to withholding a federal tax on consumption at source.
The UK company`s failure to enter into a closing agreement could force US brokers to illegally retain excise duties and UK companies to take appropriate steps to obtain a refund of unduly deducted federal consumption tax. If the U.S. company finds that it is subject to excise duty obligations because of internal premium fees, it should take steps to meet its obligations. This would require them to first assess their exposure and then determine how they can be brought into compliance. The processing of the request for a conclusion agreement requires that the applicant have a UN. Unless you already have a UN, please complete this form and receive a UN before submitting your application. Please attach this UN to your application. Read IRS Form SS-4 to apply for a UN.
* The company has not re-qualified its right to contractual services in good time in accordance with the terms of its final agreement. The liability of the FET is imposed on any person “who manufactures, signs, spends or sells documents and instruments subject to tax or who, for the use or utility thereof, are manufactured, signed, issued or sold”. The FET must be paid by the person who pays the premium to a foreign insurer or to a new insurance. . . .