Regulation 4
Deduction and amounts deemed as trading receipts
of Income Tax (Deduction for Special Reserves of Approved General Insurers) Regulations 2006
Subregulation 1
Subject to regulation 8, there shall be allowed to an approved general insurer a deduction for the following amount in a special reserve set aside by him during the basis period for any year of assessment with respect to a qualifying business dealing with any of the offshore risks described in regulation 3(a) to (f):
nil if A – B – D ≥ E;
an amount equal to C if A – B + C – D < E; or
an amount calculated in accordance with the formula E – (A – B – D) if A – B + C – D ≥ E and A – B – D < E,whereAis the aggregate amount of relieved transfers in the special reserve with respect to the qualifying business as at the beginning of the basis period for that year of assessment; Bis the aggregate amount of relieved transfers deemed to be trading receipts with respect to the qualifying business for the basis periods for all years of assessment immediately preceding that year of assessment; Cis the transfer-in amount for the qualifying business determined in accordance with regulation 5 for the basis period; Dis the transfer-out amount for the qualifying business determined in accordance with regulation 6 for the basis period; and Eis the maximum reserve for the qualifying business as at the end of the basis period.
Subregulation 2
The following amount of relieved transfers, adjusted in accordance with regulation 10, shall be deemed as a trading receipt of an approved general insurer for the basis period of any year of assessment with respect to a qualifying business dealing with any of the offshore risks described in regulation 3(a) to (f):
an amount calculated in accordance with the formula A – B – E if A – B – D ≥ E; or (b)an amount equal to D if A – B + C – D < E or if A – B + C – D ≥ E and A – B – D < E,where A, B, C, D and E have the same meanings as in paragraph (1).
Subregulation 3
In paragraph (1), “maximum reserve”, in relation to the basis period for any year of assessment, means —
in the case of a qualifying business dealing with any of the offshore risks described in regulation 3(a) to (e), an amount equal to the percentage specified in column (B) in the Schedule multiplied by the average net premiums written by the approved general insurer with respect to the offshore risks in the qualifying business; or
in the case of a qualifying business dealing with the offshore risk described in regulation 3(f), an amount equal to 400% of the highest amount of annual net premiums written by the approved general insurer with respect to the offshore risk in the qualifying business in the basis periods for that year of assessment and the 2 years of assessment immediately preceding that year of assessment.
Subregulation 4
In paragraph (3)(a), “average net premiums written”, in relation to the basis period for any year of assessment, means —
in a case where the approved general insurer has carried on the qualifying business for less than 5 years of assessment, the average amount of net premiums written by him in the basis periods for that year of assessment and all the years of assessment immediately preceding that year of assessment with respect to the offshore risk in the qualifying business; and
in all other cases, the average amount of net premiums written in the basis periods for that year of assessment, and the 4 years of assessment immediately preceding that year of assessment, with respect to the offshore risk in the qualifying business.
Subregulation 5
Any relieved transfer remaining in a special reserve of an approved general insurer at the end of the period of 10 years commencing from the first day of the basis period in which the insurer was approved under section 14O of the Act shall be adjusted in accordance with regulation 10 and be deemed as a trading receipt for the first basis period after that period.