Taxation of commissions payable to insurance brokers/agents – An obligation or a nightmare?
The insurance industry is one of the specialised businesses having a peculiar business model and corresponding distinct tax considerations in Nigeria. The core business of insurers/insurance companies, simply put, is to provide cover to another party (insured), against possible financial loss within a specified period. In return, the insured pays an insurance premium at the inception of the cover period, which forms part of the income reported in the books of the insurer. A critical aspect of the business expansion mechanism in the insurance industry revolves round brokers and agents. Insurance brokers/agents act as middle men; bridging the gap and linking insurers with potential insured parties seeking to hedge against risks. Insurance companies incur costs in sourcing the services of brokers/agents (commissions). Commissions are often calculated as a percentage of the insurance premium, depending on a number of factors such as coverage, the insurer and marketing methods, etc. Although the…
Taxation of Insurance Business – Restating the case for legislative review
One of the major objectives of the National Tax Policy (NTP) is to ensure fairness and equity, in order to imbibe a tax culture where taxpayers are regarded as the custodians of our commonwealth and enhance the Nigerian business environment. With such laudable goals, the question begs to be answered, why the reality on ground is quite different from Nigeria’s prime policy document on tax. This may be due in part to an apparent disconnect between the NTP, our current tax laws and tax administration in Nigeria.