FROM THE OFFICE OF PUBLIC AFFAIRS

Treasury and the IRS today issued guidance regarding the federal excise tax on insurance and reinsurance premiums paid to foreign insurance companies with respect to the insurance of U.S. risks.  Several U.S. income tax treaties include provisions under which the insurance excise tax is waived in certain circumstances.  For example, the new United States – United Kingdom income tax treaty, which entered into force earlier this year, includes such a provision.

The revenue procedure issued today updates and streamlines existing procedures for application of U.S. income tax treaties that provide for a qualified waiver of the insurance premium excise tax.  Under these procedures, a foreign insurance company may choose to enter into a closing agreement with the IRS with respect to the excise tax.  With this closing agreement and the required letter of credit in place, those making premium payments to the foreign insurance company generally will not be required to withhold excise tax from the premium payments.  The text for the closing agreements is included as appendices to the revenue procedure.

Related Documents:

• A copy of Revenue Procedure 2003-78 is