Tax

Alert
19 April 2023
IFRS 17 Tax amendments for
insurers become effective

Let’s talk
For a deeper discussion In brief
The Taxation Laws Amendment Act No. 20 of 2022 (‘TLAA’) was
of how this issue might
promulgated in January 2023 and introduced a series of tax amendments
affect your business, to deal with the impact of the new IFRS 17 accounting standard.
please contact:
Jos Smit
jos.smit@pwc.com In detail
Melissa Hadfield The TLAA was finally Short-term insurance
promulgated on 5 January 2023 amendments
melissa.hadfield@pwc.com
and introduced a series of tax
amendments to provide for the To mitigate the tax impact
Stephen Boakye
impact of the IFRS 17 accounting prompted by the difference
stephen.a.boakye@pwc.com
standard. These tax amendments between the measurement of
cater specifically for life insurers insurance contract liabilities under
Maryna Macdonald under section 29A of the Income
maryna.macdonald@pwc.com IFRS 4 and IFRS 17, section
Tax Act No.58 of 1962 (‘the Act’)
28(3D) was introduced to phase
and for non-life insurers under
section 28 of the Act. in the tax impact of the difference
over a period of three years.
The amendments include updates
to the insurance terms used Further corrections relating to the
within the Act to align with IFRS implementation of the
17 and provisions to phase in the amendments may, however, be
tax impact of the transition from required as the wording in the Act
IFRS 4 to IFRS 17. gives rise to uncertainty in
interpretation. This could result in
The amendments to sections 28 unintended phase-in amounts
and 29A came into operation on 1 which should be further
January 2023 and apply in investigated.
respect of years of assessment
commencing on or after that date.
This corresponds with the
implementation date of IFRS 17.

www.pwc.co.za/tax-alert
Long-term insurance amendments
A tax phase-in period of six years is
introduced in section 29A(14) to smooth the
cash flow impact for long-term insurers.
In addition, for purposes of determining
taxable profit transfers, the definition of ‘value
of liabilities’ has been amended to refer to all
other liabilities which fall outside of the
‘adjusted IFRS value’. The definition of
‘adjusted IFRS value’ has further been
amended to refer specifically to insurance
contracts and investment contracts instead of
the current general reference to liabilities.
Cell captive arrangements
Amounts recoverable from a cell owner under
certain third-party cell captive arrangements
are treated as reinsurance arrangements even
though these arrangements may not qualify as
commercial reinsurance. In addition, amounts
payable to the cell owner by the insurer in
respect of profits due to the cell owner may be
included in the value of liabilities that are
deductible for income tax purposes under
section 29A.
However, in the recent Budget Speech it was
proposed that reinsurance contracts relating
to a cell owner be disregarded. In addition, the
definition of the value of liabilities in section
29A will be amended to exclude any other
liabilities relating to a cell owner.
Takeaway
Insurers should be mindful of the amendments as the
tax impact will not be the same for every insurer.
The new phase-in rules are complex and therefore, it
is imperative that each insurer consider the tax
impacts carefully, specifically where the wording of
the new tax legislation is not clear and may require
refinement.
The IFRS 17 amendments also generally coincide
with the reduction of the corporate income tax rate
from 28% to 27%, as well as the limitation on the set
off of an assessed loss brought forward, both of
which are effective for years of assessment ending
on or after 31 March 2023.
For accounting purposes, the deferred tax impact of
the IFRS 17 amendments as well as the IAS 8
disclosure requirements need to be considered for
financial reporting purposes. This will include the
transitional impact as well as a restatement of the
comparatives in the year of implementation.
This Alert is provided by PricewaterhouseCoopers Tax Services
(Pty) Ltd for information only, and does not constitute the provision
of professional advice of any kind. The information provided herein
should not be used as a substitute for consultation with professional
advisers. Before making any decision or taking any action, you
should consult a professional adviser who has been provided with
all the pertinent facts relevant to your particular situation. No
responsibility for loss occasioned to any person acting or refraining
from acting as a result of using the information in the Alert can be
accepted by PricewaterhouseCoopers Tax Services (Pty) Ltd,
PricewaterhouseCoopers Inc. or any of the directors, partners,
employees, sub-contractors or agents of PricewaterhouseCoopers
Tax Services (Pty) Ltd, PricewaterhouseCoopers Inc. or any other
PwC entity.
© 2023 PricewaterhouseCoopers (“PwC”), a South African firm,
PwC is part of the PricewaterhouseCoopers International Limited
(“PwCIL”) network that consists of separate and independent legal
entities that do not act as agents of PwCIL or any other member
firm, nor is PwCIL or the separate firms responsible or liable for the
acts or omissions of each other in any way. No portion of this
document may be reproduced by any process without the written
permission of PwC.