Section 61

(1) An insurance business shall be taxed as a – Insurance
trade or
(a) general insurance company, whether proprietary or mutual, other business
than a life insurance company; or
(b) life insurance company:
Provided that the profits on which tax may be imposed for an insurance
business shall be in accordance with section 6 or 17 of this Act.
(2) The profits on which tax may be imposed, in the case of –
(a) a general insurance, shall be ascertained in accordance with the pro-
visions of subsection (3) as if the whole premium and investment incomes
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of the company were derived from Nigeria; and
(b) a life insurance, shall be ascertained in accordance with the provisions
of subsections (4) and (5) as if the whole investment and other incomes
were received in Nigeria and all the expenses and other outgoings of the
company were incurred in Nigeria.
(3) For a general insurance business, the profit on which tax may be
imposed shall be ascertained by taking the gross premium and other income
receivable, less reinsurance, and deducting from the balance so arrived at, a
reserve for unexpired risks, determined in accordance with subsection (9)(a)
and other deductions allowed under subsection (9)(b) and Chapter Two of this
Act.
(4) For a life insurance business, the profits on which tax may be imposed
shall be the investment income, and other income, less the management
expenses, including commission.
(5) Any amount distributed in any form as dividend from an actuarial
revaluation of unexpired risks or from any other revaluation shall be deemed to
be part of the total profits of a company engaged in life insurance business.
(6) The company shall provide the Service with full particulars of any
revaluation carried out, including a copy of the actuary's revaluation certificate,
not more than three months after an actuarial revaluation of unexpired risks or
any other revaluation has taken place.
(7) Where an insurance company carries on a life class and a general or
non-life class insurance business, the funds and books of accounts of one class
shall be kept separate from the other as though one class does not relate to the
other class, and the annual tax returns of the two classes of insurance businesses
shall be made separately.
(8) Each class of insurance shall be assessed separately as life insurance
assessment or non-life insurance assessment, and in respect of each class of
insurance business, where there are more than one type of insurance in the
same class, they form one type of business and the loss from one class shall
not be allowed against the income from another class of insurance business,
provided that the loss shall be available to be carried forward against the profits
from the same class of insurance business.
(9) An insurance company, other than a life insurance company, shall be
allowed to deduct from its premium the following reserves for tax purposes –
(a) reserve for unexpired risks, calculated on a time apportionment basis
of the risks accepted in the year ; and
(b) for outstanding claims and outgoings, an amount equal to the total
estimated amount of all outstanding claims and outgoings, provided that any
amount not utilised towards settlement of claims and outgoings shall be
added to the total profits of the following year.
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(10) An insurance company, in respect of its life insurance business, shall
be allowed to deduct the following from its investment income and other
incomes –
(a) an amount which makes a general reserve and fund equal to the net
liabilities on policies in force at the time of an actuarial valuation;
(b) an amount which is equal to 1% of gross premium earned or 10% of
net profits, whichever is greater, to a special reserve fund and accumulated
until it becomes the amount of the statutory minimum paid-up capital; and
(c) all allowable business outgoings.
(11) A reinsurance company shall be allowed to deduct the following
from its gross profit, to be credited to a general reserve fund –
(a) an amount not more than 50% of the gross profits of the reinsurer for
the year, where the general reserve fund is less than the statutory minimum
paid-up capital; or
(b) an amount not more than 25% of the gross profits of the reinsurer for
the year, where the fund is equal to, or exceeds the statutory minimum paid-
up capital.
(12) An insurance company that engages the services of an insurance
agent, a loss adjuster or an insurance broker shall include in its annual tax
returns, a schedule showing the name and address of that agent, loss adjuster
or insurance broker, the date their services were employed and terminated, as
applicable, and payments made to each such agent, loss adjuster or insurance
broker for the period covered by the tax returns.
(13) For the purposes of this section –
"gross premium" means the total premiums written, received and
receivable, excluding unearned premium and premiums returned to the
insured;
"gross income" means total income earned by a life insurance business
including all investment income, fees, commission and income from other
assets but excluding franked investment income, premiums received and
claims paid by re-insurers;
"investment income" for the purposes of taxation of a life insurance
company under this section means income derived from investment of
shareholders' funds;
"non-life insurance business" means general or other insurance
business, other than life insurance business; and
"other income", for the purposes of non-life insurance businesses, means
all the income of the non-life insurance business other than gross premium
and franked investment income.
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