In a recent update, the Federal Inland Revenue Service ("FIRS") has officially communicated the revised effective date for the implementation of the Finance Act 2023 ("the Act"). This update by the FIRS follows the deferment of the commencement of the Act by the Finance Act (Effective Date Variation Order) 2023. The Act, which was enacted on 28 May 2023 with an initial effective date of 1 May 2023 was deferred and has been revised to take effect from 1 September 2023 as stated in the Effective Date Variation Order.
Below are the key amendments introduced by the Act relating to Personal Income Tax:
The tax deductibility of any premium paid by an individual to an insurance company during a tax year, in respect of insurance or a contract for deferred annuity on the individual’s life or the life of their spouse has been reintroduced.
However, any portion of the deferred annuity that is withdrawn within 5 years from the date of the premium was paid, will be subject to tax.
Extract from the Old Act:
Section 33 subsection (3): There shall be allowed a deduction of the annual amount of any premium paid by the individual during the year preceding the year of assessment to an insurance company in respect of insurance on his life or the life of his spouse.
Extract from the New Act:
Section 33 subsection (3): There shall be allowed a deduction of the annual amount of any premium paid by the individual during the year preceding the year of assessment to an insurance company in respect of:
- Insurance on his life or the life of his spouse; or
Contract for a deferred annuity on his own life or life of his spouse:
Provided that any portion of the deferred annuity that is withdrawn before the end of the five years from the date the premium was paid, shall be subject to tax at point of withdrawal.
Kindly note that the above amendment came into effect from 1 September 2023.
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