IRAS, MAS revise tax treatment of insurance reserves
Previously, reserves were non-deductible as estimates of contingent liabilities.
The Inland Revenue Authority of Singapore (IRAS) has updated the guidelines for the tax deductibility of general insurers' reserves against incurred but not reported (IBNR) claims.
Previously, these reserves were not deductible as they were seen as estimates of contingent liabilities.
However, after representations from the Monetary Authority of Singapore (MAS) and international rulings, IRAS now allows these provisions if they are backed by reliable statistical methods, such as the loss triangulation method.
Further alternative methods have been provided for insurers unable to collate historical data.
These guidelines aim to promote sound insurance practices whilst ensuring tax compliance.
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