How are IUL and PPLI reported under CRS and FATCA?
The Common Reporting Standard (CRS), developed by the OECD, requires financial institutions to report accounts held by residents of other participating jurisdictions. FATCA, the US Foreign Account Tax Compliance Act, requires foreign financial institutions to report accounts held by US persons, to the IRS directly or through their own tax authority under an intergovernmental agreement.
Both regimes treat an insurer that issues cash value insurance contracts as a financial institution and the contract as a financial account, so an IUL policy and a PPLI structure are both financial accounts, reported where the policyholder, or a controlling person of an entity policyholder, is resident in a reporting jurisdiction or, for FATCA, is a US person. Under CRS the insurer reports, each year, the policyholder's name, address, jurisdictions of residence, tax identification number and date of birth, the account number, amounts paid out during the year, and the contract's cash value or surrender value. The insurer's tax authority exchanges it with the policyholder's country of residence. For a trust or company policyholder, its controlling persons can also be reported. Reporting shows the structure and its value; the law of the country of residence decides the tax.
CRS and FATCA reporting are the automatic exchange rules that require insurers to report cash value life insurance, including IUL policies and PPLI structures, so the details reach the tax authority where the policyholder lives.
