Foreign Life Insurance

Foreign life insurance taxation

Foreign life insurance that complies with the definition of life insurance through U.S. law falls under the same general tax treatment as one issued by a U.S. insurance company. As the cash value of a life insurance policy builds, it is tax deferred until the policy is surrendered. Once it is surrendered, any excess of the total premiums paid would be subject to the same taxation of standard income. An excise tax must also be paid on the premiums paid to the foreign insurance company which can range from 1% to 4%, depending on the type of foreign life insurance policy obtained. Other factors, such as a treaty with Switzerland, may affect how much, if any, additional taxes are required. 

Foreign annuities and foreign pensions are payments distributed through a pension or retirement policy granted by a foreign source. They are subject to the same obligations as U.S. pension taxes. Here are example sources:

  • Foreign employer
  • Foreign insurance agency
  • Foreign trust
  • Foreign government

Many expatriates seek overseas employment to enjoy a higher standard of living by taking advantage of tax incentives, such as Section 911 exclusions which covers both foreign earned income and housing allowance exclusions. PIASCIK tax experts are familiar with every venue of the tax obligations related to foreign annuities, foreign insurance polices, and foreign pensions. Our professional consultants know how totalization agreements, foreign tax credits, and foreign life insurance can directly affect retirement and trust estate planning. 

FBAR filings on foreign life insurance

According to the Internal Revenue Service, a financial account includes “savings, demand, checking, deposit, time deposit, or any other account maintained with a financial institution or Other Person engaged in the business of a financial institution.” Under these guidelines any foreign life insurance policy with cash surrender value is treated a a financial account and must be filed on a FBAR. The exception to this are foreign insurance polices that are acquired through an insurance agent located within the U.S. 

Tax expertise with modern solutions

Understanding your tax obligations before and after retirement can affect your financial position dramatically. Avoid double taxation and unnecessary taxes during retirement. PIASCIK professional tax accountants stay current with changing international tax regulations to maximize your assets and minimize your tax obligations. With over 70 years of combined international tax law experience, PIASCIK tax experts can show you how foreign life insurance in conjunction with precise retirement and trust estate planning can improve your way of life.

PIASCIK also knows how valuable your time is. Our tax experts can provide you with 24 hour a day and 7 days a week accessibility. Our flat rate engagements keep costs down without adding any hidden surcharges. PIASCIK will even provide the initial consultation FREE. Contact PIASCIK today and discover why no other international tax firm has our resources, experience and dedication to world-class services.