Insurance Board Offers Tax Exemptions for Merger and Acquisition

Kathmandu: The Insurance Board has offered special favors to insurance companies for the merger and acquisition. The regulatory authority has issued a circular to all the 39 insurance companies offering three special tax exemptions against mergers and acquisitions.

The Board has mentioned that capital gain tax, dividend tax and tax exemption will be provided to the insurance companies interested in mergers and acquisitions. The offer is valid for companies who receive the letter of intent from the regulatory authority within mid-July 2022. But the merger and acquisition must be accomplished within mid-July 2023 to be eligible to get the benefits.

The Board has decided to waive the capital gain tax(CGT) against the sale of shares within two years from the date of the merger and acquisition. Similarly, full tax exemption against the dividends distributed by the insurance companies to the existing shareholders within two years of the merger and acquisition.

The Board has stated that only the companies that have given the letter of intent to the merger and merger by the insurer who are willing to merge and acquire to get this facility will get it by mid-July 2079 BS. The committee has also mentioned in the circular that the companies that have given the letter of intent should complete the merger process by mid-July 2080 BS.

With the strategy to minimize the number of insurance companies in the country, the Board has recently issued a circular that compels all the insurers to increase their capital more than double of the existing regulatory capital. Within the end of current year (by mid April 2023), the non-life insurers have to maintain a paid up capital of Rs.2.5 billion while life-insurers must maintain a paid-up capital of Rs.5 billion. Before, such instruction, the minimum regulatory capital was Rs.1 billion for non-life insurers and Rs.2 billion for life insurers.

The Board is hopeful to minimize the number of insurance almost by half. Currently, there are 19 life and 20 non-life insurers.

With the new provision for regulatory capital, three life insurers and two non-life insurers have already agreed for merger.

 

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