Posted by China announced the implementation of CRS, and Hong Kong followed in the footsteps. Professionals analyzed the impact on life insurance customers in depth at 7 points.
Core tips:
1. In the insurance industry, the main business affected by CRS is a business, namelyHas cash valueInsurance contract or annuity contract.
2. Hong Kong is no longer a safe haven. Starting in 2018, Hong Kong has implemented CRS.
table of Contents
- What is CRS?
- What kind of assets need to be declared by CRS?
- The impact of CRS on the purchase of life insurance by high-net-worth individuals
- How can I judge that the insurance product I choose may be included in the CRS tax system?
- Why can American insurance circumvent CRS?
- Why buy U.S. life insurance?
- How to buy life insurance in the United States?
- appendix
XNUMX. What is CRS
CRS (Common Reporting Standard) is a set of due diligence and reporting standards for financial institutions. It is a set of related international tax affairs developed by the Organization for Economic Cooperation and Development (OECD) in the context of global economic integration to promote international taxation affairs. The new standard for automatic exchange of tax information.
Simply put, it is an intelligence network for governments of various countries to exchange residents' financial information.A detailed introduction to CRS is listed at the end of this article for reference.
XNUMX. What kind of assets need to be declared by CRS?
CRS stipulates that the following five types of assets need to be declared:
- 01. Deposit account
- 02. Escrow account
- 03. Cash value insurance contract
- 04. Annuity Contract
- 05. Holding equity/debt rights of financial institutions
XNUMX. The impact of CRS on the purchase of life insurance by high-net-worth individuals
1. In the insurance industry, the main business affected by CRS is a business, namelyHas cash valueInsurance contract or annuity contract.
2. Hong Kong is no longer a safe haven. Starting in 2018, Hong Kong has implemented CRS.
The affected category"Has cash value"The insurance contract category specifically refers to products whose investment significance has far surpassed its risk prevention significance. For example, many insurance companies have launched some insurance financial management products with an annual rate of return. Products are also the main products preferred by many customers, such asIndex Universal Insurance(Indexed Universal Life, IUL) class.
If the insurance you buy is purely "insurance" and does not have any investment significance, then this article has little to do with you.
But if the insurance you buy or the assets you plan to allocate meet the conditions described below, then they will all be included in the scope of CRS.
XNUMX. How can I judge that the insurance product I choose may be included in the CRS tax system?
The first case:
If you directly purchase these insurances with cash value, then you, as the insured (or the insured), usually your personal identification information and account information will be reported by the insurance company to the government of the country or region where it is located, and then passed on To the Chinese government.
The second case:
If you hold an overseas (such as Hong Kong) insurance plan through a trust, it means that the insured may still be you, but the owner of the entire insurance (with the right to change the beneficiary) is you in an offshore place (such as Cayman) If you set up a trust managed by a local trust company, the method of reporting information will be different at this time.Because this type of trust may also be classified as an “investment institution” (a type of financial institution) under the CRS. When an insurance company discovers that the policy owner is a trust and the trust also belongs to a financial institution, the insurance The company does not need to do any reporting work on this account, because the accounts held by financial institutions under CRS are not "accounts that need to be reported".At this time, the declared work falls on the trust. As a financial institution in offshore Cayman, the trust will submit the trustee and beneficiary information and the assets under the trust (ie insurance plan) to the Chinese government together.
It can be seen that whether it is directly buying and holding overseas insurance or holding insurance through trust managed by a trust company,As long as the trust or insurance company is located in the CRS participating country,Then it is usually the "Skynet" that cannot escape CRS.
XNUMX. Why can American insurance circumvent CRS?
The reason is simple,The United States has not joined the CRS.
The United States is not one of the countries or regions that have signed or promised to sign the CRS issued by the OECD.For bank accounts opened in the United States, use them to open investment accounts and pay insurance fees. Investment in industry does not need to be declared to any country.
In addition, foreigners are not required to pay inheritance taxes if they configure U.S. life insurance.According to the U.S. tax law, if foreigners purchase U.S. life insurance, their claims are completely tax-free.This is also an important reason why so many high-net-worth clients from all over the world have flew to the United States to purchase large-value insurance policies.And Chinese customers face the tax risk of the introduction of inheritance tax, and even face the issue of retrospective period 5.In terms of pure life insurance investment timing, the sooner you buy, the more cost-effective it is.Therefore, planning and purchasing life insurance in the United States as soon as possible is also the first choice for the domestic wealthy to reasonably avoid tax.
XNUMX. Why buy American life insurance?
First, American insurance companies value credibility.Except for suicide deaths and wars within the first two years of insuring, compensation will be paid for other conditions, including: drunk driving, drug abuse, natural disasters, and death in the course of crime.In the United States, there has never been an insurance company making excuses for not paying or deliberately delaying claims.
Second, the insurance company industry is the infrastructure of American society, managed and covered by the Department of Insurance.When insurance companies cannot operate, they will be guided by the government to conduct mergers and acquisitions.The most famous case is the 2008 financial tsunami, AIG (American International Group) faced bankruptcy, and finally the U.S. government rescued it.Although this move shocked the American society and triggered extensive discussions, it also showed the government's determination to defend the infrastructure by protecting insurance companies.
Third, the life insurance industry in the United States is a mature and developed market. As a result of free competition, the premiums of American life insurance are also cheaper in the world.The evaluation shows that if you buy the same insurance in the United States, China, Hong Kong and Taiwan, the insurance premiums in the United States are only one-fifth of China's, one-third of Hong Kong, and one-half of Taiwan.In other words, to buy the same insurance, the cost of capital spent in mainland China is only five times that of the United States.
Fourth, American life insurance has the function of hedging debts.U.S. life insurance can separate wealth from individuals and avoid debt risks such as politics, marriage breakdown, business operations, etc.; American insurance policies are not easily enforced by judicial agencies in other countries; when used with family trusts, it can maximize property protection and avoid cash value Recourse by creditors.
Fifth, according to the regulations of the US Internal Revenue Service, life insurance policy income is exempt from capital gains tax, death compensation is exempt from income tax, and insurance policies in irrevocable trusts are exempt from inheritance tax. Therefore, irrevocable trust + large-value life insurance policies are US green cards and passports. A natural tax avoidance tool for holders and US tax residents.
Sixth, the U.S. large-denomination life insurance policy is also the preferred choice for overseas asset allocation commonly used by high-net-worth individuals.Let us give an example: a 35-year-old woman only needs to spend 1 US dollars a year and pay for 10 consecutive years. Through reasonable allocation, he can even get a large insurance policy of up to 100 million US dollars. The high leverage of 10 times is domestic insurance, and even Hong Kong. Insurance cannot be achieved.
XNUMX. How to buy American life insurance products?
Due to time, energy, and professionalism, many customers are unable to access first-hand information and the operating principles of the U.S. market, coupled with the diversification of the market and some life insurance product agents, in order to compete in the market, will also adopt some subjective methods of criticism, so that the original is not Things that are too complicated become confusing.So the editor elaborates on some basic common sense of the American insurance industry from my own perspective.
With this common sense, it is very convenient for customers to guide brokers to escort your wealth according to their needs.
1. American life insurance brokers want to sell an insurance, they must have an insurance broker license, otherwise it is illegal.
2. American insurance companies are only responsible for issuing life insurance products, and sales are done by life insurance brokers (Agent).
3. Life Insurance Broker Agent or Life Insurance Sales Broker signs contracts and chooses different products of different insurance companies to sell.
4. The life insurance product of the end customer is a legal contract between the insured and the insurance company.
Therefore, in the United States, anyone can pass the exam, get a life insurance broker (Agent) license, obtain a qualification, and then choose a different product agency or sales network to sell different life insurance products.
If this person has a good sales performance, he can also choose to pass the Broker qualification exam and upgrade from Agent to Broker, thus setting up a company independently.At this time, he can sign different insurance company products to sell, and he can also recruit Agents to sell products signed by him.
Of course, ta can also continue to choose to be an Agent based on factors such as personality and cost.In general, this mode of practice and sales is similar to that of the real estate industry in the United States.
With the above common sense of the US life insurance industry, for customers who plan to purchase life insurance, whether it is a wealth management group or a financial planning company B, it is essentially a sales or package sales company.And the most important thing is to choose a suitable broker and understand what kind of benefits you need (Rider), through communication with the broker, through professional design, to customize a specific product that suits their own interests.
appendix:
"What is CRS?Who needs attention"
https://www.zhihu.com/question/57047794
"[Science Stickers] Introduction to Five Types of Life Insurance in the U.S."
https://thelifetank.com/5-life-insurance-in-us/
