The Belgian government has recently taken a series of measures aimed at balancing the budget for Belgium in 2006. Several of these measures will come into force on 1st January 2006 following the vote of the corresponding law, which will provide the framework for the government programme.

What are the consequences of the new Belgian law for life insurance contracts?

General principle
This law states that life insurance contracts concluded by persons having their habitual residence in Belgium are subject to the payment of an indirect tax (stamp duty) wherever the insurance company is established (in Belgium or abroad).

This tax amounts to 1.10% and will be calculated on the gross amount of each paid premium. It will have to be collected by the (Belgian or foreign) insurance company as of 1st January 2006 for each premium paid into a life insurance contract as soon as the policyholder has his/her habitual residence in Belgium.

All taxes collected by the insurance company during a month will then have to be paid directly by the insurance company - globally and anonymously - to the Belgian Ministry of Finance.

Finally, once a year, all of the (Belgian or foreign) insurance companies will have to complete a statement mentioning, for each contract, the amount of the paid premiums, the paid tax, and the date of payment of the tax.

Life insurance contracts taken out with a company established in Luxembourg, such as Swiss Life
Since this tax will have to be collected wherever the insurance company is established, we will also have to collect it for each premium paid into your life insurance contract as of 1st January 2006.
We will also have to respect all of the terms detailed hereafter.

Concretely, this means that as of 1st January 2006, the tax of 1.10% will be collected by us on each premium paid either into a life insurance contract concluded with our company before 1st January 2006, or into a new life insurance contract.
Only life insurance contracts taken out before 1st January 2006 and into which no new premium is paid will not be affected by this tax.

As stated above, only non-nominative data (details of the insurance company, contract number, amount of due premiums, collected tax and date of payment of the tax) will have to be communicated by us to the Belgian Ministry of Finance so that it can make sure that the indirect tax of 1.10% is duly collected.
As a consequence, and contrary to what was provided in the initial bill, life insurance contracts taken out with Luxembourg insurance companies will continue to be subject to the professional secrecy each company has to respect, subject to making itself liable to prosecution.
Indeed, the Belgian government acknowledged that, in the framework of the collection of this tax, it was not possible for it to require Luxembourg life insurance companies to transfer spontaneously the identity of their customers to the Belgian Ministry of Finance, due to the particularities of their professional secrecy and to the principles of Community right.


Concretely, what are the consequences of the new Belgian law for your current contracts with Swiss Life in Luxembourg, and how will this tax of 1.10% be collected?

You have taken out a contract with a single premium
Current contracts financed with a single premium paid before 1st January 2006 are not affected.

You have taken out a contract with periodical or free premiums and with notices to pay
The tax of 1.10% will simply be added to the amount of the premium you usually pay. Thus, your contract’s technical bases and insured benefits remain unchanged. There is no particular action you must take: your future notices to pay a premium will be adapted accordingly.

In the case where you have taken out a contract allowing you to not conform to the amount of the premium indicated on the notice (tariffs 110, 111 et 197), we would like to clarify that we will maintain the provided benefits only if you pay the increased amount of premium that we indicate.

However, the application of the new provisions requires the adaptation of our administration systems and of our documents. Because of this adaptation we will establish a particular organisation for the beginning of year 2006.

In order to avoid any confusion, we have voluntarily suspended the sending of the notices to pay a premium and the payments through domiciliation for all premiums payable at the beginning of year 2006. Thus, you will receive a little bit later than usual a document indicating the amount of premium to pay in order to comply with the new Belgian tax legislation. We draw your attention to the fact that the amount to pay at this moment will include all premiums due since 1st January 2006.

If you pay your premiums through domiciliation, you will receive a letter informing you about the modified amount of your premiums before the next premium is deducted.

If you pay your premiums by standing order, we would be grateful if you could suspend this standing order until reception of your next notice to pay a premium.

In all cases, we kindly request that you do not pay any premium before having received the corresponding instruction.

Meanwhile, we confirm that the guaranteed benefits are maintained.

You have taken out a contract with free premiums and without notices to pay
For the premiums that you will pay as of 1st January 2006, we will deduct the tax of 1.10% from the gross amount of each premium and then, where applicable, the charges provided in the contract, before investing the net premium.

As a consequence, in the case where your contract indicates a projection of the premiums and benefits upon the term of the contract, you should logically increase your premiums by 1.10% to obtain the same benefit.


What happens for insurance contracts in which premiums are deductible in the Grand Duchy of Luxembourg?

General principle
Contracts taken out by policyholders residing in Belgium, and in which premiums deducted in the Grand Duchy of Luxembourg within the framework of articles 111 and 111bis of the Loi sur l’impôt sur le revenu (Luxembourg law governing personal income tax) are subject to the tax of 1.10%. This tax is deductible with the premiums.

Particular case of pension savings contracts (prévoyance-vieillesse)
Luxembourg pension savings contracts (prévoyance-vieillesse) are not considered pension insurance by the Belgian tax administration. Therefore, they are subject to the tax of 1.10%.

However, in the Grand Duchy of Luxembourg, these contracts are subject to a premium ceiling depending on the age of the policyholder. It is normally not allowable to pay premiums higher than the ceiling, subject to the non-deductibility of the premium.

If you reside in Belgium, and you deduct the premiums paid into an existing pension savings contract (prévoyance-vieillesse) in Luxembourg within the framework of article 111bis of the Loi sur l’impôt sur le revenu (Luxembourg law governing personal income tax), discussions are taking place with the Luxembourg tax administration to exceptionally allow you to increase the amount of the deductible ceiling by the tax of 1.10% as of 1st January 2006.
This provision will be confirmed to you with your next notice to pay a premium.


Synthesis

The Belgian government has recently taken a series of measures aimed at balancing the Belgian budget in 2006. Several of these measures will come into force on 1st January 2006 following the vote of the corresponding law, which will provide the framework for the government programme.

As of 1st January 2006, a tax of 1.10% will be payable on each premium paid in a life insurance contract if the policyholder has his/her habitual residence in Belgium.

The tax of 1.10% is applicable to all life insurance contracts, wherever the insurance company with which the contract is concluded is established (in Belgium or abroad).

The tax of 1.10% on insurance premiums shall be borne by the policyholder.

Taxes collected by the insurance company are paid directly by it - globally and anonymously - to the Belgian Ministry of Finance.

No nominative data on the policyholders will have to be communicated to the Belgian Ministry of Finance. The information to be communicated is limited to: details of the insurance company, contract number, amount of due premiums, collected tax, and date of payment of the tax.

For your life insurance contracts taken out with Swiss Life in Luxembourg, do not be surprised to not receive any notice to pay a premium or, in case of a domiciliation, to not have your account debited. You will be informed a little bit later of the amount to pay, taking the tax of 1.10% into account. Until then, you remain covered for the benefits provided in the contract.


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