IRS PROVIDES INSURANCE EXCISE TAX REFUND PROCEDURES FOR CLAIMS BASED ON TREATY PROVISIONS.

Rev. Proc. 92-14

SECTION 1. PURPOSE

This revenue procedure provides instructions for claiming a refund of an overpayment of excise tax on insurance policies when the claim is based on the provisions of the Convention Between the United States of America and the Federal Republic of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital and to Certain Other Taxes, (the "Treaty"), signed at Bonn, Germany on August 29, 1989. The Treaty entered into force on August 21, 1991. With respect to the excise tax on certain insurance premiums, the Treaty is effective for tax paid or credited on or after January 1, 1990, if attributable to premiums paid to an insurer or reinsurer that was a resident of the territory comprising the Federal Republic of Germany prior to October 3, 1990, or that part of Berlin in which the Basic Law of the Federal Republic of Germany applied before October 3, 1990. The Treaty is effective for tax paid or credited on or after January 1, 1991, if attributable to premiums paid to an insurer or reinsurer that was a resident of the territory comprising the former German Democratic Republic or that part of Berlin in which the Basic Law of the Federal Republic of Germany did not apply until October 3, 1990.

SEC. 2. BACKGROUND

01 Section 4371 of the Internal Revenue Code of 1986 imposes a tax on each policy of insurance or reinsurance issued by any foreign insurer or reinsurer, unless the premiums paid are taxed as income effectively connected with the conduct of a United States trade or business.

02 Section 4374 of the Code provides that the tax imposed by section 4371 shall be paid by any person who makes, signs, issues, or sells any of the documents and instruments subject to the tax, or for whose use or benefit they are made, signed, issued or sold.

03 Section 46.4374-1(a) of the Excise Tax Regulations provides that the tax imposed by section 4371 of the Code shall be paid on the basis of a return. The tax shall be remitted by the person who makes the payment of the premium to a foreign insurer or reinsurer or to any nonresident agent, solicitor, or broker. The phrase "person who makes the payment" means the resident person who actually transfers the money, check, or an equivalent to the foreign insurer or reinsurer (including transfers to any bank, trust fund, or similar recipient designated by the foreign insurer or reinsurer), or to any nonresident agent, solicitor, or broker.

04 Pursuant to Article 7 of the Treaty, policies issued by an insurer or reinsurer that is a resident of the Federal Republic of Germany ("Germany"), on and after the effective dates described in section 1 of this revenue procedure, may be exempt from the tax imposed by section 4371 of the Code.

SEC. 3. REQUIREMENTS FOR REFUND OF EXCISE TAX

01 A refund of section 4371 tax may be claimed only if the tax was attributable to a premium paid or credited to a German insurer or reinsurer that is certified by the local tax office ("Finanzamt") with which the insurer or reinsurer files its German tax returns as having been a resident of Germany for the entire taxable period for which the refund is sought. Such certification may be in the form of a list compiled by the Finanzamt with which the insurer or reinsurer files its returns of all insurers or reinsurers that were residents during the period for which a refund of the excise tax is claimed. A copy of such a list or of an individual certification must be filed with any claim for refund of the insurance premium excise tax. For purposes of this revenue procedure, "taxable period" means the quarter (or part of a quarter) for which a return was filed reporting and paying the insurance premium excise tax for which the refund is sought.

02 A refund of section 4371 tax may not be claimed with respect to premiums paid or credited to a German insurer or reinsurer to the extent that the risks covered by the premiums were reinsured by the German insurer or reinsurer with a person not entitled to the benefits of the Treaty or any other convention that provides an exemption for these taxes (Article 2(1) of the Treaty).

03 A refund of section 4371 tax may be claimed with respect to premiums paid or credited to a German insurer or reinsurer only if at all times during the taxable period the insurer or reinsurer is entitled to benefits under Article 28 of the Treaty.

04 Premiums paid on policies written by a foreign insurer or reinsurer cannot qualify for exemption from the excise tax under the Convention unless the foreign insurer or reinsurer establishes that it satisfies the requirements of section 3.05; or 3.06; or 3.07; or both 3.08 and 3.09.

05 A refund of section 4371 tax may be claimed with respect to premiums paid or credited to a German insurer or reinsurer if at all times during the taxable period there was substantial and regular trading of the company's principal class of shares on a recognized stock exchange (within the meaning of Article 28(1)(d) of the Treaty). The term "recognized stock exchange" is defined in Article 28(3) of the Treaty.

06 Alternatively, a refund of section 4371 tax may be claimed with respect to premiums paid or credited to a German insurer or reinsurer that was engaged at all times during the taxable period in the active conduct of a trade or business in Germany and such premiums were derived in connection with, or incidental to, that trade or business (within the meaning of Article 28(1)(c) of the Treaty). For purposes of claiming a refund of section 4371 tax, the Internal Revenue Service will consider premiums received by an insurer or reinsurer that is a resident of Germany to be derived in connection with, or be incidental to, the active conduct of a trade or business in Germany by the company if for the company's preceding taxable year the average of the following three ratios exceeds 25 percent and each ratio is equal to at least 20 percent:

(1) The ratio of the average value that the assets of the insurer or reinsurer used or held for use in the active conduct of a trade or business in Germany during the taxable year bears to the value of all its assets. For this purpose, the value of an asset shall be determined using the method used by the taxpayer in keeping its books for purposes of financial reporting in Germany. If the insurer or reinsurer is not subject to financial reporting in Germany, the value of an asset will be determined under generally accepted accounting principles applied in Germany. The average value of the assets for the taxable year equals the average of the values of the assets determined as of the end of each quarterly period during the taxable year. An asset shall be treated as used or held for use in a trade or business in Germany if so treated under section 1.367(a)-2T(b)(5) of the Income Tax Regulations and if an office or other fixed place of business in Germany is a material factor in the acquisition of the asset and in the realization of income, gain or loss with respect to the asset. In addition, a tangible asset used or held for use in a trade or business in Germany shall be treated as located in Germany only if physically located there.

(2) The ratio that gross premiums received by the insurer or reinsurer for policies on risks situated in Germany bear to total gross premiums received by the insurer or reinsurer;

(3) The ratio that the insurer or reinsurer's payroll and commission expense paid to employees and agents for services performed in Germany bears to the insurer or reinsurer's worldwide payroll and commission expense.

07 If premiums received by a foreign insurer or reinsurer do not qualify under the ratio test in section 3.06, the Internal Revenue Service may nevertheless determine that such premiums were derived in connection with, or incidental to, the active conduct of a trade or business in Germany on the basis of other information submitted to it, including:

(1) The address of the insurer or reinsurer's office in Germany;

(2) The ratio that the insurer or reinsurer's payroll and commission expense paid to employees and agents for services performed in Germany bears to the insurer or reinsurer's worldwide payroll and commission expense;

(3) Whether the insurer or reinsurer's employees and agents in Germany have, and habitually exercise, authority to sign policies and to approve payment of claims on the company's behalf;

(4) Whether the insurer or reinsurer is subject to the national income tax imposed by Germany on the basis of residence;

(5) The ratio that gross premiums received by the insurer or reinsurer for policies on risks situated in Germany bear to total gross premiums received by the insurer or reinsurer;

(6) The ratio that gross premiums received by the insurer or reinsurer for policies on risks situated in Germany bear to gross premiums received for policies on risks situated in the United States;

(7) The ratio that the value of the assets of the insurer or reinsurer used or held for use in the active conduct of a trade or business in Germany at the close of the taxable year bears to the value of all of its assets at the close of the taxable year;

(8) Whether the insurer or reinsurer is subject to the German government regulations generally applicable to companies authorized to conduct an insurance or reinsurance business in Germany;

(9) The percentage of the insurer or reinsurer' shares of outstanding stock of each class not owned by persons entitled to benefits under the treaty or, in the case of a mutual company, the percentage of the insurer or reinsurer's policies insuring risks of persons not entitled to benefits under the treaty;

(10) The percentage of the insurer or reinsurer's gross income (including investment income attributable to its insurance business but excluding investment income not attributable to its insurance business) used, directly or indirectly, to meet liabilities to persons not entitled to benefits under the treaty. For purposes of this test, the term "liabilities" refers to amounts that reduce gross premiums or are deductible against gross income, including interest, royalties, and premiums paid in connection with reinsuring risks; and

(11) Any other information indicating that the insurer or reinsurer is engaged in the active conduct of a trade or business in Germany;

08 Alternatively, a refund of section 4371 tax may be claimed with respect to premiums paid or credited to a German insurer or reinsurer if both requirements in Article 28(1)(e) of the Treaty are met. The first requirement is that at all times during the taxable period more than 50 percent of the number of shares of each class of its shares (or more than 50 percent of the beneficial interest in the case of a mutual company) is owned, directly or indirectly, by any combination of:

1. One or more citizens of the United States or individual residents of Germany or the United States;

2. A Contracting State or a political subdivision or local authority thereof;

3. A company in whose principal class of shares there is substantial and regular trading on a recognized stock exchange; or

4. An entity which is a not-for-profit organization described in Article 28(1)(f) of the Treaty (Article 28(1)(e)(aa) of the Treaty). In applying this test, shares that are not registered to a named shareholder of the foreign insurer or reinsurer or of an intermediary company will be considered owned directly or indirectly by an individual who is neither a citizen of the United States nor a resident of either Germany or the United States.

To establish that a German insurer or reinsurer satisfied the requirements of Article 28(1)(e)(aa) of the Treaty, a claim for refund must include a list of names and addresses of the insurer or reinsurer's shareholders (or policyholders in the case of a mutual company). If any direct shareholders (or policyholders in the case of a mutual company) are persons other than:

1. Individuals; or

2. Corporations the principal class of shares of which are not subject to substantial and regular trading on a recognized stock exchange,

then a claim for refund must include names and addresses of those individuals who hold shares indirectly through such direct shareholders or policyholders.

09 In addition to the stock ownership requirement described in section 3.08 of this revenue procedure, a German insurer or reinsurer claiming entitlement to benefits under Article 28(1)(e) of the Treaty must establish that not more than 50 percent of its gross income for the taxable period for which a refund is sought was used, directly or indirectly, to meet liabilities to persons other than those entitled to benefits under Article 28(1)(a), (b), (d), or (f) (Article 28(1)(e)(bb) of the Treaty). The terms "gross income" and "liabilities" have the same meaning as in section 3.07(10).

SEC. 4. REFUND PROCEDURE

01 A refund of section 4371 tax attributable to premiums paid to a German insurer or reinsurer may be claimed by either the German insurer or reinsurer, or by the United States insured or broker that reported and paid the tax to the Service, but not by both. No claim for refund will be paid or credited by the Internal Revenue Service, unless a Statement Under Penalties Of Perjury In Support Of Claim For Refund Of Insurance Premium Excise Tax described in section 4.03 or 4.04 of this revenue procedure, whichever is applicable, is filed with the claim for refund.

02 A claim filed by the German insurer or reinsurer for refund of insurance premium excise taxes must include:

1. A copy of a residency certificate issued by the Finanzamt with which the insurer or reinsurer files its German tax returns establishing that the insurer or reinsurer was a resident of Germany for each taxable period for which refund is claimed. In lieu of an individual certificate, the claimant may attach a list, prepared by the Finanzamt of all insurers or reinsurers that were residents during the period for which a refund of the excise tax is claimed;

2. Powers of attorney from the insured(s) (and/or brokers(s)) specifically authorizing the Internal Revenue Service to mail to the representative of the German insurer or reinsurer any check for refund resulting from allowance of the claim filed for insurance premium excise tax (see Statement of IRS Procedural Rules, section 601.506(b)(1));

3. Information establishing the German insurer or reinsurer's entitlement to benefits under Article 28(1)(c), (d) or (e) of the Treaty, as described in sections 3.04 through 3.09 of this revenue procedure;

4. Information to enable the Service to identify the tax account(s) to which the excise tax for which a refund is sought was deposited at the time of payment. At a minimum, this information must include a schedule of the names, addresses, and taxpayer identification numbers of the person or persons filing the return on which the excise tax was reported; policy numbers; amount of taxable premiums per policy by quarter; amount of tax paid per quarter; and amount of refund requested per quarter; and

5. The name, address, and taxpayer identification number of each insured; the policy number and term; the date the premium was paid; the amount of the premium; the amount of the excise tax paid on the premium; and the date the tax was paid to the Internal Revenue Service.

03 A claim for refund filed by a German insurer or reinsurer must include, in addition to the documents and information required by section 4.02 of this revenue procedure, the following Statement Under Penalties of Perjury:

                    STATEMENT UNDER PENALTIES OF

(1) That this Statement is filed in support of a claim for refund of insurance premium excise tax imposed by section 4371 et seq. of the Internal Revenue Code of 1986, pursuant to the exemption provided by Article 7 of the United States-Germany Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital and to Certain Other Taxes ("Treaty");

(2) That (Name of German insurer or reinsurer) was eligible for benefits under the Treaty for quarters ended _______;

(3) That none of the risks for which premiums were paid by the insured(s) [and/or broker(s)] and for which claims for refund of the excise tax have been filed, were reinsured with a person not entitled to exemption from such tax under the Treaty or another treaty that grants exemption from such tax;

(4) That the United States insured(s) [and/or broker(s)] withheld the following insurance premium excise tax from the premiums paid to (name of German insurer or reinsurer) [or paid the following insurance premium excise tax on the premiums paid to (name of German insurer or reinsurer)] and filed Quarterly Federal Excise Tax Returns, Forms 720, reporting and paying such tax to the Internal Revenue Service:

                  INSURED'S [AND/OR BROKER'S] NAME

(6) That the German insurer or reinsurer has timely filed one or more Claim, Form 843, for refund of the insurance premium excise tax;

(7) That the German insurer or reinsurer has filed powers of attorney from the insured(s) [and/or broker(s)] specifically authorizing the Internal Revenue Service to mail to the representative of the German insurer or reinsurer any check for refund resulting from allowance of the claim filed for insurance premium excise tax (see Statement of IRS Procedural Rules, section 601.506(b)(1));

(Name of German insurer or reinsurer) and (name(s) of United States insured(s) and/or broker(s)) agree:

(1) That the sole person(s) entitled to refund of the insurance premium excise tax for quarters ended ____, is (are) the insured(s) [and/or broker(s)] [or that the sole person entitled to refund of the insurance premium excise tax for quarters ended ______, is the German insurer or reinsurer].

(2) That neither (name of German insurer or reinsurer) nor (name(s) of the insured(s) [and/or broker(s)]) nor any other person affiliated with them will make any claim outside this Agreement with respect to refund of the amount of insurance premium excise tax claimed in any Form 843 filed in connection with this Agreement.

(3) That any refund of tax, plus statutory interest, made by the Internal Revenue Service resulting from allowance of the claim for refund of insurance premium excise tax filed by the German insurer or reinsurer will be mailed to the insured(s) [and/or broker(s)] in care of the representative of the German insurer or reinsurer in accordance with the power of attorney that the insured(s) [and/or broker(s)] have given to such representative;

(4) That, for purposes of Internal Revenue Service verification of any or all facts and representations made in connection with the claim for refund of the insurance premium excise tax, the German insurer or reinsurer and the insured(s) [and/or broker(s)] will maintain for a period of 6 years from the date of this Agreement, accounts and records of items of insurance and reinsurance that will be made available upon written request by the Internal Revenue Service at the place mutually agreed upon by the Service and the German insurer or reinsurer and the insured(s) [and/or broker(s)]. The German insurer or reinsurer will also maintain for 6 years and make available for inspection records to establish eligibility for Treaty benefits under Article 28 of the Treaty.

Under penalties of perjury, the undersigned representatives of [name of German insurer or reinsurer] and [names of insured(s) and/or broker(s)] declare that they have examined this Statement, including accompanying documents, and, to the best of their knowledge and belief, the facts presented in the Statement and documents are true, correct, and complete.

IN WITNESS WHEREOF, the above parties have subscribed their names to these presents, in triplicate.

Signed this (Date) day of (Month), (Year)

[German insurer or reinsurer]

By _______________

Title _________

[Name(s) of insured(s) or broker(s)]

By __________

Title _________

04 A refund claim filed by the insured(s) and/or broker(s) must include, in addition to the documents and information required by section 4.02 of this revenue procedure, the following Statement Under Penalties of Perjury:

                    STATEMENT UNDER PENALTIES OF

(1) That this Statement is filed in support of a claim for refund of insurance premium excise tax imposed by section 4371 et seq. of the Internal Revenue Code of 1986, pursuant to the exemption provided by Article 7 of the United States-Germany Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital and to Certain Other Taxes ("Treaty");

(2) That (name of German insurer or reinsurer) was eligible for benefits under the Treaty for the quarters ended _______;

(3) That none of the risks for which premiums were paid by the taxpayer and for which claims for refund of the excise tax have been filed, were reinsured with a person not entitled to exemption from such tax under the Treaty or another treaty that grants exemption from such tax;

(4) That the taxpayer withheld the following insurance premium excise tax from the premiums paid to (name of German insurer or reinsurer) [or paid the following insurance premium excise tax on the premiums paid to (name of German insurer or reinsurer) and filed Quarterly Federal Excise Tax Returns, Form 720, reporting and paying such tax to the Internal Revenue Service:

TAXPAYER'S NAME

AMOUNT OF TAX PAID QUARTER

(5) That the taxpayer and the German insurer or reinsurer request refund of the insurance premium excise tax that has been reported and paid to the Internal Revenue Service for quarters ended __________;

(6) That the taxpayer has timely filed one or more Claim, Form 843, for refund of the insurance premium excise tax;

(Name of United States insured or broker) and (name of German insurer or reinsurer) agree:

(1) That the sole person entitled to refund of the insurance premium excise tax for quarters ended _________, is the taxpayer [or that the sole person entitled to refund of the insurance premium excise tax for quarters ended _________, is the German insurer or reinsurer].

(2) That neither (name of German insurer or reinsurer) nor (name(s) of the insured(s) [and/or broker(s)]) nor any person affiliated with them will make any claim outside this Agreement with respect to refund of the amount of insurance premium excise tax claimed in any Form 843 filed in connection with this Agreement.

(3) That any refund of tax, plus statutory interest, made by the Internal Revenue Service resulting from allowance of the claim for refund of insurance premium excise tax filed by taxpayer will be made to taxpayer.

(4) That, for purposes of Internal Revenue Service verification of any or all facts and representations made in connection with the claim for refund of the insurance premium excise tax, the taxpayer and the German insurer or reinsurer will maintain for a period of 6 years from the date of this Agreement, accounts and records of items of insurance and reinsurance that will be made available upon written request by the Internal Revenue Service at the place mutually agreed upon by the Service and the taxpayer and the German insurer or reinsurer. The German insurer or reinsurer will also maintain for 6 years and make available for inspection records to establish eligibility for Treaty benefits under Article 28 of the Treaty.

Under penalties of perjury, the undersigned representative of [name of German insurer or reinsurer] and [names of insured(s) and/or broker(s)] declare that they have examined this Statement, including accompanying documents, and, to the best of their knowledge and belief, the facts presented in the Statement and documents are true, correct, and complete.

IN WITNESS WHEREOF, the above parties have subscribed their names to these presents, in triplicate. Signed this (Date) day of (Month), (Year)

[Taxpayer's Name]

By _________

Title _________

[German insurer or reinsurer]

By _________

Title _________

05 Any taxpayer or German insurer or reinsurer requesting a refund of insurance premium excise tax should submit a Claim, Form 843, in accordance with this revenue procedure, to the following address

                     Philadelphia Service Center

SEC. 5. OTHER TREATIES

These procedures may also be used by a person claiming refund of insurance premium excise tax under any United States Convention that has similar antitreaty shopping and qualified exemption provisions. However, in lieu of a residency certificate from a German Finanzamt, a claim filed under a United States Convention, other than the one with Germany, should include a certificate of residency executed by the appropriate office in that country's tax administration.

SEC. 6. EFFECTIVE DATE

This revenue procedure is effective January 21, 1992, the date of its publication in the Internal Revenue Bulletin.

SEC. 7. DRAFTING INFORMATION

The principal author of this revenue procedure is W. Edward Williams, Office of Associate Chief Counsel (International). For further information on the procedure, call Mr. Williams on (202) 287- 4851 (not a toll-free call).