What does Federal Excise Tax mean? Read on to discover the definition & meaning of the term Federal Excise Tax - to help you better understand the language used in insurance policies.
Federal Excise Tax
A tax imposed on premium payments to offshore insurers: 4 percent on direct premiums and 1 percent on reinsurance premiums. It was once relaxed for premium payments to most offshore insurers/reinsurers in Barbados and Bermuda, but not for long. It can be eliminated if the captive makes an election to be taxed as a U.S. corporation or if the transaction is not really insurance (i.e., not claiming premium deductibility) but argued to be a transfer of self-insurance reserves.
We hope the you have a better understanding of the meaning of Federal Excise Tax.