Where the IRDAI’s Regulation of Insurance Business in Special Economic Zone Rules, 2015, did not mention intermediaries, the authority’s 2019 guidelines for intermediaries specified operations in International Financial Services Centre (IFSC) and not all SEZs.
“This enables foreign intermediaries to set up offices in any SEZs in the country as well as Indian companies to do so, to solicit business for customers outside India across the globe, subject to the local laws there,” said Joydeep Roy, global leader, insurance digital assets, PwC, adding, “This opens up possibilities to manage costs better, leverage skilled manpower better and scale up apart from solving time zone issues.”
The developments came amid the government’s efforts to attract global business at a time when many companies are looking to rebalance their dependence on China and to flee the unrest in Hong, Kong, one of Asia’s top financial hubs.
The amended rules enable IRDAI to come out with operational guidelines to permit foreign and Indian intermediaries to transact business from SEZs, the notification said, effective from Thursday.
“We will have to see whether IRDAI will come up with additional guidelines on regulating intermediaries operating from other SEZs or whether the existing guidelines for IFSCs will apply here as well,” said Aravind Venugopal, partner at Khaitan and Co.
The other issue involves the tax structure such companies would face operating in SEZs. “In case of Indian intermediaries opening offices in SEZs, issues like roll up or contain profits within SEZ are yet to be clarified. According to prevailing tax laws if the set up is not in an IFSC-SEZ then no income tax benefits accrue, which are considerable otherwise,” Roy said.
Currently, an intermediary in an IFSC enjoys a 10-year income tax holiday, a benefit not available in other SEZs.