The new law reduces premium tax for captives to 0.4% for the first $20 million and 0.3% thereafter. We understand that, before the passage of the new law, captives were taxed at the same rate as ordinary domestic insurers, which was as high as 4.75%.
Georgia Improves Captive Law
Another change is that the amount of premium tax is capped at $100,000. Furthermore, if two or more captives are set up with common ownership, they will be taxed as one company.
Georgia recently passed HB 552 which makes certain changes to the taxation of captive insurance companies that are licensed there. The intention is to bring the state into line with other US captive domiciles and make it more competitive. The main changes relate to premium taxes that Georgia captives have to pay.
Prior to these changes, Georgia was not known as a key Domicile and perhaps the onerous tax position accounts for the fact that, as at December 31, 2014, only 9 captives were licensed there. However, there is still plenty of room for improvement. Georgia has a reputation for not being user-friendly to captives and there is no captive division in the Georgia Department of Insurance. As far as we can tell, the minimum capital requirement remains at $500,000 which is twice as high as most other state domiciles. Hopefully, Georgia lawmakers are working on correcting these and other faults to that they can really become a serious competitor to the 36 other states that offer captive legislation.
Premium Tax Reduction