Foreign Insurance Tax on Form 720
Paying premiums to a non U.S. insurer for U.S. risks can trigger a federal excise tax that must be reported on Form 720. If you handle global insurance for your business this page explains how the tax works what the deadlines are and how to e-file with eFileExcise720. Our goal is to make compliance simple secure and accurate so you can focus on your operations not paperwork.
Quick eFile 720!
What it covers
Foreign Insurance Tax applies when a U.S. person pays premiums to a foreign insurer or reinsurer for coverage of a U.S. risk. The tax is imposed by Internal Revenue Code section 4371 and is reported quarterly on Form 720. The rules are narrow yet important since many international policies route through non U.S. carriers.
You owe the tax even if the foreign insurer has no U.S. office. The buyer of the policy is usually responsible for collecting reporting and paying the tax. Brokers often assist yet the liability generally sits with the insured that places coverage on a U.S. risk.
The IRS explains the filing mechanics in the Instructions for Form 720 which include a specific entry for foreign insurance. You should review the policy type policy period premium amount then identify any reinsurance to determine the right rate and base.
Rates and exemptions
Rates depend on the kind of coverage. The law sets different percentages for casualty and indemnity life and annuity and reinsurance. You apply the rate to the premium that relates to the U.S. risk.
4 percent
of premiums for policies of casualty insurance and indemnity bonds per section 4371.
1 percent
of premiums for policies of life sickness and accident and for annuity contracts.
1 percent
of premiums for reinsurance covering any of the above.
Some policies may be exempt under IRC 4373 such as insurance on export goods or where a foreign insurer has a valid 953(d) election to be taxed as a U.S. corporation. Exemptions are narrow so keep proof like endorsement wording invoices export documents or election letters. Confirm the exemption in the policy or with the carrier and consult a tax advisor when in doubt.
Example
A U.S. company buys a casualty policy from a foreign carrier for a plant in Texas. The company owes 4 percent on the premium that covers the Texas risk. If the same policy includes a factory in France only the U.S. portion is subject to the tax.
Who must file and key due dates
You must file Form 720 for any quarter in which you have a Foreign Insurance Tax liability. Most businesses that buy
insurance from a foreign carrier for U.S. risks fall into this rule. Individuals can also be liable if they purchase coverage
directly from a foreign insurer for a U.S. risk.
Form 720 is due on the last day of the month after the end of each quarter. Payment is due with the return. Mark these dates on your calendar.
Q1
January through March due April 30
Q2
April through June due July 31
Q3
Q3 July through September due October 31
Q4
Q4 October through December due January 31
If you have no liability for a quarter you may not need to file but you should review the IRS instructions to be sure.
How eFileExcise720 helps you file online
eFileExcise720 is an IRS authorized platform that lets you prepare and e-file Form 720 in minutes. You can
create a free account with no software download then use a simple dashboard to enter premiums select
rates and transmit securely to the IRS.
Key benefits include support for all Form 720 categories including foreign insurance personalized
customer help and strong data security. You also get guidance for amendments with Form 720-X
and for refund claims with Form 8849 when they apply.
With eFileExcise720 you can:
- Start free with easy signup and no download today.
- Use a clear dashboard that supports all Form 720 parts including foreign insurance easily online.
- Get personalized customer support when you need it.
- Protect your data with secure handling.
- E-file amendments with Form 720-X or submit claims with Form 8849.
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The final person I talked to was able to really help me and stayed on the line until the issue was resolved. I was about to end the call but she convinced me that she knew what i needed to do. A very good customer service person. Superior!.
The final person I talked to was able to really help me and stayed on the line until the issue was resolved. I was about to end the call but she convinced me that she knew what i needed to do. A very good customer service person. Superior!.
Frequently Asked Questions
Ready to file your Form 720
for this tax with confidence
Start now with eFileExcise720 an IRS authorized e-filing portal that keeps the process fast, secure and hassle free.
Create your free account and file today at eFileExcise720. If you have questions our customer support team is ready
to help you complete an on time submission. If you need to fix a prior quarter you can prepare a Form 720-X or submit
a claim with Form 8849 using the same account. Our step by step guidance keeps entries accurate, reduces rejects
and helps you file successfully on the first try.