Japan amends tax treatment of premiums for D&O

March 29 2016 by InsuranceAsia News Staff

Premiums for directors’ and officers’ (D&O) liability insurance in Japan will no longer need to be treated as a director’s salary income under the new tax treatment policy announced by Japan’s National Tax Agency (NTA).

The NTA said that D&O insurance premiums may no longer be recognized as salary income provided that the company bears the cost of the premium based on corporate approvals.

D&O liability insurance premiums are typically recognized in Japan as salary income.

D&O insurance has become common in Japan as companies seek protection from damages caused by their directors.

As of March 2015, about 90% of listed companies in Japan were enrolled in D&O insurance. Under Japan’s Companies Act, directors are liable to their company and third parties for damages as a result of their own actions that involve fraud or negligence.