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Federal Excise Tax

Federal Excise Tax (FET)

Definition

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.

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