Deferred taxes arise from temporary differences between accounting basis and tax basis. It normally arises because one of the bases may accelerate or delay profit emergence and thus accelerate or delay tax liabilities compared to the other basis. Therefore, depending on whether the company is making profits of losses, the different treatment of assets and liability valuation under the two bases will create a deferred tax liability or a deferred tax asset. Examples of temporary differences relate to how assets are depreciated under the accounting basis, while for tax purposes, capital allowances are used to determine the taxable value of the asset gains/losses. Therefore, the net value of an asset after depreciation could be different from the net values after allowing for capital allowances and this creates the temporary differences. In short, the depreciation rates could be difference from the capital allowance rates.

In the Life Insurance context in Kenya, the temporary differences arise from the tax laws in force. The tax laws in Kenya state that all surpluses (excess of assets over actuarial and other liabilities) should be taxed at the corporation tax rate. However, taxes are only payable when a transfer is made out of the life fund/statutory fund to shareholder funds to pay the dividend and the corresponding tax payment. This creates a temporary difference between the timing of paying the tax when a transfer is made and when it arises when profits are realized. Therefore, companies with large surpluses accumulate significant deferred tax liabilities due to this temporary difference.

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Panelist:

Name: Joseph Birundu, FIA

Job Title: Director LOGIT Actuarial Solutions

• BSc First Class Honors in Actuarial Science from University of Kent, United Kingdom (UK)
• Diploma in Actuarial Techniques from the Institute and Faculty of Actuaries UK
• Certificate in Finance and Investment from the Institute and Faculty of Actuaries UK
• Fellow of the Institute of Actuaries UK
• Fellow of the Actuarial Society of Kenya Joseph Birundu is an actuary with over 19 years’ experience in insurance both in the UK and Kenya.

Joseph is currently a Director at LOGIT Actuarial Solutions Ltd, where he is responsible for growing the consultancy business and providing consultancy services for clients.

He was previously a Director at QED Actuaries and Consultants and the Group Actuary at UAP Old Mutual where he was responsible for managing the East African Actuarial team.

He has worked in large insurers and reinsurers in UK both as a senior member of staff or as consultant. The companies he has worked for are: Royal Sun alliance, AVIVA, Lloyds Banking Group, AXA, Legal and General, Scor RE and Pacific Life Re. He is the Chair of the Life Insurance Working Party of The Actuarial Society of Kenya.

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Moses Mutuga, FIA is the Actuarial Manager at Sanlam Life insurance Kenya. He has a decade of experience working in life insurance where he has provided technical actuarial support to the company on various aspects such as product development and financial reporting. He is passionate about financial inclusion and implementing insurance solutions that enrich people’s lives.  

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David Limo, FIA, ACAA,  is currently the Head of Actuarial at Britam Life Assurance Company Kenya Ltd with over 8 years of experience in the industry. Prior to this, David was the Regional Actuarial Manager at Britam where he oversaw the Actuarial functions for Britam’s Uganda, Tanzania, Malawi, Mozambique, Rwanda and South Sudan subsidiaries. David holds a Bachelor’s degree in Actuarial Science from the University of Nairobi and is a Chartered Certified Accountant (ACCA). Known to his friends as a risk-taker and a fitness enthusiast, David is an experienced hiker and loves travelling. He is an usher at his Church.

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