Global tax points for insurers
Volume 2 Issue 1
In this issue, we explore a number of developments in tax for insurance companies. First, we share some thoughts on the tax consequences for insurers of the business restructurings that are likely to happen as a consequence of the UK’s withdrawal from the European single market. Over the years, insurance companies in the UK have enjoyed a more benign value-added tax (VAT) treatment of outsourced functions compared to some of their competitors on the mainland, and this difference is likely to be a key factor in determining post-Brexit operating structures. From a corporate tax point of view, too, it will be important to plan carefully for structural changes. We highlight some of the important considerations in that process.
Next, we look at the impact on insurance groups of the Section 385 regulations in the US. These regulations, published in final form in October last year, provide guidance on how to determine whether interests in related corporations should be treated as debt or equity and how this should be documented. We provide some guidance on what insurance groups should be thinking about in this complex area and suggest an approach for dealing with the practical implications of these new rules.
We then look at recent tax developments in Argentina and their impact on insurance groups. Inbound investors will welcome the reduction of the tax burden on profits distributed by way of dividend. Also welcome will be the forthcoming reduction in the Minimum Presumed Income Tax level. It is interesting to note that compliant taxpayers are being granted relief from the net equity tax for a period of three years and a new voluntary disclosure regime has also been introduced — a clear indication that the government is serious in its efforts to improve compliance and its willingness to look at approaches that favor the compliant taxpayer.
Finally, we discuss how the Australian government is taking the transparency and anti-avoidance agenda forward. Australia has been at the forefront in driving the Organization for Economic Co-operation and Development’s (OECD) agenda for base erosion and profit shifting (BEPS). Their recent introduction of their Multinational Anti-Avoidance Law (MAAL) and their diverted profits tax (DPT) highlights their determination to augment the tools available to deal with perceived abuses by multinational groups. We look at how these rules might affect multinational insurance groups, particularly in the context of cross-border reinsurance transactions, and we suggest some practical steps they should take to protect their position.
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