FR_4xCase Studies_Artwork

Following an internal review, management were unable to fully establish whether all relevant premium taxes had been correctly calculated; furthermore, internal evidence proved insufficient to conclusively prove what premium taxes due had been settled with the appropriate tax authorities.

Internal calculations initially estimated GFSI’s premium tax ‘time-bomb’ at several million US $. GFSI needed a swift resolution.

Upon discovery of the issue, GFSI had to make significant financial provisions for the estimated unpaid premium taxes that were payable. In addition, provisions had to be made for the cost of settling the premium taxes due, which included professional fees, penalties and fines, which were likely to be imposed by local tax authorities.

Mindful of protecting a market-leading reputation, GFSI wanted this issue dealt with promptly, professionally and discreetly, to minimise any negative impact.

GFSI decided to engage FiscalReps to perform a detailed review of company insurance policies. The review’s purpose was to establish the correct amount of premium taxes that should have been paid. Secondly, a thorough reconciliation was performed to identify which premium taxes remained unpaid. FiscalReps

approached the relevant tax authorities and agreed a full and final settlement of the unpaid premium taxes.

Vitally, FiscalReps also developed a series of internal controls which could be adopted by GFSI to ensure the company’s premium tax position remained fully compliant in future.

GFSI was able to save money by reducing the overall unpaid tax provision and settling the remaining premium taxes quickly and efficiently, with minimal penalties incurred.

Following the FiscalReps review, the estimate of total unpaid premium taxes was reduced by nearly US $2m, a considerable tax saving from the original estimate.

At the time of the engagement, GFSI was undergoing a number of important strategic and structural changes. The use of FiscalReps allowed management to remain focused on core business issues at this time. Crucially, the FiscalReps team were able to resolve the premium tax issue without GFSI suffering any reputational damage.

The overall cost of the exercise to GFSI, including settlement of all premium taxes, penalties, interest and professional fees was approximately 20% less than the original estimate of unpaid premium taxes.

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How to defuse a premium tax ‘time-bomb’

A global financial services institution (GFSI) had for a number of years purchased global insurance policies for a range of liability risks covering global operations.

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10 FENCHURCH AVENUE LONDON EC3M 5BN UK

T +44 (0)20 7663 5672 | [email protected] | WWW.FISCALREPS.COM

Why FiscalReps? Since formation in 2003, FiscalReps has been the market leader in the field of international IPT compliance, providing robust compliance solutions for over 200 clients, including many of the world’s largest insurers and captive owners.

With qualified professionals in the areas of finance and insurance, and with extensive experience gained both in the London market and internationally, FiscalReps is able to harness technical skills and market experience to deliver a robust but common-sense IPT compliance solution.

FiscalReps offer a suite of products encompassing Outsourcing, Technology, Consulting and Training solutions to assist clients in achieving and maintaining global compliance.

Mike Stalley FCA, Chief Executive, founded FiscalReps in 2003 after experiencing at first hand the difficulties involved in achieving international premium tax compliance.

To find out how FiscalReps can give you certainty surrounding your organisation’s IPT compliance obligations, please contact us.

We can also speak to you in French, German and Spanish.

Given the size of the property portfolio and premiums, the insurance premium tax (IPT) due was considerable and any tax errors were likely to be material to the captive’s financial performance.

IPT regulations across the European Union are complex but for FMCG it was essential to be able to identify the full cost of insurance, including premium taxes, in an ever-changing corporate environment. Furthermore, compliance failures can be costly as in many countries penalties and fines are punitive when mistakes in tax calculations are made. Many tax authorities are viewing IPT as a source of revenue growth and are taking much greater interest in the tax compliance affairs of their captive insurer taxpayers. Insurers writing business within the European Union have the primary responsibility for IPT compliance.

FMCG, having already engaged with FiscalReps to outsource all of its IPT compliance requirements within the European Union, decided to acquire a number of licences of taxDNA® on a flexible Software-as-a-Service (SaaS) basis.

FiscalReps quickly trained FMCG’s risk managers and brokers to use taxDNA®. FMCG now uses taxDNA® to calculate all relevant premium taxes at renewal, and for any mid-term adjustments, basing IPT calculations on FiscalReps’ in-house maintained tax rate database.

By using taxDNA® FMCG quickly obtained a professional level knowledge of all European Union IPT rates and was immediately able to calculate IPT due on premiums written accurately and consistently, ensuring that no compliance failures were suffered. FMCG was able to save time by having a simple IPT calculation tool at its disposal to calculate taxes quickly and was able to save money by taking advantage of the flexible contract terms offered by FiscalReps under the SaaSlicense option.

FMCG has subsequently expanded the use of its captive to underwrite corporate casualty business and is using taxDNA® to calculate IPT on these programs.

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How taxDNA® helpeda captive manage IPT costs

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A major fast-moving consumer goods multinational corporation (FMCG) owned a captive which was used to underwrite its global property portfolio.

As an insurer in start-up mode, resources were limited and it was essential that all taxes were managed accurately to ensure that no compliance failures were suffered which could affect the future performance and reputation of the fledgling business.

IPT regulations across the European Union are complex and for EUI the initial investment required to obtain the necessary tax skills and information to ensure full compliance was considered to be prohibitive. However, compliance failures can be costly, as in many countries penalties and fines are punitive. Furthermore, many tax authorities are viewing IPT as a source of revenue growth and are taking much greater interest in the tax compliance affairs of their insurer taxpayers. Insurers writing business within the European Union have the primary responsibility for IPT compliance.

EUI, having already engaged with FiscalReps to outsource all of its IPT compliance requirements within the European Union, decided to acquire a number of licences of taxDNA® on a flexible Software-as-a-Service (SaaS) basis.

FiscalReps quickly trained EUI’s underwriters to use taxDNA® and EUI now uses taxDNA® when quoting for all new insurance business, calculating all relevant premium taxes prior to inception and basing calculations on FiscalReps in-house maintained tax rate database. Furthermore, taxDNA® was configured for all insurance products offered by EUI, allowing insurers to search for tax rates by product type, ensuring a consistent tax treatment across the business.

By using taxDNA® EUI quickly obtained a professional level knowledge of all European Union IPT rates and was immediately able to calculate IPT due on all pieces of business written accurately and consistently, ensuring that no compliance failures were suffered. EUI was able to save time by having a simple IPT calculation tool at its disposal to calculate taxes quickly and was able to save money by taking advantage of the flexible contract terms offered by FiscalReps under the SaaSlicense option.

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How taxDNA® helpeda start-up insurer achieveimmediate IPT compliance

A newly formed European Union insurer (EUI) had recently commenced underwriting operations and was wrestling with the tricky issue of insurance premium tax (IPT) compliance and how to make it efficient within their organisation.

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Insurance premium tax (IPT) compliance was always a headache and how to make it efficient within the organisation remained a constant challenge.

As an insurer with profit and return on investment (ROI) targets to meet, resources were focused on the business of insurance; however, it remained essential that all premium taxes were managed accurately to ensure that no compliance failures were suffered which could affect the future performance and reputation of the business, which had a valued brand and reputation within the industry.

IPT regulations across the European Union are complex and for MGI the resources required to maintain the necessary tax skills and information to ensure full compliance was considered to be prohibitive. However, compliance failures can be costly, as in many countries penalties and fines are punitive. Furthermore, many tax authorities are viewing IPT as a source of revenue growth and are taking much greater interest in the tax compliance affairs of their insurer taxpayers. Insurers writing business within the European Union have the primary responsibility for IPT compliance.

MGI, having already engaged with FiscalReps to outsource all of their IPT compliance requirements within the European Union, decided to acquire a number of licences of taxDNA® on a flexible Software-as-a-Service (SaaS) basis.

FiscalReps quickly trained MGI’s underwriters to use taxDNA® and MGI now uses taxDNA® when quoting for all new insurance business, calculating all relevant premium taxes prior to inception and basing calculations on FiscalReps’ in-house maintained tax rate database. Furthermore, taxDNA® was configured for all insurance products offered by MGI, allowing insurers to search for tax rates by product type, ensuring a consistent tax treatment across the business.

By using taxDNA® MGI quickly obtained a professional level knowledge of all European Union IPT rates and was immediately able to calculate IPT due on all pieces of business written accurately and consistently, ensuring that no compliance failures were suffered. MGI was able to save time by having a simple IPT calculation tool at its disposal to calculate taxes quickly and was able to save money by taking advantage of the flexible contract terms offered by FiscalReps under the SaaSlicense option.

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How taxDNA® helpedan insurer manage IPT compliance more effectively

A major global insurer (MGI) with European Union operation had for a number of years written a range of property and casualty business throughout the European Union under the EU Freedom of Services provisions.

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