larity, consistency and
increased scrutiny are
among the key concerns
voiced by the captive
insurance industry with regard to the
Organisation for Economic Co-operation
and Development’s (OECD) base erosion
and profit shifting (BEPS) Action Plan.
While the initiative has been lauded
for its potential to clamp down on
tax avoidance strategies that exploit
gaps and mismatches in tax rules by
artificially shifting profits to low or notax
locations, there are concerns over
various definitions, its application by tax
administrations and potential conflicts
with existing regulations.
Temporary double taxation, a
non-recognition of premiums,
increased costs of administration and
compliance, increased documentation
and reporting, and a greater number of
tax audits are all possibilities that may
flow from increased scrutiny from tax
Many consider the recommendations
from the OECD have essentially
reversed the burden of proof on the
legitimacy of captives, referring to them
as potential vehicles for tax avoidance.
Some industry players even suggest
that BEPS could potentially reshape the
European captives landscape.
“BEPS is arguably the most influential
force in the European captives domain
at the moment,” says Ciarán Healy,
captive consulting & development lead,
EMEA, at Willis Towers Watson.
“This global tax reform is bequeathing
tax authorities with increased new
powers and interrogating the legitimacy
of captives worldwide.”
Healy suggests that BEPS is driving
two emerging trends in Europe: captive
owners moving their captives from
offshore to onshore, and an investigation
into the potential to relocate a captive to
the parent company’s location.
“BEPS has created a considerable
amount of discourse in European
captives circles, with some
organisations committing to a change
of location from the outset. However,
the overriding position of the majority of
captives owners is one of consolidation
and further investigation,” Healy adds.
COVER STORY www.captiveinternational.com
The finer detail of the OECD’s base
erosion and profit shifting (BEPS)
Action Plan is still being negotiated—
but its very existence may already
be changing the captives landscape.
Captive International examines what
the next steps should be.