Tax and regulatory news

Latest on Airmic's global compliance database Airmic, the UK risk managers' association, has had over 100 members sign up for its global compliance database. John Hurrell, Chief Executive, Airmic, said the association would be working with Ferma and RIMS over the coming months to ensure that the opportunity is given to their members to have access to the global database. "Compliance is a critical issue for our members as regulators take a greater interest in the affairs of multinational companies, said Mr Hurrell, adding: "And it is a wider issue than just insurance." Speaking at the launch of ACE's global programme survey, Mr Hurrell said: "The level of complexity in trying to keep up with global compliance in more than 200 countries is more of a challenge that anyone can meet, and we would commend to the insurance industry to engage more with international regulators and try to get some sort of transparency and consistency around the reporting requirements around the world to make it easier to comply. Basically, companies want to comply and be good local citizens but it is becoming so challenging."hideFrance to raise IPT on legal expenses contracts The French government has proposed to raise the rate of Insurance Premium Tax (IPT) on insurance contracts relating to legal expenses from 9% to 11.6%, according to FiscalReps. The announcement was made during the 2015 Budget presentation (Projet de loi de finances pour 2015) on 1 October, 2014 at the Ministry of Finance. Parliament will vote on the matter in the next couple of months, and FiscalReps said it is anticipated that the rate increase will take effect on 1 January, 2015. The French government's aim is to collect an additional €25m per annum on this type of contract. For reference, said FiscalReps, the total amount of premiums sold in 2012 in respect of insurance contracts relating to legal expenses was €970m. Bahamas: insurance exemption from VAT? The troubled birth of a VAT system in The Bahamas is reaching a conclusion, but there is still some doubt about the exemption for insurance, according to FiscalReps. "It appears from the latest draft of the legislation that the tax will be introduced on 1 January, 2015, with an exemption for financial services which includes life insurance policies and annuities/savings plans. However, the intention is to tax general insurance, with an 'introductory' exemption applying only until 30 June, 2015," said FiscalReps. It added that zero rating will apply to all insurance if the insured is outside The Bahamas, except where the (general) insurance relates to a property in The Bahamas or to a vehicle, ship or aircraft registered in The Bahamas when the introductory regime will apply prior to full taxation from July 2015. "Interestingly, import VAT is payable on imported services-even by a natural person," said FiscalReps. "So from 1 July, 2015 it appears as though the insured will need to make an import declaration and pay 7.5% VAT on insurance premiums, directly to the Comptroller within seven days of paying the premium to an overseas insurer. For an insured business in The Bahamas there will be a deferment regime to allow the VAT to be paid on a VAT return, subject to conditions." TMF Group IPT Update The TMF Group has published its latest Insurance Premium Tax (IPT) Update, which reveals: All domestic insurance policies in The Bahamas are exempt from VAT until 30 June, 2015. From 1 July, 2015 the exemption will continue to apply only on reinsurance and life policies and all other policies will be taxed. The Italian motor IPT rate is increased in the province Medio Campidano from 1 November, 2014. The UK's Flood Re levy plans for domestic property and fire policies are still on track for implementation in summer 2015. Stamping Fee will be increased on surplus lines policies in Illinois in the US, effective on or after 1 January, 2015. The Danish government proposes to introduce annual duty on insurance premiums for indemnity insurance policies from 1 January, 2015. Ireland reaffirms 12.5% corporate tax rate Deloitte has reported that Ireland's budget 2015, presented on 14 October, 2014, has reaffirmed the government's commitment to the 12.5% corporate tax rate, but also includes an announcement that the 'double Irish' structure will be abolished and a broad range of measures introduced to provide a competitive alternative to the double Irish regime. ASEAN insurance regulation report from AM Best Integration of insurance markets among the 10 member states of the Association of Southeast Asian Nations (ASEAN) has a long way to go, according to a special report from AM Best. It said: "Prospects for closer connectivity in a region presenting vibrant growth give insurers and regulators an incentive to focus on boosting competitive strategies." The report looks at the relative strengths of regulatory systems, new business and capital attractions and economic fundamentals, as well as their prospects for success in terms of market and business competitiveness. ASEAN comprises Brunei, Cambodia, Myanmar, the Philippines, Laos, Indonesia, Malaysia, Singapore, Thailand and Vietnam. Best explained that the proposed ASEAN Economic Community (AEC) slated for 2015 aims to create a competitive economic region with a single market and production base by facilitating the free flow of goods, services, investments, skilled labour and capital. ECJ ruling on VAT to hit financial services firms Banks, insurers and other financial services firms across Europe face extra VAT costs running into hundreds of millions of pounds in the UK alone, following a European Court of Justice (ECJ) judgement, according to PwC. The ruling means services supplied between a group's headquarters and its branches may now be subject to VAT. The judgement concerned Skandia America Corporation and the Swedish Tax Authority. Other tax authorities across the EU will now consider how they implement the rules. Stephen Morse, tax partner at PwC, said: "The case significantly expands the VAT net for financial services firms. Banks and insurers are likely to be affected most. It's standard for head office costs to be shared between a group's subsidiaries. Any internal costs between a firm's branches will now face VAT, rather than just the external costs. Many financial services firms will see their VAT bills soar." AM Best gets approval in Mexico AM Best America Latina has received approval from the Comision Nacional Bancaria y de Valores (CNBV) to be a registered rating agency in Mexico. Best said that it has established a subsidiary office in Mexico City under the leadership of Andrea Keenan, Managing Director of AM Best America Latina, and Alfonso Novelo, Director of Rating Analysis. The move was the result of a new regulatory framework being implemented by the Comision Nacional de Seguros y Fianzas (CNSF), under which all Mexico insurance companies will be required to have a national scale rating from a CNBV-regulated rating agency beginning in April 2015. FiscalReps explains Greek motor taxes FiscalReps has reported that there are three main taxes or levies in Greece related to motor insurance. Insurance Premium Tax (IPT) is the first with the rates being 10% (and 20% for fire etc.) which is paid to the competent Tax Office. Secondly, there is the TEA EAPAE (Occupational Insurance Fund of Insurers and Personnel of Insurers Companies) with a contribution rate of 2%, paid directly by insurers. It is proposed that TEA EAPAE will be abolished before the end of this year, said FiscalReps. The third tax that motor insurance companies need to pay is the MGF (Motor Guarantee Fund) which takes a contribution of 6% calculated on the registered gross premiums for third party liability insurance related to car, and 70% of this is paid by insurance companies and 30% by the insured. FiscalReps explained: "In addition, motor insurance companies still need to pay the 0.6% contribution of the TEO, described as such on invoices. TEO as a body was abolished on 26 March, 2014, but previously there was a contribution of 1% of the net premiums of the auto industry. 0.4% was apportioned in favour of the TEO and 0.6% was paid to the MGF. The 0.4% is no longer chargeable as the TEO no longer exists, but the 0.6% remains payable to the MGF even though it may still be charged as 'TEO'." New regulations to strengthen Omani insurance industry The Omani insurance industry will be strengthened by new regulations requiring Omani insurers to be listed on the Muscat Securities Market and maintain capital of at least OMR10m ($26m), according to Moody's Investors Service. Moody's said the new requirements from the Capital Market Authority will improve insurance companies' access to capital markets, enhance transparency and stabilise the insurance market overall. In 2013, large local groups, such as Dhofar Insurance Co. and National Life & General Insurance Co., dominated the market, with the top five groups accounting for 61% of market premium, said Moody's, adding that volatility of market performance remains high, driven to some degree by catastrophe losses. "However, both the issuance of takaful (Islamic insurance) licences and the new capital requirements could reduce volatility by encouraging growth in new market segments and/or encouraging consolidation among smaller players whilst also posing a barrier to new entrants," said Moody's. IPT rate complaint in France FiscalReps has said that the French Constitutional Council will have to take a position on the Insurance Premium Tax (IPT) rate applicable to fire risks for private buildings dedicated to private school use. This follows a decision taken by the Cour de Cassation considering a complaint from Mutuelle Saint-Christophe, a mutual organisation specialising in the insurance of this type of building. Premiums covering fire risk for private buildings dedicated to school use currently attract the default fire IPT rate of 30%, while the same premiums for state-owned buildings used for public schools are taxed at 7% according to article 1001 (1) of the French Tax Code. "The complaint is that this difference in tax treatment could be considered as contrary to the principles of equality before the law and public charges," said FiscalReps. "Furthermore, the high rate may discourage the insurance of fire risk of private buildings dedicated to private school use. As such, the Constitutional Council is now asked, through a priority question, whether both public and private schools should apply the same IPT rate on premium covering fire risk." Indonesia passes new insurance law The Indonesian parliament has passed a new law on insurance, which, according to Norton Rose Fulbright, sets out a comprehensive regulatory framework for Indonesia's insurance sector. "In addition to providing greater regulation of the insurance business, the new law also has an underlying nationalistic sentiment, evidenced by the approach to foreign ownership. Whilst any change to maximum foreign ownership levels (currently 80%) has been held over until an implementing Government Regulation is issued, which will happen within 30 months, the New Insurance Law does introduce several fundamental changes that foreign investors need to consider carefully," said Norton Rose Fulbright. Under both the old law and the new law, Indonesian shareholders must hold at least 20% of the issued capital of any joint venture IBC, while foreign shareholders can hold up to 80%. "Under the Old Insurance Law, the Indonesian shareholders of an IBC could be Indonesian citizens and/or Indonesian legal entities fully owned by Indonesian citizens and/or Indonesian legal entities. The New Insurance Law has removed the italicised words meaning that an Indonesian corporate IBC shareholder must now ultimately be fully-owned by Indonesian citizens in order to qualify as Indonesian. This now makes unlawful the use of the dual-layer PMA structure which foreign entities have utilised to ultimately own 100% of an IBC," the law firm explained in a briefing note. It said that since many joint venture insurance companies operating in Indonesia are currently fully controlled by foreign investors through utilising a dual-layer PMA structure to own shares in excess of the FDI limit of 80%, 'this change in law could have a major impact'. Insurance Europe briefing on insurance regulation Insurance Europe has published an Insight Briefing entitled Insurers, Regulation & Stability, which said that regulations should help not hinder insurers in their central role of promoting stability and economic growth. "Following the financial crisis insurers are subject to more regulatory scrutiny than ever before on a local, European and global level. As an example, over the tenure of the last European Commission 130 legislative initiatives were proposed that had a bearing on insurers either directly or indirectly. While recognising the important role of effective, well thought-out regulation, insurers are concerned that certain areas of regulation could make it more difficult for them to continue to provide long-term investment," Insurance Europe said. Insurance Europe added: "Much regulation also appears to take its basis from banking regulation, which was designed for a completely different industry. It is crucially important for regulators to fully understand and take into account the nuances of the insurance industry when designing its regulation, both to properly protect policyholders, as well as ensuring that insurers are not unnecessarily overburdened, or discouraged from making their crucial contribution as long-term investors in the European economy."

Tax and regulatory news

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