Tax and regulatory news

Nebraska signs MMoU Nebraska is the latest jurisdiction to join the International Association of Insurance Supervisors' (IAIS) international supervisory cooperation and information exchange agreement. There are now 36 jurisdictions admitted as signatories to the IAIS Multilateral Memorandum of Understanding (MMoU), representing more than 52% of worldwide premium volume. Nebraska is the third US state signatory to the MMoU.hideSouth Korea introduces compulsory Fire Legal Liability insurance South Korea recently announced the introduction of compulsory Fire Legal Liability insurance, described by Willis in a South Korea Regulatory Update, as "another step in the government's continuing effort to protect third parties in public premises". The new law relates to specific businesses located in multi-tenant facilities and took effect February 23, 2013 for new tenants. Existing tenants have until August 22, 2013 before enforcement begins. On premises with an area smaller than 150 square meters, the application of the legislation will be delayed until February 23, 2015 for new tenants and August 22, 2015 for existing tenants. According to Willis, businesses which must purchase this insurance include restaurants and fast food outlets, private educational institutions and internet cafes. The minimum liability limit requirements are: - Property Damage KRW100m (USD92,000) - Bodily Injury - in case of death KRW100m (USD92,000) - Bodily Injury - in case of injury KRW20m (USD18,000) - Bodily Injury - in case of disability KRW100m (USD92,000) Willis explained that local liability policies of global programmes can be extended to include this cover to satisfy the requirement. Alternatively, local insurers will offer stand-alone fire legal liability policies. The Willis Update pointed out that South Korea does not allow insurance policies issued by non-Korean registered insurance companies. The exceptions are: - Life insurance, marine cargo, aviation, travel, hull, long-term casualty and reinsurance; - Where cover has been declined by more than three Korean insurance companies offering the required insurance; - Where the insurance is not available on the local market; - If approval for exemption is obtained from the Financial Services Commission; - Where the contract begins outside of Korea and continues in Korea during the insurance period. Italian tax modification The Italian Tax Office formally notified on April 30 2013 that the data fields requested for premiums and contracts 2012 reports will be modified. Furthermore, the original deadline for 2012 reports of April 30 2013 has been extended to December 4 2013. In future years it will revert to 30 April. (Fiscal Reps) Moody's reports on global insurance solvency regimes Future significant changes to global insurance solvency regimes will not directly affect insurers' ratings, but company responses could have positive and negative credit implications, according to a report from Moody's Investors Service, 'Global Insurance Regulators Battle Doubts and Delays Over Solvency Modernization.' The report examines the likely benefits of Solvency II in Europe, and the Solvency Modernization Initiative (SMI) in the US. "Both regimes are supportive of the interests of insurance company creditors; focusing on addressing missing risks under current rules, encouraging insurers' to improve risk management, and; improving disclosure of certain financial data," said Moody's. But there are challenges to realising these benefits, which have become more apparent as the targeted implementation dates have drawn near. Moody's pointed to the likely delay until January 2016 of Solvency II in Europe even as regional economic stress increases. In the US, the National Association of Insurance Commissioners (NAIC) has made some progress on accreditation standards, and will continue its work on upgrading solvency regulation in 2013. Global insurance solvency regimes will undergo significant changes in coming years, moving toward more principles-based approaches with incentives for improved risk management, said Moody's. It added that Solvency II is very likely to be delayed by two years from January 2014 to January 2016, although there remains a possibility that certain aspects may apply by 2014. "We expect political considerations to play an increasing role in the Solvency II decision process in 2013," said the rating agency. CBI publishes new statement of tax principles for business The UK's Confederation of British Industry (CBI) has published a statement of principles outlining how companies should conduct their tax affairs to improve transparency and understanding, which includes using narrative reporting. The CBI strongly recommends that these principles are followed by British businesses and all companies operating in the UK. The CBI also said it was supporting the important work of the OECD to update some of the international tax rules, "which have lost pace with globalisation". The CBI published a statement of principles to encourage more responsible tax management, including: 1. UK businesses should only engage in reasonable tax planning that is aligned with commercial and economic activity and does not lead to an abusive result; 2. UK businesses may respond to tax incentives and exemptions; 3. UK businesses should interpret the relevant tax laws in a reasonable way consistent with a relationship of 'co-operative compliance' with HMRC; 4. In international matters, UK businesses should follow the terms of the UK's Double Taxation Treaties and relevant OECD guidelines in dealing with such issues as transfer pricing and establishing taxable presence, and should engage constructively in international dialogue on the review of global tax rules and the need for any changes; 5. UK businesses should be open and transparent with HMRC about their tax affairs and provide all relevant information that is necessary for HMRC to review possible tax risks; 6. They should work collaboratively with HMRC to achieve early agreement on disputed issues and certainty on a real-time basis, wherever possible; 7. Firms should seek to increase public understanding in the tax system in order to build public trust in that system. Tax authorities getting fiercer, warns tax advisor Tax planning presents an additional level of risk for multinationals across the globe given the increasing ferocity with which the tax authorities are challenging strategic initiatives, according to Taxand, specialist tax advisors to multinational businesses. Frédéric Donnedieu de Vabres, Chairman of Taxand, told the Taxand global conference 2013, "The number of media headlines focused on tax have been on the rise in recent years, as tax authorities - under instruction from governments with budgets under pressure - ramp up their challenges to the tax strategies put in place by multinationals. Conscious of competitiveness and the need to appear to be stimulating growth, governments have avoided any increase of tax rates, instead focusing on the tax take driven by their tax authorities." He went on, "As a result, we have seen a rise in the number of challenges from the authorities, coupled with an increase in the technical ferocity with which they are carried out. In a relatively short space of time, the range of issues that are called into question during tax audits has grown exponentially, leaving multinationals battling against an ever changing tide of compliance and assessment." South Africa holds back on new SAM solvency regime South Africa has postponed the introduction of its new Solvency Assessment and Management (SAM) regime for insurers. The insurance regulator, the Financial Services Board (FSB), has been developing new standards modelled on the principles of the European Union's Solvency II directive with some adjustments to account for local conditions. The SAM regime was scheduled to take effect in January 2015, but widespread reports in the past week have indicated the new requirements will not be introduced until January 2016 - at the same time as Solvency II is expected to be implemented. It is imperative that the new risk-based framework is rolled out in the next few years, according to A.M. Best. Carlos Wong-Fupuy, senior director, analytics, said the postponement of the proposed deadline for the SAM regime to be implemented will create a breathing space, particularly for small and niche insurers: "In line with Europe, the largest South African insurers have taken the greatest steps to adopt the measures of the new regime and have made significant investments in developing internal capital models. They are likely to incur increased costs as a result of the delay." A.M. Best added that it expects industry consolidation as a result of the SAM regime, with dominant players likely to increase their presence. Companies that are not taken over may have to close to new business, as attracting additional capital in the current unstable economic environment will be challenging, said the rating agency. Romania merges supervision authorities Romania has reportedly merged its supervision authorities for the stock exchange, insurance and private pensions markets into a single entity to meet pledges to the International Monetary Fund, according to Bloomberg. "The approval of the financial authority is one of Romania's pledges to the IMF and needs to be respected," according to Dan Radu Rusanu, a lawmaker from the ruling coalition who will head the office. "My plan, as head of the institution, is to have a non-banking market, valued at about EUR15bn, that is compatible with other European markets." Tax changes around the world noted TMF Group has revealed a number of tax changes in various jurisdictions: - Canada: Prince Edward Island has raised motor insurance levy significantly; - Curacao: Government proposes to increase Business Turnover Tax on insurance premiums; - Fiji: Stamp Duty on Property & Fire and Marine insurance policies have increased; -Spain: A number of new municipalities have come forward and requested the local reporting and payment of Fire Brigade charges; - Sri Lanka: Stamp Duty on all non-life insurance classes has been increased. Guernsey signs DTA with Hong Kong Guernsey has signed a Double Taxation Arrangement (DTA) with Hong Kong. Guernsey has now signed 'full' DTAs with seven jurisdictions. In addition to this DTA with Hong Kong, Guernsey has had a DTA with the UK for many years and has signed DTAs with Malta, in 2012, and earlier this year with the Isle of Man, Jersey, Qatar and Singapore. Guernsey's finance industry has worked closely with its counterparts in China and Hong Kong since 2006, particularly since the establishment of a Guernsey Finance office in Shanghai at the end of 2007. Guernsey signed a Tax Information Exchange Agreement (TIEA) with China in 2010. In 2011, Guernsey businesses were approved to list on the Hong Kong Stock Exchange (HKEx) Fiona Le Poidevin, Chief Executive of Guernsey Finance - the promotional agency for the Island's finance industry, said: "The DTA between Guernsey and Hong Kong further deepens the relationship and offers significant potential for expanding financial services business between the two jurisdictions. The DTA means that individuals or companies with 'home' as one jurisdiction but with interests in the other jurisdiction will have mechanisms in place to prevent them from being taxed by both sets of authorities on the same income. This clarity and certainty on matters of taxation makes it more attractive to conduct business between the two jurisdictions, especially in terms of investment funds, fiduciary services and intellectual property."

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