KPMG Meijburg & Co FS insurance seminar Branche expertise verzekerd

KPMG Meijburg & Co FS insurance seminar ‘Branche expertise verzekerd’

27 mei 2014

Welkom en introductie


transparantie

crisis

AIFMD

digitalisering

Solvency II

toezicht & regelgeving

leadgeneration

provisieverbod

consolidatie

OESO

tax fairness debat

FATCA

SEPA

‘woekerpolissen’

IFRS IV

kostenefficiëntie

outsourcing

©2014 KPMG Meijburg & Co, belastingadviseurs, is een samenwerkingsverband van besloten vennootschappen en maakt deel uit van KPMG International Cooperative ("KPMG International"), een Zwitserse entiteit. Alle rechten voorbehouden.

EU

Programma

Onderwerp 15.00 – 15.05


15.05 – 15.40

Internationale ontwikkelingen binnen de EU en OESO en de impact hiervan voor verzekeraars

15.40 – 16.30

Fiscale aspecten van Solvency II en IFRS IV

16.30 – 17.00

Longevity risk management

17.00 – 17.10

EU-claims

17.10

Afsluiting & borrel

Spreker Gert-Jan van Norden Vinod Kalloe Frank van den Wildenberg & Bart Jimmink Ing Tai Ching (AEGON) Niels van der Wal


Internationale ontwikkelingen binnen de EU en OESO en de impact hiervan voor verzekeraars

Recent developments 2013 going forward to 2015

■ No substance ‘Letterbox’ companies

■ No risks, no functions, no activities

■ Bermuda Tax Havens

■ British Virgin Islands ■ Cayman Islands

OECD

■ fight against base erosion, profit shifting: 15 points

EU

■ fight against base erosion profit shifting: 15 points

■ Others

Paying too little corporate income tax

International mismatches

■ Relative to total turnover ■ ‘Fair share’ ■ Eroding ‘fair share’ in developing countries

■ Hybrid entities ■ Hybrid financial instruments

■ Lack of corporate tax transparency Transparency

■ Lack of effective exchange of tax information


Country specific

■ Unilateral anti-abuse measures

Tax and morality on a sliding scale

Term

Legal basis

Regimes

Yardsticks

Tax fraud

Criminal law

Deliberate false or misleading statements (EC)

Legally wrong

Tax evasion

Tax law

Illegal arrangements by hiding income or information (EC)

Legally wrong

Tax avoidance

EU case law

Tax incentives

Legally wrong

EU code of conduct

200+ decisions

Politically wrong

OECD forum on harmful tax competition

Rules and practices

State aid Tax avoidance


Tax and morality on a sliding scale

Term

Legal basis

Regimes – examples

Yardsticks

Tax avoidance, aggressive tax planning

‘Could strictly be legal but in contradiction with the spirit of the law’ (EC)

Mismatches/hybrids

Politically wrong?

Using tax havens Shifting profits without real economic reality

Tax optimization

Holding company to reduce withholding taxes

Tax efficiency

Value chain: manufacturing, procurement, R&D, sales and logistics

Tax compliance

Using regular tax deductions (R&D, depreciation, etc.)


Morally wrong?

EU 15-point action plan? (1)

EU institution

Action point

Objective

European Parliament

Resolutions on aggressive tax planning

Advisory to Commission and Council

European Commission

1. Communications on aggressive tax planning

Timing 2014 2012-2015

2. Tax havens

Coordinated blacklisting

2014

3. Digital economy expert group

Recommendations

2014

4. EU platform on good governance (CSR)

Influencing taxpayer behaviour

2015

5. EU state aid task force aggressive tax planning

Review public debate and companies, country survey, patent boxes

2014

6. EU joint transfer pricing forum

Model instruction for spontaneous exchange of information

2014


EU 15-point action plan? (2)

EU institution

Action point

Code of conduct group

7. Anti-hybrids

2014

8. Switzerland

2014-2018

9. Guidance notes for tax regimes

Objective

EU political agreement

10. Patent boxes Working group

11. Parent subsidiary directive amendment

Timing

2014 2014

Anti-hybrid and GAAR

2014

EU law Working group

European Council

12. EU common consolidated corporate tax base (CCCTB)

Negotiations?

13. EU financial transaction tax (FTT)

Enhanced cooperation?

2016

14. EU mutual assistance directive

Proposal for automatic exchange of information

2015

15. EU country-by-country tax reporting (CbCR)

Public disclosure

2016


2036?

OECD base erosion, profit shifting 15-point action plan (1)

Action 1

■ Address the tax challenges of the digital economy (Sept. 2014)

Action 2

■ Neutralise the effects of hybrid mismatch arrangements (Sept. 2014)

Action 3

■ Develop recommendations regarding the design of CFC rules (Sept. 2015)

Action 4

■ Limit base erosion via interest deductions/other financial payments (Dec. 2015)

Action 5

■ Counter harmful tax practices ■ Include compulsory spontaneous exchange of rulings ■ (Sept. 2014-Dec. 2015)

Action 6

■ Prevent treaty abuse (Sept. 2014)

Action 7

■ Prevent artificial avoidance of PE status (Sept. 2015)


OECD base erosion, profit shifting 15-point action plan (2)

Action 8

■ Ensure that profits associated with the transfer and use of intangibles are appropriately allocated in accordance with value creation

Action 9

■ Prevent BEPS by transferring risks, or allocating excessive capital to group members, align returns with value creation

Action 10

■ Other high-risk transactions: re-characterise transactions, management fees and head office expenses (Sept. 2015)

Action 11

■ Establish methodologies to collect and analyse data on BEPS (Sept. 2015)

Action 12

■ Recommendations for mandatory disclosure rules for aggressive tax planning and design model for exchange of information of tax schemes between tax administrations (Sept. 2015)

Action 13

■ Re-examine transfer pricing documentation: and include CbCR in master file (Sept. 2014)

Action 14

■ Make dispute resolution mechanisms more effective (Sept. 2015)

Action 15

■ Develop a multilateral instrument (Dec. 2015)


Tax in the international arena

Tax in the international arena

OECD member

Not OECD member

EU members

AT, BE, BG, CZ, DK, EE, FI, FR, DE, EL, HU, IE, IT, LT, LU, NL, PL, PT, SK, SI, ES, SE, UK

CY, HR, LV, MT, RO

G20

CAN, JAP, USA MEX, KOR,TUR, AUS FR, DE, IT, UK, (EU)

BRA, CHI, IND, RUS, SA INO SAU, ARG

G8

CAN, JAP, USA FR, DE, UK, IT

RUS

BRICS MIST

BRA, CHI, IND, RUS, SA MEX, KOR, TUR

Following? Others

INO MAL, THA, SIN, VIE, SA

SWI, CHIL, ICE, ISR, NZ, NOR

HK GCC (including UAE, Abu Dhabi and Dubai) Caribbean and Latin America ASEAN (BRU, MYA, CAM, LAO, PHI) African countries


EU – OECD – G20 – G8 – Focus: tax transparency

Transparency and exchange of information International mismatches (hybrids) Transfer pricing

Anti-abuse provisions Harmful tax practices Tax havens Digital economy and taxation Influencing taxpayer behaviour


Tax transparency – Transparent to whom?

Transparent between taxpayer and tax administration: mandatory disclosure rules and OECD CbCR

Transparent between tax administrations: exchange of information

Transparent to the public: mandatory CbCR

Transparent to the public: voluntary CbCR


Example 1: transparency between taxpayer and public (mandatory)

EU institution

EU action plan – Point 15

Objective

EU Council

EU country-by-country tax reporting

Public accountability on tax arrangements and payments

Timing

1.

Extractive industries (US Dodd-Frank act)

2016

2.

Banks (CRD-IV package)

2015

3.

All multinationals?

2018


Example 2: transparency between taxpayer and public (voluntary)

NGOs

Action point

Objective

Transparency initiative

Examples:

Public accountability on tax arrangements and payments

Extractive industry transparency initiative (EITI) Oikos Tax justice network Many others

■ BHP Billiton ■ Shell ■ Vodafone

■ RBS ■ Statoil ■ Rio Tinto ■ SABMiller ■ HSBC ■ Carlsberg


Timing

Now

Comparative overview of CbCR initiatives

Nature of reporting

Entitlements

Payments to government

Names of entities, nature of activities and geographical location Host government's production entitlements National state-owned company production entitlement Royalties Dividends Bonuses (signature, discovery, production etc.) Fees (license, rental, service etc.) Infrastructure improvements Payments in kind Taxes on profit or loss Accrual basis Cash basis ! Withholding tax paid Other taxes on income, profit or production Profit or loss before tax Revenues Number of employees Total employee expense Stated capital and accumulated earnings Tangible assets other than cash or cash equivalents Public subsidies Intercompany payments (interest, royalties, service fees) Legal entities Place of effective management Important business activities

EU accounting and transparency dir.

Dodd-Frank act

CRD IV

BEPS action plan – Point 13

O P P P P P P P P ? P O P O O O O O O O O O O O

O P P P P P P P P ? ? O P O O O O O O O O O O O

P O O O O O O O O ? ? ? ? P P P O O O P O O O O

P O O O O O O O O O P! P! O P P P P P P O P P P P


Example 5: Transparency between tax administrations

OECD


Timing

1. Counter harmful tax practices OECD forum on harmful tax competition

Review report (Sept. 2014) + revision of harmful criteria (Dec. 2015)

2. Including

Strategy to expand participation to non-OECD members (Sept. 2015)

a. Compulsory spontaneous exchange of rulings and unilateral APAs b. Requiring ‘substantial activity’ for any preferential regime EU in parallel

■ EU code of conduct group ■ EU joint transfer pricing forum

Model instruction for spontaneous exchange of information on rulings and unilateral APAs

■ Committee on administrative cooperation for taxation (CACT)

2014


EU – OECD – G20 – G8 – Focus: hybrids




OECD BEPS anti-abuse provisions


OECD

■ BEPS 2: neutralising the effects of hybrid mismatch arrangements

Timing

Sept. 2014

■ BEPS 5: hybrid branches EU

■ Amending parent subsidiary directive

2014

EU

■ Code of conduct proposals to close mismatch arrangements (hybrid entities, hybrid permanent establishments)

2014


EU – OECD – G20 – G8 – Focus: anti-abuse




OECD BEPS anti-abuse provisions

OECD

BEPS action plan – Point 4 ■ Limit base erosion through interest deductions and other financial payments ■ Develop recommendations for designing limitations on excessive interest deductions or financing the production of exempt or deferred income


Timing Sept. 2015

EU – OECD – G20 – G8 – Focus: harmful tax practices




Harmful tax practices

EU Council: code of conduct for business taxation

EU Commission: state aid investigations

OECD BEPS: forum on harmful tax practices


Example 1: EU state aid?

Amazon US

Payments for technologies Amazon Europe Holding Technologies [partnership] Luxembourg

2012 tax: nil (exempt)

Payments for technologies European sales support

Cost-plus fee

Amazon EU SarL Luxembourg

Sales support services 2012 profits: €10m

2012 sales revenues: €12bn 2012 profits: €30m 2012 tax:€8m 300 FTEs

Customer sales transactions

2012 tax: €3m European customers


Example 2: EU state aid?

US Inc IP transfer

Dividends

Bermuda

X Ireland Holdings

X Ireland Ltd

Fee

USA

Royalties

Royalties X Netherlands Holdings BV

Customers (EU/Japan)


Ireland

Netherlands

Example 4: ruling practices

EU state aid investigations

Multiple jurisdictions

Based on public information in newspapers/parliaments

Procedure?


Harmful tax practices

EU Council : Code of Conduct for business taxation

Insurance, reinsurance and captive insurance • 1999 EU Code of Conduct report: Harmful where it appears that the level of tax effective reserves which is permitted may be in excess of the real underlying risks; or where there is an exceptionally long deferral of taxation on insurance profits; or where there is a special regime of exemption or reduced rate or fixed base taxation for certain types of business. • The Group also noted that some of the exempt and offshore company measures and of the financial services, group financing and royalty payments measures that have received positive evaluations can be used by companies carrying on insurance or reinsurance business. • Harmful: B007 Provisions for fluctuations in reinsurance Luxembourg; B008 Aland Islands Captive Insurance Finland; B12 Exempt (offshore) Companies and Captive Insurance Gibraltar; F23 Captive Insurance – Netherlands Antilles; F32 Captive Insurance – Aruba; F42 Offshore Insurance companies – Guernsey; F43 Insurance companies – Guernsey; F48 Captive insurance companies Jersey; F 63 Exempt insurance companies – Isle of Man


Concluding

Future outlook on global tax coordination efforts?

2015

2016-2018

2018

Final OECD and EU reports

Implementation

Evaluation


Onwards? OECD / EU Unilateral

OECD and EU expected results?

Transparency – CbCR and automatic exchange of information

Hybrids – closing of possibilities

Conduits – anti-abuse provisions (unilateral and treaties)

Enhanced transfer pricing documentation and audits

Patent/IP boxes: nexus and significant development/management


Global tax future outlook?

Attempts at global tax coordination

Signs of fragmented implementation

Leading to ever more complexities where business

grows more global while taxes remain local


Global tax future outlook?

Signs of fragmented implementation

Unilateral actions by countries

Increased risk of tax disputes

Non-effective dispute resolution mechanisms


Navigating through fast-changing landscapes – business responses?

Sustainable tax planning: substance and transparency-based Increasing need for tax risk management Enhancing transfer pricing strategy and documentation Increasing tax transparency and CSR Enhancing relationship with tax authorities


Q&A

IFRS IV Phase 2

Insurance Contracts • 20 June 2013: – Re-exposure draft published 25 October 2013: Comment period ends

• Overview • Introduction of a comprehensive accounting and measurement model for all insurance contracts • Proposals apply to all insurance contracts, rather than insurance entities, and to investment contracts with a DPF issued by insurers • Model is based on current fulfilment value, including four building blocks • Use of current assumptions and discount rates • Simplified (or ‘premium-allocation’) measurement approach for some short-duration contracts

• 1 January 2017: – Earliest possible effective date • 1 January 2018: – More likely earliest effective date

• Revised definition and accounting for acquisition costs • ‘Mirroring’ approach for some participating contracts, better aligning the measurement of these contracts with their underlying items • New presentation and disclosure requirements


Overview of applicable approach (IASB)

Current fullfilment value

Short duration Pre claims period

Short duration Claims period

Long duration

Premium Allocation Approach

Building blocks without residual margin

Building blocks with residual margin


39

IFRS 4 Phase II – measurement model The four ‘building blocks’

Current fulfilment value

1

Probability-weighted current estimates of contractual cash flows

2

Discounted using current rates to reflect the time value of money

3

Risk adjustments

4

Contractual service margin (residual) (to remove any profit on inception)


40

Fundamentals Building block approach

Initial recognition: Building block 1

Building block 2

Building block 3 #

Building block 4

zero Contractual service (or single) margin Expected cash inflows

Discounting ** Expected cash outflows

Risk adjustment

* Recognised in profit or loss if no contractual service margin ** Effect of discounting could be to either increase or decrease the liability


Building block approach & presentation Initial recognition: Building block 1

Building block 2

Building block 3 #

Building block 4

zero Contractual service (or single) margin Expected cash inflows

Discounting ** Expected cash outflows

Risk adjustment

Presentation of changes in profit or loss and OCI (# IASB only): Changes in cash flows unrelated to services: profit or loss

Unwind of lockedin discount rate: profit or loss

Changes in cash flows related to past and current services: profit or loss

Changes in discount rate: OCI

Changes in risk adjustment: profit or loss #

Changes in cash flows related to future services: Offset against the margin * #


* Recognised in profit or loss if no contractual service margin ** Effect of discounting could be to either increase or decrease the liability

Release of margin: profit or loss Offset changes related to future services #

Comparing the proposals with Solvency II and current accounting

IFRS Phase II versus Solvency II Liabilities Assets

IFRS 4 phase II

Solvency II Surplus

Equity

SCR MCR

Residual margin

Market value of assets

Risk margin

Risk adjustment

Direct acquisition costs

Expected present value of future cash flows


Market consistent value for hedgeable risks

Best estimate for non-hedgeable risks

Fiscale aspecten van IFRS IV

Fiscale aspecten van IFRS IV • Regels voor bepalen technische voorzieningen veranderen ingrijpend • Voor landen waarin de fiscale winstbepaling IFRS volgt (bijvoorbeeld UK) leidt invoering potentieel tot een grote resultaatsprong • Mogelijk dus ook groot cash effect • Overgangsregeling?


Fiscale aspecten van IFRS IV - Nederland • In Nederland zijn goed koopmansgebruik en BWRV bepalend voor de omvang van de technische voorziening voor de fiscale jaarwinstbepaling • Artikel 2 BWRV: 1. 2.

De premiereserve wordt berekend naar de grondslagen die worden gehanteerd bij de bepaling van het tarief waarop de verzekeringen zijn of worden gesloten. Een omrekening van de premiereserve naar in totaal zwaardere grondslagen wordt in aanmerking genomen indien: a. b.

de omrekening betrekking heeft op de gehele verzekeringsportefeuille met uitzondering van het gedeelte dat gesloten is tegen de op het tijdstip van de omrekening voor nieuw te sluiten verzekeringen geldende tarieven, en bij de omrekening en vervolgens voor de toepassing van het eerste lid de volgende grondslagen worden gehanteerd: i. ii. iii.

de op ¼ percent naar beneden afgeronde en met ¼ percent verlaagde gemiddeld behaalde rendement op de gehele beleggingsportefeuille; de sterftetafels die op het tijdstip van de omrekening worden gehanteerd bij de bepaling van het tarief voor nieuw te sluiten verzekeringen; de batepremie die uit de brutopremie wordt afgeleid door deze te verminderen met een bedrag gelijk aan het verschil tussen de brutopremie en de nettopremie voor de op het tijdstip van de omrekening nieuw te sluiten verzekeringen.

• Commerciele verslaggevingsregels dus in principe niet relevant voor fiscale winst


Fiscale aspecten van IFRS IV - Nederland • Om BWRV te kunnen blijven toepassen moeten historische grondslagen worden vastgehouden • Berekening technische voorzieningen voor Solvency II en IFRS zullen afwijken. Is het realistisch dat er nog een apart systeem voor fiscale doeleinden wordt aangehouden? • Als historische grondslagen niet langer beschikbaar zijn, moet voorziening op andere wijze worden bepaald → omrekening

• Regels van artikel 2, lid 2, onderdeel b leiden tot minimaal evenveel praktische complicaties als voortzetten van historische grondslagen: – Wat is gemiddeld behaalde rendement? – Berekening voorziening in latere jaren: opnieuw omrekening of vasthouden van de grondslagen van eerdere omrekening als ‘nieuwe’ historische grondslagen.


Fiscale aspecten van IFRS IV - Nederland • IFRS


Fiscale aspecten van IFRS IV - Nederland • Regels voor berekening premiereserve in BWRV achterhaald? • IFRS regels voor winstdelende polissen veranderen. Anders dan systematiek BNB 2004/59. In overeenstemming met BWRV / Goed koopmansgebruik? • Acquisitiekosten: IFRS behandeling fiscaal aanvaardbaar? • Alternatief? • Meest voor de hand liggend: tax = ifrs • Dan moet IFRS IV wel in overeenstemming zijn met goed koopmansgebruik • Grote waardesprong bij invoering. Overgangsregeling? • IFRS IV: verwachting dat resultaten veel volatieler zullen worden. • Volatiele fiscale winst: – Liquiditeitsgevolgen – Mogelijke verliesverdamping


Fiscale winstbepaling verzekeraars • Zou er gedacht moeten worden aan alternatief voor BWRV? • Initiatief bij MvF / Belastingdienst of bij verzekeraars?

• Wat zijn de wensen uit de sector: – Praktisch hanteerbaar – Geen eenmalige grote impact bij invoering – Volatiliteit fiscale winst dempen

• Alleen aanpassing relevante artikelen of algehele herziening? • Timing


Solvency II

Solvency II - Background • Current regulations are based on the EU Solvency I Directives (latest of those Directives implemented in 2002, but has its origins in the 1970s) • Solvency I has become outdated, for example only requres explicit solvency capital to be held against insurance risks. No specific requirement to hold capital against market, credit or operational risk. • Solvency II will reform solvency requirements for life and non-life insurance undertakings.

• The Solvency II Framework Directive has had to be adapted - through the Omnibus II directive (adopted by European Parliament on March 11, 2014). • European Parliament and the Council agreed that the Solvency II Directive (including the amendments introduced by Omnibus II) should apply as of 1 January 2016


Solvency II – Pillars • Solvency II is closely based on the Basel 3-pillar structure • Pillar 1 covers all the quantitative requirements. This pillar aims to ensure firms are adequately capitalized with risk-based capital. All valuations in this pillar are to be done in a prudent and market-consistent manner. Companies may use either the Standard Formula approach or an internal model approach. • Pillar 2 imposes higher standards of risk management and governance within a firm’s organization. This pillar also gives supervisors greater powers to challenge their firms on risk management issues. It includes the Forward Looking Assessment of Own Risks (FLAOR), formerly known as the Own Risk and Solvency Assessment (ORSA), which requires a firm to undertake its own forward-looking self-assessment of its risks, corresponding capital requirements, and adequacy of capital resources. • Pillar 3 aims for greater levels of transparency for supervisors and the public. There is a private annual report to supervisors, and a public solvency and financial condition report that increases the level of disclosure required by firms.


Solvency II - Pillar I Components


Break-down of quantitative requirements under Pillar 1 The quantitative requirements under Pillar 1 can effectively be broken down into six components: 1. Valuation of assets and liabilities – Harmonized with existing fair value options within International Financial Reporting/ Accounting Standards (IFRS/IAS), as far as possible 2. Technical provisions – The calculation of technical provisions will be based on their current exit value. They will be established as best estimate liabilities plus a risk margin (except in the case of hedgeable risks arising from (re)insurance obligations) 3. SCR –The SCR is designed to project the economic balance sheet in one year’s time following a 1-in-200-year loss event occurring. The SCR covers at least the major risks, insurance, market, credit, and operational risk and will take full account of any risk mitigation techniques that can be demonstrated and would be applied in times of stress. 4. MCR – MCR is designed to be the lower solvency calculation, corresponding to a solvency level, below which policyholders and beneficiaries would be exposed to an unacceptable level of risk, if the insurer were allowed to continue its operations.


Break-down of quantitative requirements under Pillar 1 5. Own funds – BOF is the excess of assets over liabilities as determined by the EBS with any qualifying subordinated debt added back. Some forms of off-balance-sheet finance may receive regulatory approval to qualify as AOF. Both BOF and AOF are allocated to tiers of Own Funds depending on prescribed criteria, and the SCR and the MCR both have rules regarding the extent to which the tiers of Own Funds can be used as coverage of these requirements. 6. Investments – Under Solvency II, there are no prohibitions on classes of assets, but, for all assets held, insurers need to be able to demonstrate that they comply with the prudent person investment principles (PPIP) and that they fully understands the risks involved, makes proper provision for these (via the SCR), and that investment decisions are made in the best interests of the policyholders.


Recognition of deferred tax assets and the tax effect of the stress scenario If insurance companies comply with the recognition criteria set out in IAS 12 they can: • recognize DTA on the SII balance sheet, thus increasing own funds; and

• reflect the tax effects of the 1-in-200 shock when calculating the SCR (known as the lossabsorbing capacity of deferred tax in the context of standard formula firms) thus lowering their SCR. Both aspects may have a material impact on a insurance company’s Solvency II position.


Loss-absorbing Capacity of Deferred Taxes (“LACDT”)  Article 103: The Solvency Capital Requirement calculated on the basis of the standard formula shall be the sum of the following items: (a) the Basic Solvency Capital Requirement, as laid down in Article 104; (b) the capital requirement for operational risk, as laid down in Article 107; (c) the adjustment for the loss-absorbing capacity of technical provisions and deferred taxes, as laid down in Article 108.

 SCR = BSCR + Operational risk - Loss absorb of TP - LACDT  Loss absorbing capacity of deferred taxes: will the shock loss be tax deductible?  If so, will there be sufficient profits from which to deduct it?


Solvency II – LACDT • Loss absorbing capacity of deferred taxes. What about current tax in the shock scenario?  Date of shock loss:  The Standard Formula requires that the loss is instantaneous, which could be interpreted as meaning either on the reporting date, or immediately after it.  With an Internal Model, a 12 month time horizon should be taken and this prospective view implies that the loss should be treated as arising in the period following the balance sheet date.  The main impact of this is in respect of the periods to which the shock loss can be carried back or offset against profits elsewhere in the group.

• Dutch fiscal unity: if an insurance company is a member of a fiscal unity, it will not have receivables on the Dutch tax authorities itself. Will this affect the LACDT? Will an agreement regarding the setting off of taxes within the fiscal unity improve this position? • CEIOPS Advice for Level 2 Implementing Measures on Sollvency II: The adjustment to the basic SCR for the loss-absorbing capacity of deferred taxes is equal to the change in the deferred tax liability and/or asset.


Valuation of deferred tax assets and liabilities  Deferred tax assets and Liabilities to be valued in accordance with International Accounting Standards  Need to demonstrate ‘recoverability’ – Supervisory authority will require demonstration that future taxable profits are ‘probable’  Deferred Tax can take the form of an asset or a liability  Deferred Tax arises where there is a difference between the Solvency II economic balance sheet valuation and the corresponding tax assessed value  Values should not be discounted  DTA’s are amounts of taxes recoverable in future periods: • Deductible temporary differences • Carry forward of unused tax losses • Carry forward of unused tax credits


Own Funds – Tier 3 restrictions  Own Funds (excess of assets over liabilities) • • • •

Net Deferred Tax Asset classified as Tier 3 Basic Own Funds if criteria met Eligible Tier 3 restricted to 15% of total eligible Own Funds QIS5: DTA’s comprised over 50% of Tier 3 capital Eligibility restrictions also apply to MCR

• Consolidation treatment of deferred taxes from participations has a large impact on the group net DTA position • For group solvency calculations, the tier limits should only be applied on group level


Group Issues • The consolidation treatment of participations under Solvency II can be different than the IFRS consolidation treatment . As a result, the netting of DTL from participations on group level could be impacted. • Consolidation is only discussed in the Group Supervision articles (Title III of the Directive) Solo Reporting • No consolidated reporting should be made on solo level, only at group level • Participations should be valued on quoted market prices, or where this is not possible, on the adjusted equity method. As a result the DTA or DTL of a participation cannot be used in netting on solo level Group Reporting • For group entities where DTA and DTL of participations are included on their balance sheet the resulting own funds from the net DTA position are assumed to be not effectively available (Article 323.3.b SCG3, DDA), • unless the entity can demonstrate to the satisfaction of the supervisory authority that this assumption is inappropriate (article 323.3, DDA)


Extent to which the LACDT is recognized

KPMG Technical Practices Survey 2013


DTA sources of income profit

KPMG Technical Practices Survey 2013


Regulators view on valuing tax losses 

Evidencing future profits will generally be more challenging than tax technical aspects



Regulators could challenge the value of tax losses: • • •



Imposing a limit on the number of years of future profits that can be used Challenge a particular item of future profit Probing the assumptions and evidence used to support future profits

Each insurer will need to argue its position individually. Management decision on how tax is being used to reduce SCR


Regulators view: PRA • Supervisory Statement | SS2/14, Solvency II: recognition of deferred tax • Applies to all firms supervised by the PRA - UK life insurers, general insurers and mutuals; not applicable to firms outside the UK • PRA’s proposed Supervisory Statement will be subject to review if EIOPA choose to issue regulations or guidelines on tax, however – the PRA would not include anything in the Supervisory Statement which they expect would be likely to be contradicted. – Nothing appears to be inconsistent with what was included in pre-consultation drafts of level 3 text produced by EIOPA in 2012

• Although in principle not applicable to firms outside the UK, the Supervisory Statement may indicate what the view of other regulators could be


PRA: Supervisory Statement • ‘Judgement’ will be needed by both Firms and supervisors to decide if future taxable profits are ‘probable’ in accordance with IAS 12. The ‘supervisory judgment will be based on knowledge of the firm and information, primarily related to business projections, provided by firms’. • the PRA does not expect a firm to reflect any tax effects of the shock in its SCR calculation if the notes to its statutory accounts disclose that: – it has unrecognised tax losses; and – those tax losses were not recognised because it was considered not probable that future profits would arise against which they might be utilised Rebuttable if it is explained as to why the firm’s taxable profitability would improve to such a material extent after the stress scenario, or why losses generated in the stress scenario might otherwise be expected to be utilized, for example because they relate to a different type of tax or another jurisdiction

• Group relief (the transfer of tax losses to profitable companies in the same group) can be assumed but the impact of the shock on other group companies (including non-SII companies) needs to be considered. • The PRA state that before embarking on complex work, firms should consider if the output will likely be of sufficient quality to be credible. They will be unconvinced by the layering of ever more assumptions, data and complexity in an attempt to support a position


Board oversight of tax methodology

Tax can offer a material saving on capital requirements therefore the Board may want to challenge the tax methodology adopted (for example, can a more beneficial tax position be taken, or, where aggressive positions have been taken, are they happy to bear this increased tax risk? )


Longevity Risk Management

EU-claims

EU-claims – grondslag voor belastingteruggaaf Binnenlandse investering

Belastingplichtige Lidstaat X

dividend -/- kosten belast tegen VPB tarief

Buitenlandse investering

Belastingplichtige Land Y

Effectief geen bronbelasting op dividend

Lidstaat X

15% bronbelasting op dividend

Lidstaat X

• Vpb heffing over netto resultaat versus bronbelasting over bruto resultaat.

Cijfermatig voorbeeld op de volgende slide.

• Deze benadering biedt regelmatig kansen voor (levens)verzekeraars (bijv. unit-linked producten), maar soms ook voor market makers en banken.


EU-claims – cijfermatig voorbeeld Voorbeeld 1

● Bruto inkomen uit portfolio dividend afkomstig uit EU-lidstaat X

100

2

● Economisch (direct) samenhangende kosten

90

3

● Bronbelasting tarief in EU-lidstaat X

15%

4

● VPB tarief in EU-lidstaat X

25%

5

● VPB op netto inkomen

(100 -/- 90) x 25% = 2.5

6

● Claim voor teruggaaf in EU-lidstaat X

15 -/- 2.5 = 12.5

Jurisprudentie Voorbeelden van ondersteunende jurisprudentie: • HvJ EU C-234/01; • HvJ EU C-290/04; • HvJ EU C-265/04; • HvJ EU C-345/04; • HvJ EU C-342/10; • Verzoek (met redenen omkleed advies) van de Europese Commissie d.d. 16 april 2014.


EU-claims – bronbelasting op outbound dividenden Santander arrest (C-338/11 t/m C-347/11)

Buitenlands beleggingsfonds

HvJ EU uitspraak 10 mei 2012

Conclusie: Buitenlandse beleggingsfondsen hebben recht op zelfde WHT vrijstelling als Franse beleggingsfondsen.

Franse FCP/SICAV

Geen VPB Geen WHT

WHT

Frankrijk Co


EU-claims – gevolgen Santander arrest Gevolgen

• Teruggaafmogelijkheid in Frankrijk naar aanleiding van het Santander arrest: vergelijkbare beleggingsfondsen (UCITS/niet UCITS) kunnen hun Franse dividendbelasting vanaf 1-1-2009 terugkrijgen mits een verzoek is ingediend vóór 2015 (en adequaat bewijs wordt geleverd). • Nederlandse Belastingdienst benadert vermogensbeheerders: FBI’s krijgen naheffingsaanslagen dividendbelasting als geen claim wordt ingediend in Frankrijk. Fiscus wil vaststellingsovereenkomst sluiten. • Rente. • In ieder geval over de periode 1 januari 2009 tot 17 augustus 2012 verzorgen Franse paying agents geen teruggaven. • Ook FGR’en die naar Nederlandse fiscale maatstaven transparant zijn, zouden wel eens een teruggaaf in Frankrijk kunnen bewerkstelligen.


Afsluiting

Afsluiting

verzekeringsmarkt

fiscaliteit

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