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The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

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Captive Insurers Offshore Watching Push for Adoption of BEPS Scheme

Global Taxation
October 01, 2015

A September 27, 2015, Wall Street Journal article titled “Crunchtime for Global Tax-Avoidance Push,” written by Paul Hannon, reports that 50 governments are scheduled to agree this fall on the adoption of a new set of tax rules for multinational corporations to rein in so-called tax avoidance schemes. If the rules are adopted and work as planned, according to the article, large corporations will pay tax on profits where they are earned, boosting revenue for governments.

Last week, reported on a presentation at the 16th Annual South Carolina Captive Insurance Association (SCCIA) Executive Educational Conference concerning the implications for captives if the Organisation for Economic Co-operation and Development (OECD) successfully implements its push for base erosion and profit shifting (BEPS).

While Mr. Hannon notes that most governments are in favor of adoption, the devil is in the details. Much less clear is how the new rules will be applied and whether they will significantly boost government revenue as intended. The article goes on to explain that there is considerable resistance to BEPS in the US Congress. The issue there revolves around whether the US Department of the Treasury can institute international rules that have not been codified in US legislation.

As the presenters in South Carolina noted, captives domiciled offshore need to pay close attention to whether BEPS is adopted. Non-US captives should make sure they can articulate the reasons for their domicile decision and successfully show how they are promoting the reduction of risk for their member insureds.

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