The Organisation for Economic Co-operation and Development’s anti- base erosion and profit shifting (BEPS) initiative is changing the international tax environment. Cross-border structures which are currently regarded as tax efficient may become less so as the BEPS recommendations are implemented. In response to these changes, many groups are considering whether they need to restructure to adapt. However, the steps associated with restructuring are often complex and multi-jurisdictional, with the potential to carry significant tax risks.

1. How tax insurance is helping
companies adapt to BEPS
The Organisation for Economic Co-operation and Development’s
anti- base erosion and profit shifting (BEPS) initiative is changing the
international tax environment. Cross-border structures which are currently
regarded as tax efficient may become less so as the BEPS recommendations
are implemented. In response to these changes, many groups are
considering whether they need to restructure to adapt. However, the steps
associated with restructuring are often complex and multi-jurisdictional,
with the potential to carry significant tax risks.
Keycoverage
In response, Aon clients are using tax insurance to underwrite the tax
treatment of their internal reorganisations, “locking in” the expected tax
treatment and shielding themselves from unexpected costs if this treatment
is challenged. Able to benefit from over EUR 500 million of coverage for a
single tax issue, coverage is linked to a steps paper (typically drafted by a tax
adviser or law firm) and covers taxes which may arise if the anticipated tax
treatment described in the paper is not achieved.
The kinds of steps tax insurance can cover include transfers of assets
and entities within a group, transfers and releases of intra-group loans,
migrations of tax residence, mergers or liquidations of entities, distributions
and returns of capital.
Typically, insurance covers any unexpected taxes, as well as associated interest
and penalties. Contest costs can often be covered, as can
tax payable on receipt of insurance proceeds. Policies tend to be governed
by English law, but Aon can arrange local law contracts
in many EU jurisdictions.
Aon clients are
using tax insurance
to underwrite
the tax treatment
of their internal
reorganisations.
For the attention of: tax directors, finance directors, risk managers
Risk. Reinsurance. Human Resources.
Aon Risk Solutions
Global Broking Centre | Financial & Professional Services

2. Coverage is suited to low probability, high quantum risks, particularly
those which turn on an uncertain point of law. Risks which turn on
facts (such as residence and permanent establishment risk) are
potentially insurable, provided the underwriter is given the time
and information to carry out due diligence.
Disclosable or tax avoidance motivated transactions fall outside the
scope of coverage, as do situations where the client is reliant on
non-discovery of challenging tax issues. There must be a robust,
defensible legal position for coverage to be obtained.
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The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavor to
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in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
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For more information
please contact:
David McCann
+44 (0)20 7086 7071
david.mccann@aon.co.uk
Anka Taylor
+44 (0)20 7086 4833
anka.taylor@aon.co.uk
Risk. Reinsurance. Human Resources.
Aon Risk Solutions
Global Broking Centre | Financial & Professional Services