Insurance Europe: More clarity needed in latest OECD tax avoidance paper

12 September 2018

Insurance Europe supports the efforts of the Organisation for Economic Co-operation and Development to tackle tax avoidance through its base erosion and profit shifting (BEPS) initiative.

In its recent response to the OECD’s BEPS consultation on the transfer pricing aspects of financial transactions, Insurance Europe called for greater clarity in the OECD’s paper to ensure that the guidance is correctly applied.

General comments:

• Insurance Europe recommends applying existing Chapter 1 guidance to captive insurance, rather than introducing special guidance. This is because Chapter 1 guidance already sets out the principles for the delineation and recognition of transactions. In cases where the Chapter 1 analysis leads to the conclusion that the captive insurer's business is other than that of insurance, Chapter 1 also gives guidance on how to recharacterise the transaction. 
• If special guidance for captives is considered necessary, Section E should begin by a more detailed description of captive insurance and captive insurance transactions, to properly differentiate these from other forms of (re)insurance between members of a regulated insurance group.  
• Insurance Europe notes that the entire Section E refers to MNE groups and their members. In the absence of further clarification, Section E guidance would therefore also end up applying to intragroup reinsurance between members of a regulated insurance group or intra-group retrocession in a regulated reinsurance group. 
• Providing additional clarity would ensure that the guidance is properly focussed on non-insurance MNE groups in which a company provides (re)insurance to other group members (as Insurance Europe understands is the OECD’s intention).  
• Insurance Europe disagrees with the statement in paragraph 163 that a captive insurance company does not provide insurance but rather insurance-type services.

Response

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