There are a few upcoming regulatory tax projects that will affect the Swiss insurance industry. On a global level these include the latest tax risks facing the industry in light of the OECD’s base erosion and profit shifting (BEPS) reports.
Among others, BEPS will affect the following fields:
BEPS is designed to give the tax authorities the tools to address inappropriate tax planning strategies and increase the transparency of insurance groups’ global tax affairs. All these developments will lead to greater controls, disclosures and challenges in managing their global tax risk and reporting requirements.
The international tax initiatives will materially affect Switzerland’s taxation landscape over the next few years. These challenges and their impact on Swiss insurance companies need to be analyzed carefully to transform them into opportunities, including:
Developments in the Zurich insurance tax practice: In November 2015, the tax practice regarding recording of lump-sum provisions on securities has been strengthened. Insurance companies need to consider addressing the details of the new practice upfront with the cantonal tax authorities, under consideration of the company’s general loss situation and business projections and, more notably, the upcoming Swiss Corporate Tax Reform III.
Swiss Corporate Tax Reform III (CTR III): CTR III is an important reform package with the aim of retaining and enhancing Switzerland’s competitiveness as a business location in the light of international developments. The Swiss public will vote on the CTR III in February 2017. If accepted by the Swiss voters, CTR III would be effective as of 1 January 2019. As of the effective date, certain types of privileged tax status—such as a holding company or mixed company—would be repealed, and new internationally accepted tax incentives would be implemented.
Certain aspects potentially would be of interest for Swiss insurance companies:
BEPS and country-by-country (CbC) reporting: Switzerland will implement CBCR in 2018. To reduce the overall risk, it is imperative to assess how the CBCR aligns with the transfer pricing documentation.
BEPS and ruling exchange: As from 2018 onwards, Switzerland will conduct a (spontaneous) exchange of information with other countries concerning tax rulings. This is applicable to tax rulings that were approved from 2010 onwards and are still in force in 2018. Many Swiss insurance companies have tax rulings in place. Careful analysis regarding the potential impact of the information exchange needs to be conducted and decisions need to be made on whether a tax ruling should be withdrawn.
The BEPS project affects local tax legislation in Switzerland, EU tax legislation (e.g., EU draft Anti-Tax Avoidance Package) as well as a tax authority’s behavior in performing tax audits. All these changes need to be anticipated early by the Swiss insurance industry in order to consider any potential tax and reputational risks. Insurance company boards, not only their global tax directors, may need to devote greater time to discussing tax issues than as in the past. Failure to properly prepare could result in unexpected tax assessments, reputational risk and a competitive disadvantage.
Read a November 2016 blog report prepared by the KPMG member firm in Switzerland: Impact of global and Swiss tax changes on the insurance industry
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