ameri resources


Need an office in metro Detroit, Alabama or Toronto? Office suites, meeting rooms, virtual offices, network access




free downloads
USA: "A Roadmap to Business Success in Michigan: A Guide to Opportunities and Laws" guide

USA: "A Roadmap to Business Success in Michigan: A Guide to Opportunities and Laws" guide. 104-page report by Honigman.

proceed to download
eJournals





back to index backAMERItalk April,  2017


How to Avoid the Hidden Costs of Corporate Income Tax Liability

You're arranging an insurance program for a multinational company (MNC). You've considered your risk exposures, but have you thought about how much corporate income tax liability could cost you in the event of a loss at a foreign subsidiary?

It turns out that corporate income tax liability " often ignored at insurance strategy and placement stages " is the most significant hidden cost facing MNCs. Increasingly, MNCs are facing scrutiny from local authorities for unpaid premium-related taxes in places such as Canada, the US, Switzerland, and certain EU member states. An MNC could find itself at a loss of millions of dollars as a result of corporate income tax liability, if it is operating in a country where nonadmitted insurance is not permitted.

You may feel safe in the knowledge that you have a local policy to cover some of your liability exposure and a master policy in your home country to cover the rest of your potential maximum loss. However, what you may not know is that if this led to a loss for which you needed to transfer funds to your foreign subsidiary by way of capital injection, it could be challenged by the local tax authorities for additional taxes, such as corporate income tax.  This could lead to double taxation and an unbudgeted cost for your company.

Structuring Insurance Policies to Avoid Tax Liability Surprises 

Luckily, you can take the following steps at the insurance placement stage to avoid surprising hidden costs down the line:

- Evaluate the foreseeable expected/potential maximum loss that each group entity (that has significant operations) could suffer " particularly if the MNC is resident in a country that does not allow nonadmitted insurance.

- Arrange local policy limits equal to this foreseeable expected/maximum potential loss. Where possible, ensure that the local policy wording mirrors the master policy wording, subject to any local laws/regulations and translation issues.

You could also consider the following with regards to your insurance coverage:

- Use a financial interest cover clause in the master and excess policies after understanding the full implications for the MNC.

- Negotiate a tax warranty and indemnity clause to be included in the master policy to mitigate any potential net adverse corporate income tax impact on the insured group.

- Implement a premium allocation methodology for the master and excess policy premiums, based on exposure and the likelihood of a loss exceeding the local policy limits.

- Consider the use of a captive (re)insurance vehicle to support the global insurance program and the appropriate local policy limits.

Taking these steps can help you ensure that the insurance program is "fit for purpose," the potential loss is appropriately covered, and any potential tax issues are mitigated.

Source: Marsh - GAI



previous page

go top
search our site


Loading

AMERItalk

Other articles from the same issue (April,  2017).

North American auto industry needs NAFTA, says Scotiabank
play read on

The Digital Automaker (report)
play read on

Border Adjustment Tax: Estimated Impact on U.S. Vehicle Prices
play read on

Inside Alabama's auto jobs boom: Low wages, little training, crushed limbs
play read on

Location Notebook: Tennessee Automotive on the Road to Prosperity
play read on

The Next Generation of Automotive Sales: 2025 and Beyond
play read on

North American Automotive Production Forecast Summary (Q1-2017) - report
play read on

US Auto Industry Factory Production Falls Most Since August
play read on

Fascinating 1936 Footage of Car Assembly Line
play read on

How to tell if a car or truck is 'American'
play read on

Where the H-1B Visa Program Has the Biggest Impact
play read on

An Innovation-Led Boost for US Manufacturing
play read on

Surprise: Robots Aren't Replacing Humans In Key Areas Of Manufacturing
play read on

Trade Wargaming: Will Your Company Survive the Coming Global Trade War?
play read on

U.S. South, not just Mexico, stands in way of Rust Belt jobs revival
play read on

Why China is likely to stay quiet on Trump's steel probe
play read on

Supply Chain News: Made in USA is Real Trend, but Returning Production to US Shores is not Easy for Many
play read on

Delivering Excellence Globally: Insights into Cost Effective International Packaging
play read on

Time to Review Internal Confidentiality Agreements
play read on

Holding Us Back: Regulation of the U.S. Manufacturing Sector
play read on

Special Report: Commercial Insurance at the Crossroads
play read on

How to Avoid the Hidden Costs of Corporate Income Tax Liability
play read on

Why You Should Spend Dollars on Patent, Trademark Protection
play read on

Gender diversity on US boards in 2017
play read on

North America Tax News and Developments - April 2017
play read on

Employment Authorization Issues Arising From Corporate Restructuring
play read on

American Society of Employers (ASE) releases 2017 Starting Salaries for Co-op Students and Recent College Graduates Survey
play read on

Millennials aren't job-hopping any faster than Generation X did
play read on

U.S. Manufacturing Jobs Increase for Fourth Straight Month
play read on

Germany's Merkel encouraged US will consider EU free trade deal
play read on


Our Free eJournals
GlobalAutoExperts

To visit GlobalAutoExperts Directory, click here.


©2008 GlobalAutoIndustry.com | HCI Group, Ltd.
101 West Big Beaver Road, Suite 1400 | Troy, MI 48084 USA
USA Tel: +1.248.687.1060 | USA Fax: +1.248.927.0347
Fax UK: +44.(0)845.127.4765 | Fax Europe: +31.20.524.1659 | Fax Asia: +852.3015.8120