Financial and insurance taxes

Elevating your financial and insurance tax solutions

Financial services tax and insurance

Financial services tax

In a period of fiscal consolidation, financial services will continue to be a priority for SARS and many other countries’ tax administrations. This is further emphasised by the G20/OECD Base Erosion and Profit Shifting (BEPS) initiatives designed to limit tax avoidance, harmful practices and aggressive tax planning. The G20’s efforts to build more resilient financial institutions, increase transparency, build market integrity and fill regulatory gaps will continue to add pressure to the responsibilities of tax teams.

A key focus area is the exchange of information between tax administrations. The introduction of the Common Reporting Standard (CRS), which draws extensively on the intergovernmental approach to implementing the Foreign Account Tax Compliance Act (FATCA), is a huge challenge for all reporting financial institutions, i.e. banks, life insurance companies, investment funds and investment vehicles. For banks that keep US securities in custody for their clients, compliance with the Qualified Intermediary (QI) agreement will certainly remain one of the biggest challenges because a senior manager will have to certify to the Internal Revenue Service (IRS) that the bank is fully compliant. We expect this burden to increase as governments and regulators formalise their approach to crypto assets.

For alternative investment funds (AIFs), BEPS and unilateral measures taken by some countries might have an impact on treaty entitlement and might oblige a fund to adapt its structure. In this new tax environment, the goal will be to find a tax-neutral result. Tax optimisation will often only be possible when the substance is in line with the activity.

Finally, for other industries, transfer pricing (TP) is a key consideration. Our TP specialists can help you answer questions about equity allocation and advisory fee payment processes, amongst others. Our experts will do their best to elevate your enquiries towards a tax-neutral solution.

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Insurance (long- and short term)

Not only have COVID-19, natural disasters, riots and their repercussions put the proverbial cat amongst the pigeons in the insurance industry, the profession is also in the midst of transitioning to International Financial Reporting Standard 17 (IFRS17), which inevitably comes with tax uncertainty and adoption challenges. BDO’s insurance tax team’s involvement with our various insurance clients, along with our participation in industry initiatives and industry-specific tax contributions, keep us abreast of the current economic, market and regulatory events impacting our insurance clients.
Our insurance tax team has extensive experience in servicing small, medium and large insurers’ tax needs with 17 years of insurance tax advisory and compliance experience at tax partner level.
Some of the current tax challenges facing insurers include:

  • Accounting for the tax impact of IFRS17 adoption
  • Uncertainty caused by pending legislative amendments required to marry the intended IFRS17 transition impact to tax law
  • SARS’ pending digitisation of the long-term insurance tax submission and assessment processes
  • Housing part-risk, part-investment product policies in the correct tax fund
  • Understanding the tax treatment of cell-captive and other self-insurance structures and options
  • The potential impact of the introduction of Pillar II global minimum tax rules
  • Scarcity of available guidance, commentary and training on insurance-specific tax principles.

We look forward to being part of your insurance journey.


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