Norway vs Amoco Norway, 2002, Supreme Court, Case No HR-2001-01156

« | »

Amoco Norway, a wholly owned US subsidiary of Amoco Corporation, performed oil extraction on the Norwegian Continental Shelf.

The case concerns the validity of the taxable income for Amoco Norway Oil Company for the years 1992-95. For these years, the company signed insurance for its business first in the insurance company Riunione Adriatica Di Sicurta and then – from the second half of 1995 – in the insurance company American International Reinsurance Company Ltd.

The insurances Amoco Norway subscribed to in these companies was fully reinsured in Northern Resources Assurance Inc., which is a group-owned captive insurance company in the Amoco Group.

The question in the case was whether Amoco Norway in determining the taxable income was entitled to a deduction for that part of the insurance premium that relates to the risk that Northern has not reassured but has retained on its own account totaling an amount of NOK 176,759,645.

The Tax authorities did not accept the total insurance premiums as tax-deductible expenses and held that the risk was not transferred from Amoco Norway, because Northern’s exposure in case of an event causing maximum damage was regarded as disproportionate to the company’s solvency capital.

The Judgement
The Court held that by entering into the insurance agreements with the fronting companies, Amoco Norway had transferred the risks attached to that insurance. Thus, Amoco Norway was entitled to tax deductions for the total insurance premium, including the share which corresponded to Northern’s retained insurance risk.

Click here for translation

Norway vs Amoco 2002 TP

Related Guidelines