In this guidance, the term captive insurance is intended to refer to an insurance undertaking or entity substantially all of whose insurance business is to provide insurance policies for risks of entities of the MNE group to which it belongs ... Read more

X is the holding company of the so-called A-group, which is active in the recreation business. The activities in X was taking out cancellation insurance. Within the group an Irish re-insurance company was established. Several contracts were concluded between X and the Irish company with regard to the insurance activities. The court considered that the tax administration had proved that X transferred profits to the Irish company. The internal reinsurer generally does not perform the underwriting function, does not diversify risk itself and does not have the required expertise and experience in relation to the insurance activity and investment of the premiums received. Therefore, transactions between the internal reinsurer and the group entity pursuing the main business of the group will not qualify as insurance transactions. The reinsurance entity performs only a limited administrative function that justifies only limited remuneration. Click here for English translation Click here for other translation ... Read more

This case concerns the sale of extended warranties to third-party customers of Dixons, a large retail chain in the UK selling white goods and home electrical products. The DSG group captive (re)insurer in the Isle of Man (DISL) insured these extended warranties for DSG’s UK customers. Until 1997 this was structured via a third-party insurer (Cornhill) that reinsured 95% on to DISL. From 1997 onwards the warranties were offered as service contracts that were 100% insured by DISL. The dispute concerned the level of sales commissions and profit commissions received by DSG. The Tax Tribunal rejected the taxpayer’s contentions that the transfer pricing legislation did not apply to the particular series of transactions (under ICTA 88 Section 770 and Schedule 28AA) – essentially the phrases ‘facility’ (Section 770) and ‘provision’ (Schedule 28AA) were interpreted broadly so that there was something to price between DSG and DISL, despite the insertion of a third party and the absence of a recognised transaction ... Read more

The Knights of Columbus, a resident United States corporation, provides life insurance to its Canadian members and relies upon Canadian agents to do so. The issue before the court was whether the Knights of Columbus is liable for tax in Canada on business profits from its insurance business. This hinges on the application of the Convention between the United States of America and Canada with respect to Taxes on Income and Capital (the Canada-U.S. Treaty), specifically a determination of whether the Knights of Columbus has a permanent establishment in Canada as a result of either: (1) carrying on its business through a fixed place of business in Canada (Article V(1) of the Canada-U.S. Treaty). (2) using agents, other than independent agents acting in the ordinary course of their business, who habitually exercise in Canada authority to conclude contracts in the name of the Knights of Columbus (Article V(5) and (7) of the Canada-U.S. Treaty). The Tax Court’s decision The Tax ... Read more

The banks were subsidiaries of a holding company that also controlled a management company, an insurance agency, and, from 1954, an insurance company (Security Life). In 1948, the banks began to offer to arrange credit life insurance for their borrowers, placing the insurance with an independent insurance carrier. National banking laws prohibited the banks from receiving sales commissions, which were paid by the carrier to the insurance agency subsidiary. The commissions were reported as taxable income for the 1948-1954 period by the management company. After 1954, when Security Life was organized, the credit life insurance on the banks’ customers was placed with an independent carrier, which reinsured the risks with Security Life, the latter retaining 85% of the premiums. No sales commissions were paid. Security Life reported all the reinsurance premiums on its income tax returns for the period 1955 to 1959, at the preferential tax rate for insurance companies. The tax authorities, pursuant to 26 U.S.C. § 482, determined ... Read more