Tax Offerings for Insurance Industry
Deloitte Tax is a leading provider of tax services to the insurance industry. We have a global network of industry-dedicated professionals, working together to provide insights on critical issues facing insurers large and small, in jurisdictions around the world. Deloitte is committed to keeping clients current regarding industry-leading practices. Our clients benefit from field-experienced practitioners devoted full time to the insurance industry as well as from our deep bench strength across tax disciplines. We can address your objectives for specialized tax knowledge and also supplement your tax organization with ongoing tax planning, advisory, and compliance support.
- R&D Tax Credit Opportunities
- Tax-Basis Balance Sheet (TBBS)
- Tax Compliance Solutions
- Tax Attribute Planning
- Business Model Optimization
How we can help.
Deloitte is committed to keeping clients current regarding industry-leading practices. Our clients benefit from field-experienced practitioners devoted full time to the insurance industry as well as from our deep bench strength across tax disciplines. We can address your objectives for specialized tax knowledge and also supplement your tax organization with ongoing.
R&D Tax Credit Opportunities
The insurance industry has seen significant improvement in R&D cost recovery through R&D tax credits in recent years. Our team has significant insurance specific experience in assisting clients with claims and documentation of R&D credits and incentives. This is an excellent way for insurance companies to lower their global tax burden and potentially offset investment in developing new or enhanced technology and software applications. Please note, time-sensitive elections relating to R&D credits and incentives may need to be considered on a timely filed return.
Read more about Research & Development Tax Credit Opportunities
Research & Development (R&D) Tax Credit Opportunities
Tax-Basis Balance Sheet (TBBS )
Deloitte Tax LLP has deep experience in providing TBBS assistance to multinational insurance companies across many sectors of the insurance industry. In assisting clients with TBBS, we work closely with Deloitte Tax Management Consulting (TMC) to help provide sustainable solutions and processes. Our TMC team has extensive tax technical, technology, and consulting experience and focuses on people, process, and technology.
Deloitte Tax LLP has assisted numerous multinational insurers that historically had struggled with their tax provision and tax return calculations and process. These clients now calculate their provisions using a reliable balance sheet approach resulting in separately calculated deferred taxes and have realized the following benefits: established tax provision process efficiencies with less burden on current professionals and resources, increased calculation accuracy while reducing the need for manual reconciliations, and received auditor sign-off on tax provision approach.
Tax-Basis Balance Sheet (TBBS )
Tax Compliance Solutions
Deloitte has developed a proprietary methodology that can help us facilitate the tax compliance process through an approach that utilizes an integrated and standardized tax compliance technology, which allows for the automated import of data directly from the annual statement, integrates tax return workpapers while calculating more than 30 insurance book-to-tax adjustments, and produces automated diagnostics allowing for efficient reviews and quality control checks.
Tax Attribute Planning
Tax Accounting Methods Application
Our approach provides a combination of people, accelerators, experience interacting with the IRS and scalable tax modeling tools to analyze the impacts of various tax accounting methods elections on utilization of tax attributes.
Attribute Tax Planning — Accounting Methods
Deloitte Tax has assisted multinational financial services and insurance clients with implementing tax planning methodologies to manage the utilization of attributes. In general, these method changes have taken into consideration unique fact patterns of the insurance industry and have accelerated the utilization of tax attributes while establishing additional deferred tax assets. Typically, these accounting method changes have included Section 481(a) computations.
Tax Attribute Planning
Business Model Optimization
Our BMO service offering focuses on helping multinational companies integrate their operational and tax planning in a scalable and sustainable way to help business leaders make more effective decisions on an after-tax basis. The BMO strategic focus is on the alignment of functions, risks, and assets in a manner that creates operational efficiencies and tax efficiencies. The purpose of this type of project is to provide assistance to a company through operational restructuring, supply chain rationalization, integration of acquisitions within existing structures, centralization of intellectual property management and use, and migration to centralized management structures regionally or globally. Specific opportunities may include anticipated centers of excellence activities, such as pricing/actuarial, business analysis, marketing analytics, predictive tax modeling, claims processing, systems development and maintenance, certain finance and accounting functions, certain human resources (HR) functions, and centralized risk management; anticipated shared services center functions, such as administrative support and process, data analytics, portfolio management, financial operations, reinsurance accounting, tax reporting and compliance, certain HR functions, and internal functions; anticipated regional hub processes, such as communications, claims management, systems and finance management, among others; functions expected to be carried out virtually; and other identifiable intangible property.
Subpart F and Active Financing Exception
As part of the BMO offering, Deloitte will utilize its extensive experience assisting US-based multinational insurance companies in structuring to potentially increase the tax deferral on foreign-earned insurance and investment income. While most income earned by foreign insurance companies that are controlled foreign corporations is considered “subpart F income” and taxed currently to the CFC’s US shareholders, by utilizing the exempt insurance provisions of Internal Revenue Code Section 953(e) and the active financing exception provisions of Internal Revenue Code Section 954(i), taxation on underwriting and investment income earned by these CFCs can potentially be deferred until the income is repatriated via dividend. Deloitte can help with the analysis of whether the insurance income from foreign operations may be eligible for a specific deferral, suggest structure changes to increase tax-deferred amounts, identify deferred investment income, and confirm that the CFC is properly apportioning expenses to increase the income eligible for deferral.
Business Model Optimization (BMO ) for Insurance companies
Foreign Currency Exchange
Internal Revenue Code Sections 987 and 988:
We have assisted several multinational insurance companies with translational and transactional foreign currency issues, including adopting a reasonable method of account for Section 987 foreign exchange gain/loss, calculating foreign currency translation gain/loss under the 2006 regulations for foreign branches of US taxpayers, and creating an automated model for future Section 987 gain/loss calculations. Additionally, the interplay between the foreign currency rules under Section 988 and insurance company taxation under Subchapter L creates challenges for insurance company tax departments. A mismatch in the timing of foreign exchange recognition on assets and liabilities can create significant foreign currency volatility. Under Section 988, reserves are held at the yearly spot rate while bonds are held at historical rates (not marked to market each year), creating the timing mismatch in foreign exchange gain/loss recognition.
Foreign Account Tax Compliance Act (FATCA)
Deloitte Tax is assisting multiple small and large US- and foreign-based insurance companies with determining their obligations under the FATCA and assisting them with streamlining procedures so that they will be in compliance when FATCA withholding formally begins on July 1, 2014.
FATCA requires all entities to determine whether any payments they make would be “withholdable” under FATCA and further requires when such payments are made that proper documentation reflecting the status of the payment’s recipient is collected. For non-US entities, determining their status under FATCA requires that they ascertain whether they would be classified as a foreign financial institution or a nonfinancial foreign entity, with each type of entity carrying different compliance obligations. Because insurance premiums are included in the definition of “withholdable” payments, many insurance companies that might not have expected an impact from FATCA may be affected.
Deloitte’s FATCA specialists can help insurance companies in classifying their entities, analyzing their withholding obligations, assisting in streamlining and reviewing current and new procedures to determine that proper documentation is collected, and aiding in the compliance process.
Deloitte’s US Captive Insurance Tax Practice is composed of more than 50 professionals throughout the United States. Our Deloitte Captive Insurance Tax Practice and Deloitte Consulting LLP have teamed to create a National Captive Insurance Company Task Force, which offers a “one-stop shopping” approach that is leading the industry. This is a collaborative approach that forms a cross-functional team of highly talented Deloitte professionals for each captive engagement. Each team is composed of experienced professionals with skills in the areas of risk management and risk financing, actuarial services, accounting (accounting principles generally accepted in the United States of America, tax, statutory, International Financial Reporting Standards), tax (federal, state, international), domicile selection and services, claims management, information systems, and organizational structure/management. Based upon the collective skill set that each team brings to the table, they are able to help clients identify potential opportunities that leverage the unique characteristics of insurance companies, thus enabling clients to enhance their financial and operational performance.
- Investment Tax Advisory Group
- Insurance industry impact —Senator Baucus’ discussion draft on changes to international tax rules
- District Court Rules § 4371 Excise Tax Inapplicable to Foreign-to-Foreign Retrocessions
- Rent-A-Center, Inc. v. Commissioner
- Tax transforms, business wins: An industry perspective
- Notice 2016-66: IRS Identifies Certain “Micro-Captive” Transactions as Transactions of Interest