FiscalReps
CIT talks to Mike Stalley of FiscalReps, who shines a light on developments in Solvency II and insurance premium tax legislation
Could you describe FiscalReps and your role at the firm?
FiscalReps provides premium tax and VAT compliance solutions and advice to the global insurance industry. Our team of insurance, tax and finance professionals delivers services to international insurance businesses, including captives, captive managers and captive owners. Our services are split into four main offerings: outsourcing, technology, consulting and training. I’m the founder and chief executive. I started the business in 2003, after spotting a gap in the market for a specialised and dedicated service.
How do your offerings differ between captive insurers and managers?
Where we work directly with captive insurance companies (and their owners), we offer a very hands-on approach. We assist with areas such as premium allocation, premium tax calculation and premium tax compliance. Given our detailed knowledge of our clients’ business, we are in a good position to offer practical premium tax advice to ensure their continued compliance and, in some cases, reduce their overall tax cost.
When we work with captive managers, we tend to manage the tax compliance needs for a portfolio of their clients. Our role tends to be more compliance focused. We maintain close relationships with the captive manager, however, to ensure that the best possible advice is always given where tax issues arise.
What are the biggest obstacles for the captive sector at the moment?
Continuing strong demand for captive solutions means growth will continue. However, if not properly managed, increasing corporate governance demands (including tax compliance) could challenge the role and value of a captive.
What are the implications of insurance premium tax for captives?
In most countries, insurance transactions are subject to taxation, which is commonly referred to as premium tax. It takes many forms, such as VAT, stamp duty or goods and services tax, and each country’s tax regime differs greatly. In many cases, captives are responsible for collecting and settling these taxes with the local tax authorities. If not, the liability often rests with the local insured.
As a captive owner, it’s likely that both your captive and the local insureds have to manage the correct calculation and settlement of tax across a wide range of countries, especially if you are writing a multinational programme through your captive.
FiscalReps was seeking further details on the proposed insurance premium tax in Hungary, including whether a fiscal representative will be required for non-Hungarian insurers—have you made any headway?
At that time, the legislation was only in draft form and awaiting parliamentary approval. We can only offer absolute clarity on the exact tax regime to be introduced once that happens. However, we have already started building relationships with the local insurance market, including trade associations, regulators and tax officials. This puts us at the forefront of any developments. Once the act becomes law, we can offer our clients definitive guidance on the operational implications of the new tax regime.
When a country introduces a new tax regime, the operational requirements often remain uncertain even after the act is passed in parliament. Having built relationships with the relevant organisations, FiscalReps is in a position to work with them to develop operational best practice. We can then roll this out to our clients.
Why are some insurance service providers reluctant to give captives tax advice?
It’s like asking doctors to give you a legal opinion. Many insurance professionals are specialists in their own area and feel uncomfortable about offering advice outside of their area of expertise. Premium taxes are very complex. The devil is in the detail and, as with all tax matters, only professionally qualified people can really offer advice. FiscalReps works alongside many insurance service providers to offer premium tax advice when they feel unqualified to do so.
What are your views on Solvency II, and what kinds of questions are you getting from captive owners regarding the directive?
The industry appears to feel that Solvency II may place an unnecessary additional compliance burden on the EU captive market. However, there are new requirements that must be met.
Aside from the capital requirements, a number of parts of the legislation appear to encourage a ‘best practice’ approach to governance. In particular, there’s a need for outsourcing partners to be ‘fit and proper’. At FiscalReps, we believe that the service that we offer and the professionals who we employ should be of the same professional standard as captive employees. We have focused on recruiting tax, finance and insurance professionals so that, as a business, we can demonstrate that we are ‘fit and proper’. We can be considered a reliable outsourcing partner when the activity that we perform is considered to be a core part of the captive operations. Furthermore, we have built a financially secure business with strong internal controls, ensuring that our standards of service remain consistently high.
