Tax Insurance
Tax rules are famously complex, especially when business operations span multiple jurisdictions. Even with the best expert advice, companies often need to make good-faith judgments about how the rules apply to their business operations. Tax authorities might have a different judgment about how the very same rules apply to the very same business operations and challenge a tax position taken by a company. This results in uncertainties which often cover multiple financial years and involve significant amounts.
In M&A transactions, uncertainty surrounding identified tax issues can be an obstacle to strategic planning and getting a deal across the line. Tax insurance can help:
  • where a transaction fails to qualify for its intended tax treatment;
  • cover losses including taxes payable, interest and penalties, and gross-up amounts for tax due on insurance proceeds;
  • contest costs tied to the defence of the position;
  • overcome difficult negotiations when acquiring targets with a large tax exposure;
  • benefit a seller looking to cover indemnity obligations for pre-close tax exposures; and
  • allow a buyer to insure itself against a heightened tax issue rather than seek a special indemnity that can hinder the deal.
In addition to M&A transactions, tax insurance can also be strategically used as a risk management tool for contingent tax risks related to:
  • Corporate reorganisations (tax-free and taxable)
  • Intra-group fund flows (dividends, interest, royalties and services fees)
  • Intra-group transactions and investments
  • Net Operating Losses
  • REITs/real estate acquisition/sales
  • Tax residency status
  • Partnerships
  • Employee benefits
  • Indirect taxes (VAT/GST)
Benefits of Tax Insurance
Benefits of Tax Insurance 
As a dominant global tax insurance broker, our team of tax professionals across geographies can help you achieve confidence about the tax treatment of your deal or items uncovered through diligence.
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