Tax Liability Insurance is suitable for risks turning on questions of law rather than fact and is unlikely to be available for repetitive or purely tax motivated transactions or those cases already subject to audit, litigation or on appeal from a tax authority.
Subject to Fusion’s risk assessment, the Tax Risk policy can respond by:
The jurisdiction of the tax authority and the insured
The availability and quality of advice including the technical
The probability of risk discovery
Our analysis of the defense arguments
The estimated tax exposure of the identified tax risk(s)
Interest and penalties
Defense costs
Incremental costs should the proceeds under the Specific
Tax Risk Insurance Policy be themselves taxable (‘Gross Up’)
Tax Liability Insurance is an effective solution for corporates, funds and individuals to protect against the tax risk associated with corporate structures, specific transactional issues and other areas of tax related uncertainty.
Valuable tool during mergers and acquisitions when the parties have identified a tax risk but neither party is willing or able to retain the risk.
Transfers an uncertain liability from the insured to the insurer.
Reduces the insured’s concerns about a potentially adverse challenge from a tax authority.
Allows for improved balance sheet certainty.
Preserve or enhance the value of an asset
Can enable restructurings and rationalisation of corporate structures.
Facilitates increased fiscal certainty.
Assists in managing negative financial impact. Informations and features.
Fusion’s aggregate policy limits typically range from USD / AUD 2m to 25m.
Fusion and the insured will agree on the retention, which is the amount of the loss to be borne by the insured.
A Tax Risk Insurance Policy will be designed to align with the applicable statute of limitations in the jurisdiction of the insured.
The policy will generally exclude losses resulting from:
As this is very much a bespoke protection, the range of premiums expressed as a rate on line base don the limit of liability are usually in the range of 5% to 12% in the Asia Pacific region.
Fusion will require an expense agreement to be entered into before commencing formal underwriting.
This is to cover the cost of instructing external counsel.
Legal fees typically range from US$ 30,000 – US$60,000.
The legal fee is charged in addition to the premium.
