Too early to say how minimum tax will affect captives

31-08-2021

Too early to say how minimum tax will affect captives

shutterstock/Tony Stock

The potential impact of proposals for global minimum tax rates remains difficult to evaluate, according to Marsh.

In a briefing published last week, the risk management group noted that the OECD/G20 Inclusive Framework, which proposes a global minimum corporation tax rate of 15%, has already gained widespread support from more than 130 countries. That includes popular captive domiciles, such as Bermuda, the Cayman Islands, Guernsey, Luxembourg, Singapore, the Isle of Man, the British Virgin Islands, Malta, and Hong Kong.

Nevertheless, it notes that any minimum rate could prompt other changes, leaving the effects uncertain.

“There has been discussion about how different governments might adjust other taxes should the 15% global minimum tax be adopted. Potential exclusions to the tax are also being debated,” the briefing reads.

“The impact of the global minimum tax should be more easily determined once there is more guidance on its implementation and rollout.”

It added: “The impact of the global minimum tax should be more easily determined once there is more guidance on its implementation and rollout.”

Captives are likely to remain popular with many regardless, however, according to Marsh. Its 2020 Captive Landscape report found that only 30% of captive owners considered realising tax benefits a captive value driver.

“Since most captive owners do not consider tax as a driver of the use of a captive insurer or its location, the impact of a minimum tax will likely be less relevant,” it wrote.

Marsh, Tax Rates, Risk Management, OECD/G20 Inclusive Framework, Insurance, Reinsurance, Global

Captive International