20 June 2017Accounting & tax analysis

FERMA proposes ‘consistent implementation’ guidelines for OECD BEPS

The Federation of European Risk Management Associations (FERMA) has proposed guidelines for captive re/insurance arrangements aimed at ensuring a consistent implementation of the OECD recommendations on Base Erosion and Profit Shifting (BEPS).

The guidelines have been created to support national administrations when transposing BEPS actions into national laws.

Three areas which have raised questions around their interpretation by OECD members – commercial rationale, substance and governance, and transfer pricing – have been addressed in the guidelines.

FERMA hopes to allow OECD members to assess the compliance of captive re/insurance arrangements with the BEPS recommendations in a consistent manner.

Drawing on contribution from its 22 member associations, FERMA’s report compiles data on premiums, profitability and taxation levels from a sample of 462 captives owned by European resident multinational companies.

"The objective of such guidelines is mainly to avoid creating a patchwork of diverging national legislations inspired by BEPS,” said Jo Willaert, president of FERMA. “Captives serve an important enterprise risk management role with true business purposes for European businesses and other organisations.

“Although captives are only a very small portion of BEPS, FERMA believes that national authorities should be guided in how to assess captive arrangements according to BEPS recommendations."

Carl Leeman, leader of the captive project group and FERMA board member, added: "Our document demonstrates that the main financial ratios of the captive insurance industry are in line with the traditional insurance market.

"The paper, enriched and approved by our 22 national associations, represents a strong consensus within the European risk management community on how captives are supporting the operations of their parent organisations."

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