Tax Liability Insurance

In addition to W&I insurance policies VTS offers tax liability policies on a standalone basis.

Tax liability insurance protects the insured when the tax authority disagrees with a tax position taken by the insured.  The policy covers financial loss where the tax authority deems the taxpayer to have a greater tax liability than claimed by it.  Tax liability addresses a specific circumstance rather than providing general coverage as per our W&I insurance policies.

There are certain tax liabilities and transactions that fit with the use of tax liability insurance and which VTS would consider which include:

• maintenance of operating losses and other tax attributes following a transaction;
• transfer pricing;
• tax treatment of reorganizations and recapitalizations;
• capitalisation and debt versus equity analysis;
• capital gain versus income treatment;
• deductibility of expenses and capitalisation of expenses;
• compensation and distributions; and
• imposition of withholding taxes.

VTS requires tax risks to have an associated tax opinion and would not insure tax liability risks:

• that do not have the required standard of tax opinion;
• where there is an indefensible tax position such as caused by a lack of information;
• relating to penalties arising from organisational errors such as late filing;
• relating to tax avoidance or evasion; and
• relating to commercially available tax schemes.