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.