Financial and Insurance Services

Today’s Financial and Insurance Services sector operates in an environment defined by digital disruption, complex cross-border operations, tighter regulatory scrutiny and an increasing global push for transparency and fair taxation. Tax authorities have begun placing significant emphasis on economic substance, risk alignment and arm’s length pricing of intercompany transactions involving reinsurance, asset management or fintech business activities. 

Economic substance requirements have become an industry standard in offshore financial hubs. Regulators and tax authorities work together to enforce real presence of people, functions, and risks within low-tax jurisdictions; while OECD BEPS legislation as well as local legislation is altering group structures.

Large financial institutions must report their effective tax rates by jurisdiction. Financial and insurance companies must model and track tax impacts from investment flows, cross-border services and digital financial products to ensure they adhere to a 15% minimum tax.

Industry-specific challenges:

• • Maintaining documentation and audit readiness across various tax and regulatory frameworks;
  • Justifying business models using centralized capital and IP against local tax expectations;
  • Mitigating double taxation risk caused by inconsistent local transfer pricing rules.