AGEFI Luxembourg - mars 2024

Mars 2024 21 AGEFI Luxembourg Assurances Marion Zeller, could you give us a brief overview of the main tax challenges of your clients today? More transparencyandgovernments’ need for revenuehave resulted in in- creased tax risks worldwide faced in an increasingly challenging in- ternational post-BEPS tax environ- ment. The surge of modern complex tax rules as well as the re- inforcement of the cooperation and communication between tax au- thorities place a heavy bur- den on companies around theworld,whichamplifies the pressure on tax functions. The speedwithwhich taxpolicy and the new digital tax methods change are also an increasing trend to be taken into consideration when assessing tax risks. Learning about these developments after the fact is too late and tax- payers are, todaymore thanever, looking for imple- menting the right tax hedging strategies tomitigate the uncertainty of certain tax rules or practices. To efficiently reach their commercial objectives, tax- payers need to be able to identify tax trends, antici- pate tax changes andsufficientlyquantify the effects of anticipated tax risks tomeet thehighest standards of tax governance. Luxembourg is no exception. In the current environ- ment, many key tax concepts introduced recently have not received sufficient interpretation or guide- lines (e.g.ATAD, Pillar 2, etc.). It is alsomore difficult toobtainataxrulinginatimelymannerandtheissues forwhich theLuxembourg taxauthorities arewilling toprovidearulingarelimited,asillustratedbythere- cent data communicatedby theLuxembourg tax au- thorities in their report for the tax year 2022.We have seenLuxembourg taxpayers relyingmore frequently on a contractual allocation of the tax risks between partiestoatransaction,particularlyinthefundindus- try. However, such commercial allocation of the tax risks does not always offer a proper or sufficient so- lution depending on the tax issues discussed or the actors involved. Besides, enforcing these types of clausesmay,inpractice,bechallengingand/ornotal- waysdesirable ina contextwhere the commercial re- lationshipwith investors is to be preserved. How does tax insurance become an alternative to certain tax uncertainties? Asmentionedabove,thecombinationofcomplexre- cent modern tax rules, the lack of clarity in their in- terpretation, the increase of the international tax transparencystandardsandexchangeofinformation aswell as thedecrease of theLuxembourg tax ruling practice has led to significant uncertainty when it comes to the assessment of tax risks.Managing all of this can be challenging and a commercial allocation of tax risks is not always a viable option or the most appropriate way to mitigate those tax risks. That’s where tax insurancemay become an interesting tool against tax uncertainty. By transferring the risk to insurers, tax insurances fa- cilitate commercial discussions, provide taxpayers with tax certainty and financial protection but also more reliance on cash management. Taxinsurancecanprovideprotectionfortaxesandas- sociatedcostsrelatedtoaspecifictaxposition.Itisalso possibletoinsuretaxrisksthatarealreadyunderaudit orinactivelitigation.Thisallows,forexample,to“lock in” a favourable court decisionwhen the tax admin- istration decides to appeal a case. The opportunities of a tax insurancemay go beyondwhat is possible in atraditionalrulingsystemandbeaflexiblewaytoac- commodatebothpartiesfromacommercialperspec- tive.Atthesametime,ithelpstaxpayerswithcashand liquiditymanagement,forexamplebyeliminatingthe need for escrowor by allowing to syntheticallywrap risks in a tax policy allowing a timelywind-up of in- vestment funds at the endof their life cycle. DavidMussche, couldyougiveus abrief introduc- tion toHowden? Howden is a specialist team of commercially min- ded, multi-disciplinary advisors providing global insurance solutions across banking, private equity firms, large corporate andassetmanagers.Ourmis- sion is to be the go-to broker for design and execu- tion of bespoke risk transfer solutions, including Warranty & Indemnity insurance and Tax and Contingent Risk insurance.Weuse thepower of the global insurancemarket to solve complex and long- term capital risks and are differentiated by our multi-disciplinary team of commercially minded technical experts that work together to harness in- surance and alternative capital in a way that others cannot. We bring commercial experience beyond the world of insurance. And, as employees are the largest owners of our business, we takewhatwe do personally and are proactive and innovative in our approach- going the extramile for our clients, tode- liver exceptional value, backed by an international reach, including in the GrandDuchy. What are yourmain tasks? I amamember of theTaxandContingentRisks team atHowdenM&A,ourteamconsistingoftax,litigation andstructuringexpertsfromtoptierlawfirms,invest- ment banks and theBigFour, drawingonour collec- tive experience to devise and deliver cutting-edge insurance and capital solutions.We helpour clients: - Release cash trappedon the balance sheet and lock- in expected tax treatment during the entire life cycle offundsorcorporates(e.g.duringfundswind- up,duringasetupofnewbusinessinitiatives, etc.); - Facilitate negotiations and execution cer- tainty in the context ofM&A, onanhistoric and forward-looking basis; and -Achieve certaintyby ‘locking-in’ expected outcomes, preserving an initial (court) judgementorunderpinningacapitalpreser- vation strategy. WhatisTaxandContingentRiskinsur- ance exactly? A specific tax risk insurance policy is a bespoke insurance solutiondesignedtoprovidefi- nancial cover in the event of an identified tax riskcrystallising into an actual liability by transferring the identified tax risk to the insurance market against a (one-time) premium. Specific tax risk insur- ancepolicieshavebecomevaluableandcost-effective toolsforfunds,corporatesandindividualstomanage tax risks. The product can be placed in a transactional context by the buyer, the seller or the target, but can also be placed on a standalone basis, such as insuring tax risks concerning forward looking cash repatriation, internal restructuring issues or providing surety where the tax lawisunclear. Bothhistoric and future risk can be insured. The premium is calculated as a percentage of the policy limit (known as the ‘rate on line’). Typically, the rate on line applied is around 1- 3% in the UK and 1-4% in Europe depending on a number of factors. It takes typically about 2 to 3 weeks from the initial call to place a policy. Contingent risk insurance is similar to tax insurance but relates to all other legal (non-tax) risks, typically relatingtoongoingdisputesandlitigation.Thesepoli- cies, however, can also include e.g. insurance against break fees or a transaction falling through because of regulatory requirements such as antitrust. Howden recently set up in Luxembourg. Can you tell us why you chose the Grand Duchy and how themovewent? Howden is constantly expanding into newmarkets to bring our unique approach to insurance to new clients.TheGrandDuchywasaclearandeasychoice, due to its internationally regarded business acumen, geographical proximity being in a strategic location, and its highly skilled talent. So far themove has been seamless,andwelookforwardtodevelopingourop- erations here further. What have you gained from the acquisition of the UnitedBrokers portfolio? Throughtheacquisitionofaportfolioofbusinessfrom Luxembourg-basedFinancialLinesspecialistUnited, we’veenteredanewandimportantmarketinEurope. This is the beginning of an exciting growth journey, which includes the establishment of a branch inLux- embourg City. Partnering with Jacques (Emsix), the branch representative and former owner of the port- folio, Howden will develop a retail business in the country. This reflects Howden’s strategy to invest in experience and partner with culturally aligned firms toexpanditsgeographicalfootprintintolocalmarkets for the benefit of its clients. Tell us about your business portfolio in Luxem- bourg. We currently plan to further develop the portfolio previously owned by Jaques (Emsix), to further grow the presence in the market, and leverage our existing network at Howden to further bolster its strength. At the same time, we plan on expanding our footprint in Luxembourg through promoting W&I and Tax andContingent Risk insurance. Howdo you see tax insurance developing in Lux- embourg? The international tax landscape has been deeply evolving over the past fewyears and Luxembourg is no exception. With the multiplication of anti- abuse regulations and the decrease of the Luxem- bourg tax ruling practice, tax and contingent risk insurance appears as a smart alternative to better face the uncertainty resulting from the post-BEPS tax environment. The tax and contingent risk insur- ancemarket in theGrandDuchy is relativelyyoung. We are in constant dialogue with insurers to test their appetite to insure some of the more common tax risks clients face in Luxembourg. These include for example, amongst others, beneficial ownership issues, issues related to classes of shares, or anti-hy- brid or reverse hybrid rules. That will help our clients to tackle some of the risks they are often fac- ing, and will help to familiarize them with the tax insurance process. From there on, we can design and promote additional tax insurance products. You are particularly active in the mergers and ac- quisitionsmarket.Howdoyousee thismarket de- veloping? 2023 ended on a strong note from a macroeconomic perspectiveasresilientgrowth,steeperthanexpected fallsininflation,andmoderatingshort-termyieldsco- alesced to drive a robust rally in financial markets. Headwindsareneverthelesslikelytopersistinto2024. Expectations are formodest economic growth across advanced economies. Inflation volatility, climate change, the net-zero transition, civil unrest and war, canbemoredifficult topredict, and the (re)insurance market has a crucial role to play in indemnifying losseswhen they occur. There are also newopportu- nitiestosupportmitigationandadaptationinitiatives by offering risk reduction incentives topolicyholders and rewardingpositivemeasures. For M&A activity, 2023 has been a tough year, but should see a resurgence in appetite for 2024. To what extent remains to be determined, but should hopefully be in a positive trajectory, as buyers and sellerswhowithdrewfromparticipating indeals in 2023 start looking to deploy – valuation disparage- ments hopefully correcting. What are your main objectives for 2024? Risks are escalating as the world lurches from one crisis toanother. This is themoment for brokers and carriers to step up and find creative solutions that safeguard the insurability of assets exposed to a myriad of risks. InterviewwithMarionZELLER, Counsel andheadof tax, K&LGatesVolckrick&DavidMUSSCHE,AssociateDirector | Tax&Contingent Risks, Howden Tax Insurance, ASmart Tool Against Tax Uncertainty L e Luxembourg Insti- tute ofHealth (LIH) et CatalpaVentures ont établi unpartenariat pour sti- muler l'innovationdans le domaine de la santé numé- rique, dans le but de rappro- cher la recherche scientifique et le capital-risque dans le secteur florissant des techno- logies de la santé dupays. Cette collaboration, qui met l'ac- cent sur le transfert de connais- sances et les solutions de santé commercialisables, souligne l'engagement du Luxembourg à cultiver un environnement où la recherche se transforme en solu- tions de santé tangibles, contri- buant ainsi à un changement positif dans le domaine des soins de santé. Le27février2024,leLuxembourg Institute of Health (LIH) et Ca- talpaVenturesontsignéunaccord de collaborationde cinqans,mar- quant une étape importante dans l'évolutiondusecteurHealthTech au Luxembourg. Catalpa est une société de capital-risque spéciali- sée dans l'investissement dans les entreprises technologiques en phase de lancement qui révolu- tionnent les soins de santé et qui a récemment ouvert sesportes au Luxembourg. La collaboration vise à capitaliser sur la synergie entre la recherche scientifique et lecapital-risque,enseconcentrant particulièrement sur l'avance- ment des technologies numé- riques de la santé. L'engagement du Luxembourg à encourager l'innovation dans les technologies de la santé, soutenu par des initiatives gouvernemen- tales et des institutions de re- cherche telles que le LIH, positionnelepayscommeunevé- ritablecapitaledel'e-santétransla- tionnelle. Catalpa Ventures, conscient de ce potentiel, entend jouer un rôle central en créant un fonds de capital-risque spécialisé dans les startupsHealthTech. L'accord définit un cadre straté- gique de collaboration, englobant diverses activités telles que le sou- tien à LIH dans le contexte de hackathons, de compétitions et de lacréationdespin-offsauLuxem- bourg. Catalpa Ventures, en re- tour, vise à renforcer ses activités de capital-risque en tirant parti de l'expertise scientifique du LIH, en offrant aux startups une valeur ajoutéeunique grâce aux connais- sances spécialisées, aux conseils et au soutien de la communauté scientifique du LIH, ce qui pour- rait leur permettre de se démar- querdanslepaysageconcurrentiel et d'encourager l'innovation dans le secteur des soins de santé. Le professeur Ulf Nehrbass, CEO du LIH, s'est montré enthousiaste quant à cette collaboration, souli- gnant le potentiel de transfert de connaissances et l'application de l'expertise financière de Catalpa pour propulser la recherche vers dessolutionsdesantécommercia- lisables. «Nous pensons que les nombreuses possibilités de trans- fertdeconnaissancesdécoulantde ce partenariat et lamise à disposi- tion de l'expertise financière et d'investissement de Catalpa à nos chercheurs créeront unpont entre la recherche et sa commercialisa- tion. Cela garantira que nos résul- tats scientifiques sont viables et peuvent être traduits en solutions de soins de santé tangibles, facile- ment accessibles aux cliniciens et aux patients», a déclaré le profes- seurNehrbass. Le Dr Thomas Goergen, l'un des partenaires fondateurs de Ca- talpa, amis l'accent sur l'effort de collaboration visant à valoriser le potentiel de la santénumériqueet de la recherche translationnelle, contribuant ainsi à l'amélioration des soins de santé et des résultats pour les patients. «Lorsque nous avonsdéterminéoùlancernosac- tivités de capital-risque, le choix du Luxembourg était une déci- sion logique pour nous», a expli- qué le Dr Goergen. «Grâceànosexpériencespositives avecleLuxembourgentantqu'en- trepreneurs,nousnousréjouissons d'être le partenaire fiable de l'éco- système des startups HealthTech, qui connaît une croissance dyna- mique. Il s'agit non seulement de soutenir les entreprises luxem- bourgeoises ambitieuses, mais aussi d'attirer les entreprises HealthTech d'Europe et d'ailleurs pour qu'elles utilisent le Luxem- bourg comme plateforme de lan- cement en vue d'une expansion internationale.» Le LIH et Catalpa Ventures unissent leurs forces DrThomasGoergen,fondateurdeCatalpaetprofesseurUlfNehrbass,CEOduLIH

RkJQdWJsaXNoZXIy Nzk5MDI=