From: Captive International
Challenges for captives across Europe are rising following the Covid pandemic, according to tax and regulatory compliance firm Sovos.
The firm’s new guide to insurance premium tax compliance, notes that while the continent is the third largest captive domicile in the world, the number of captives in Europe has “stagnated” in recent years.
“There are 900 active captives, but most of them are located in less than ten territories,” the report notes, with Guernsey and the Isle of Man most popular, followed by Luxembourg.
While the industry has overcome previous tests such as Solvency II, Sovis notes it faces increasing challenges with the directive currently under review, and the OECD Base Erosion and Profit Shifting scheme increasing regulation, especially with country-by-country reporting requirements.
The biggest immediate threat, however, is the pandemic and its aftermath, according to Sovos.
“With the global economy paused, many industries have been affected including automobile, aviation, retail and tourism. Some businesses have been hit harder than others. Some may even close which could threaten the existence of some captives through a domino effect,” the guide states.
A key question will be whether captives could play a role in covering pandemic risks in future.