Tax and Insurance
Whether as a standalone solution or as part of a transaction, tax insurance opens up new opportunities.
Tax law is becoming increasingly complex, and even experienced advisers are often unable to rule out residual legal uncertainty regarding a tax position or structure. At the same time, obtaining a binding ruling from the relevant tax authority is time-consuming and only permitted under certain circumstances.
Tax insurance policies address such remaining uncertainties and offer faster and more comprehensive financial protection against a tax claim. A tax insurance policy also covers legal defence costs, interest and, for example, an immediate payout in the event that enforcement is not suspended.
Taking out tax insurance can therefore help avoid lengthy exemptions in the context of a transaction or facilitate decision-making in the context of corporate structuring.
Funk M&A and Tax Solutions is highly experienced in negotiating and arranging tax insurance and would be happy to advise you on this matter.
| Type of risk | Binding information | Tax insurance |
|---|---|---|
| Time frame of the risk | Future risks only | Historical/current/future risks |
| Requirements | Compliance with formal requirements is necessary; no implementation until binding information is provided | Negotiable with the insurer |
| Scope of cover | Negotiable with the insurer | |
| Tax risk | Not covered in the event of rejection | Included |
| Interest and penalties | Not covered | Included |
| Legal defence costs | Not included | Included |
| ‘Gross-up’ | Not included | Included |
| Level of protection | Low (rejection possible) | High |
| Binding effect | Limited to the facts described in the application | Deviations from the facts are harmless, provided no new risk assessment is carried out |
| Timeframe | Approx. 2–6 months | Approx. 5–14 days until the final policy |
| Costs | Up to €120,000 (see Section 89(4), (5) in conjunction with Sections 34, 39(2) GKG) even in the event of rejection! | One-off insurance premium of between 2% and 5% of the risk to be insured |
Would you like to find out more?
Please contact us on +49 40 35914-0 or send us a message.
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