Hannover Re profits from decision of Federal Fiscal Court

The Federal Fiscal Court (BFH) today disclosed a decision on additional taxation pursuant to the Außensteuergesetz (Foreign Transactions Tax Act) (ref. I R 61/09).

Although the BFH decision - only the substance of which is known at the present time - does not concretely refer to an entity of the Hannover Re Group, it is of relevance to the company. The final decision of the BFH means that provisions established on a precautionary basis can be released, thereby boosting Group net income in the third quarter and in the full 2010 financial year by probably around EUR 100 million.

The core of the legal dispute was the question of whether the investment income generated by a reinsurance subsidiary domiciled in Ireland must be taxed at its parent company in Germany because it had outsourced its business operations to a Group-owned service company in Ireland.

The BFH thus confirmed the decision in the first instance of the Fiscal Court of Lower Saxony in Hannover. Hannover Re had set aside provisions for the risks connected with these proceedings in an amount sufficient to meet the additional taxation of the investment income of its Irish subsidiaries that does not derive from investments used to cover technical provisions. Since the reason for constituting these tax provisions has now ceased to exist, they will be released. It is necessary to wait for the written explanation of the decision before an assessment of the further particulars can be made.