Freedom of services insurers are faced with a number of different obligations when entering new territories and writing insurance business within the European Union. One that may initially be overlooked relates to which policy details are required to be recorded and then reported to the tax authorities.
It is essential that all insurance premium tax (IPT) and parafiscal details are accurately collected and complete for all new territories where insurance is written in order to comply with the varying rules and regulations that apply in each regime.
Detailed information at a policy level may not actually be needed for the tax return itself as these are often concise declarations. Instead, additional reports may be due that require the insurer to disclose this additional, detailed information at the policy level.
The more complicated reports are required by the Portuguese, Italian and Spanish tax authorities.
Portugal – The ANPC report relates to the Portuguese fire brigade charge and is a prime example of a reporting requirement that a foreign insurer may not be aware of when first entering the market. This report is due twice every fifth year and relates only to that year’s ANPC contributions. Insurers writing policies covering fire risks must complete the report which requires the ANPC contributions be split between Portugal’s 300 plus municipalities. While this information is usually collected, the infrequency with which it’s reported on can mean insurers’ systems are not sufficiently geared up to extract this level of detail.
Italy – Detailed policy information should be recorded and kept for all premiums collected in this country. Insurers’ systems should be able to report the required details on a regular basis. One area that should be captured and recorded, which can sometimes be onerous, is the policyholder’s fiscal code since this is an unusual requirement compared to other EU member states. Insurers writing policies from less burdensome taxation regimes can be caught out by and be unaware of this particular requirement.
Spain – The Consorcio de Compensación de Seguros, a compulsory governmental catastrophe insurance scheme, introduced new reporting requirements which came into effect from 1 January 2019. The monthly report requires transactional, line-by-line reporting, including detailed policy information such as the insureds’ postcode, sum insured and indemnity limits.
It is perhaps not surprising that a fragmented insurance premium tax landscape across the European Union results in such diverse requirements which understandably can create further challenges for insurers’ underwriting and tax compliance systems.
Failing to capture the required reporting information in each tax regime could lead to delays or even non-submission of reports. This could have further consequences for non-compliance as without a complete report it may not be possible to settle the tax which could, in turn, trigger penalties in that regime.
Having a robust understanding of local requirements from a freedom of services perspective is just as essential as knowing the tax treatment itself.