France is usually known for the complexity of its insurance premium tax filing system with many parafiscal charges potentially applying to insurance premiums and with many overseas territories where IPT should be filed directly. Over the last decade, France has either introduced new taxes and contributions on insurance premiums or increased rates. Now, as for all nations, the COVID-19 pandemic is likely to add to the complexity.
Multiple IPT rates and multiple parafiscal charges
The French IPT rate is commonly understood to be 9%. However, multiple IPT rates apply depending on the type of risks covered in France ranging from 7% to 30%. And, when a policy covers multiple risks, the premium should be split accordingly in order to apply the correct IPT rate on each portion. There are also up to 10 parafiscal charges that may be due on insurance premiums. Rates vary from €0.02 per person insured (contribution on Hunting Liability insurance) to 100% (contribution to the National Agricultural Catastrophe Fund for insurance of shellfish plants). If part of these parafiscal charges are filed under the IPT return, the other contributions should be filed to the local Guarantee Fund and the URSSAF, which can require two additional registrations.
When it comes to French overseas territories, the distinction must be made between so called Départements and Régions d’Outre-Mer and Collectivités d’Outre-Mer. In other words, the first group – known as DROMs – are treated the same as for mainland France for premium tax purposes. Premiums covering risks located in these territories should be declared in the same way, although with an asterisk for Guyane and Mayotte where the IPT rates applicable are reduced by half. For the second group – known as COMs – the local tax authority for each of them can levy taxes on insurance premiums. As such, most of them have set up their own IPT regimes, often requiring insurers to appoint a fiscal representative. It’s worth adding that some French parafiscal charges may also still be due too.
The Business Interruption question
As in many countries, COVID-19 has hit many French businesses who have not been able to claim compensation for the business interruption caused by the pandemic as it is not deemed to be related to a material damage. Current insurance schemes, like the CatNat regime, do not apply to this type of loss. Discussions are currently being held between insurers and the French government to design an insurance scheme that will cover other future major events such as pandemics.
The idea of replicating the CatNat regime to pandemics is popular. In such schemes, both insurers and insureds must contribute, and an unlimited State guarantee provides a better compensation. In practice, if such scheme were implemented, this would mean that an additional premium would be collected from the insured with the possibility to either levy taxes and contributions on this additional taxable basis or exempt it in order to give an incentive to insureds to cover themselves against pandemic risks.