What’s on the horizon for Insurance Premium Tax in Europe?

Elliot Shulver
May 5, 2021

Europe has seen relatively few changes to insurance premium tax (IPT) rates recently. The most notable recent change was the 33% increase in IPT rate in Spain (up from 6% to 8%) at the beginning of 2021.

Brexit became official on 1 January 2021, following the end of the transition period. This means UK based insurers are no longer part of the EU single market and effectively cannot write insurance business in the EU. We also saw Luxembourg introduce mandatory online IPT filings this year. The first filing using the new system was in April.

Upcoming IPT changes

As well as these recent examples, other European countries are considering changes to their IPT rates and reporting.

Denmark is reducing the levy for the contribution to the Storm Damage Tax. The levy will reduce by a third to 40 Danish Krones from 1 July 2021. This reduction is in part because of the storm fund reaching its top target of 500 million. Should there be a requirement for the fund to pay out because of a real disaster, it’s feasible the levy will once again temporarily increase.

France has intentions to modernise IPT reporting by introducing online filings. There is no set implementation date, however, per an article in the 2020 Budget Law, implementation should be complete by 1 January 2022. We expect to see the tax authorities release further information on this proposal by the end of the year at the latest.

What could we expect to see in the future for IPT?

Blanket IPT rate increases are unlikely to happen in the near future. There is however always the potential for more targeted rate increases or introductions of specific taxes. An example of this is the COVID-19 tax in France, where the French tax authority imposed a tax on health insurers’ financial results. The French government is using the income from the tax to reduce its social security deficit, which has heavily increased because of the pandemic.

We expect to see the trend of modernising IPT collection to continue. Tax authorities will continue to move away from admin-heavy paper returns in favour of more efficient and accurate online filing systems. This could be as an online return (similar to Luxembourg and upcoming in France) or as a more detailed reporting system on a transactional level (similar to Spain and Portugal).

We may see other European countries follow Germany in its expanded Location of Risk rules and implement similar rules to protect their local insurance market. As IPT is so fragmented across different countries, it’s vital to keep up to date with changing rates and regulations.

Take Action

Watch our webinar, IPT regulation changes in Europe, to find out about recent changes across Europe or contact us to learn more about IPT compliance.

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Elliot Shulver

Consulting Manager, IPT compliance for indirect taxes at Sovos. A chartered accountant with 6 years’ experience of indirect tax, including IPT, VAT and Gambling Duties, Elliot is responsible for our Consultancy practice, as well as providing regulatory updates for our global compliance solution suite.
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