Insurance premium tax (IPT) deadlines – whether it’s month end, quarterly filing or end of year, can be stressful for insurance tax teams juggling regular workloads alongside the added pressure of ensuring filing is completed accurately and on time.
To help, we wanted to offer some guidance on how to navigate deadline season successfully.
Understand tax and reporting requirements in each territory
There’s very little consistency country to country when it comes to IPT reporting.
- Tax point – it can be when premium is received, on the date of invoice or the maturity date for when tax liabilities become due
- Filing and settlement frequency – differ between monthly, quarterly, bi-annually and annually
- Tax rates and their application – up-to-date tax rates are required for compliant filing
- Currency – country specific requirements for the source/application of exchange rates
- Language – tax returns need submitting in the country’s native language
Specialist expertise is often necessary to ease this burden as ensuring taxes are filed and settled correctly, compliantly, and all while adhering to the latest rules and regulations for each country can be challenging.
The treatment of negative premiums also varies country by country. The nature of negative premiums (cancellations, mid-term adjustment or correction of errors) defines whether negative premiums can be included in the current submission or if a formal reclaim needs filing.
Be aware of submission deadlines
When filing in multiple territories, understanding when taxes are due and the relevant submission deadlines is vital. It’s important to be aware of country specific bank holidays and any rules for deadlines that fall on weekends. This will help set internal submission deadlines for the settlement of taxes.
Ireland, the UK and the Netherlands all require filing and settlement on a quarterly basis, so adding these submissions to existing monthly deadlines increases workloads as it involves reviewing the last three months of data.
There is additional stress when quarter end coincides with bi-annual and annual reporting, such as the bi-annual reporting of ASF in Portugal and annual reporting in Spain.
There are even territories, such as Portugal, where some taxes and parafiscal charges are declared on a quarterly, bi-annually and annual basis.
Missing submission deadlines can result in penalties and interest imposed by the tax authority, as well as reputational damage with both the tax authority and the market.
In Germany, late submission of the tax declaration can result in penalties of up to ten percent of the liabilities due and the tax office may impose penalties of one percent for late settlement. There are also penalties in the UK for late submission of tax returns and some tax authorities (Ireland and Italy) impose interest calculated on a daily basis.
Beware of nil submission filing
In Germany, the UK, Denmark, Finland and Austria, nil returns must be submitted regardless of whether business is currently being written or not. The tax authorities require nil return submissions as formal proof that the company has no liabilities to declare, and failure to submit can incur penalties.
Accurate data and planning ahead
Smooth filing starts with underwriting. Collecting all the required details for submission at this stage ensures seamless submissions and avoids having to contact policyholders for missing information or queries about inaccuracies.
Early preparation of data can mitigate potential issues. Providing data monthly allows time to review well in advance of deadlines and lets you clarify and rectify any missing information proactively.
This means that once the quarter submission is due, only the data for the last month of the quarter will need to be reviewed and final quarter declaration approved, rather than data for the entire quarter (or year!).
Be aware of latest changes
Whilst it’s always important to stay ahead of upcoming changes, this year more than most is one where keeping updated is vital. Due to COVID-19 some tax authorities have issued deferrals or have changed filing requirements.
The pandemic has also meant workforces are working from home, which can make data collection for filing a more complicated process and cause delays. As always, looking ahead and planning in advance can avoid these pitfalls and ensure a smooth submission.
Outsource to alleviate stress
Organisation and mobilisation of resources will help make quarter end and annual submissions easier. Unfortunately, the normal workload doesn’t stop and filing still needs to take place, so it can be helpful to outsource this task to ensure it’s completed accurately and on time.
Get in touch about the benefits a managed service provider can offer to ease your IPT compliance burden.