European Insurance Premium Tax Reporting Requirements

In recent years, tax transparency has become a vital issue. It is becoming increasingly evident that tax authorities are adapting to online submissions for further transparency and accuracy in collecting and reporting of taxes and requesting more detailed policy information.

There is very little consistency across European territories regarding reporting; differences in tax rates, submission dates and tax point dates vary from country to country. This blog will discuss a few countries that have increased scrutiny of Insurance Premium Tax (IPT) reporting.

Italy

Premium tax and parafiscal reporting for insurers can be challenging. Often there are links between an upcoming year’s reporting requirements and declarations made in previous years, such as IPT prepayments and other similar obligations specific to the class of business covered. Although only liabilities are paid monthly and returns filed annually, an important point to note is that it is a legal obligation to maintain IPT books on a per policy level to be readily available should the Italian tax authorities request it.

Parafiscal charges

In addition to Italian IPT, there are also several insurance parafiscal charges, including:

• Emergency treatment fund
• Road accident victims’ fund
• Solidarity fund for victims of extortion

Spain

Spain is one of the more complex countries for IPT and parafiscal reporting in Europe.

Insurance Premium Tax

As IPT is reported on a provincial level, and while most liabilities are reported under the central administration of Madrid, there are provincial regimes to consider. The postcode determines which administration the liabilities should be filed to.

Unlike other countries across Europe, there is only one rate to consider across all business classes, but there are also several exemptions.

Spain has annual reporting requirements, i.e. Modello 480 Annual IPT Reports and FBC Reports, therefore up to date record keeping is important.

Parafiscal charges
Fund for the Winding Up of Insurance Companies and Fund for the Insurance of Extraordinary Risks (Consorcio)

Insurers are required to submit reports detailing all policies related to that monthly reporting period. Each policy must be itemised separately, and mandatory reporting fields must be declared.

Fire Brigade Charge (FBC)

FBC calculation is straightforward, and there are only two applicable rates, 5% in the case of pure fire policies and 2.5% for multi-risk policies, including fire coverage.

FBC policies are reported annually, and payment is made upon receipt of invoice from Gestora. However, like Italy, links between an upcoming year’s reporting and declarations made in previous years is applied here, with adjustments done up to four years after submission of the initial report filed.

Portugal

The Portuguese tax authority introduced monthly Stamp Duty Reporting requirements, which requires all insurers covering Portuguese risks to report at an individual policy level.

Insurers are required to collect, disclose, and submit additional information in the Monthly Stamp Duty Declaration.

Information required to be reported includes:

• Policyholder’s tax ID: Tax ID issued by the policyholder’s country of residence
• Policyholder’s country code: The code of the policyholder’s country of residence which should be the country issuing the policyholder’s tax ID
• Territoriality: The exact location where the insurance premium was issued
• Insured risk’s location in Portugal: The postcode of the area or region where the risk is located – i.e. Continent (Mainland)/Azores/Madeira since the Portuguese tax authorities require the stamp duty to be filed regionally.

In addition to the above, Law Decree no 119/2019 revokes an ‘offsetting’ mechanism relating to tax from the previous period. Insures must now submit a replacement declaration whenever there are changes to the previously declared amounts.

Parafiscal charges

In addition to Portuguese Stamp Duty, there are also several insurance parafiscal charges, including:

• Fire Brigade
• Emergency Fund (INEM)
• Motor Guarantee Fund (FGA)
• Portuguese Insurance Institute (ISP)

Germany

Germany passed a law on the modernisation of IPT in December 2020. Several changes affected IPT, including, mandatory filing of tax returns online, which will take effect from 1 January 2022.

The most significant change is the updated location of risks rules, Insurance Tax Act reforms in Germany, which was effective from 10 December 2020.