We are in unprecedented times where hour-by-hour change has become the new norm. This is particularly true across our industry as governments evaluate and assess every direct and indirect tax at their disposal as part of broader economic stimulus measure.
Tax authorities across the world – national, regional and overseas territories – have acted decisively in recent weeks. Measures include headline-grabbing tax deference schemes, new exemptions designed to prop up particularly at-risk industries, and tax digitisation postponements.
So far though, IPT has broadly escaped change.
Portugal may have postponed its new Stamp Duty reporting system until January 2021 following a state of emergency and four Spanish provinces have allowed insurers to defer their insurance premium tax payments, yet aside from those specific examples, widespread alterations have been minimal.
This is unlikely to be the case forever. We could well see the same happen to IPT as has to VAT and Corporate Tax. If these changes do trickle down (or perhaps, when they do, depending on your stance), payment and filing adjustments may have to take place urgently.
Cross-border IPT determination is complex at the best of times. Now, even more than ever, insurers large and small should be closely monitoring their tax obligations as well as the graces available to them.
It is certainly not the time to incorrectly calculate IPT for three reasons:
1. Commercially, as there is a common need to preserve liquidity
2. Productivity, so people and departments stay as efficient as possible
3. Compliance, for regulatory peace of mind
Bolster bottom lines
It is vital that any insurer maintains as buoyant a bottom line as possible during these choppy times. The longer organisations can protect cash reserves, the better.
From a practical perspective, this means taking advantage of any IPT deference schemes (if and when they become available in coming months), reducing overpayments and preventing underpayments, and keeping abreast with any new notifications. IPT could well change at short notice, so having the capacity to adapt rapidly is crucial too.
Productive people
Secondly, once the dust starts to settle and everyone acclimatises to this ‘new normal’ as best they can, companies will expect their tax managers to maintain the same care and attention to detail as always. Remitting IPT at the correct rate, yet at the ideal time, across every region the company is operating in, will be important to keeping business flowing throughout the business.
Audit assurances
Lastly, once tax authorities themselves start to audit historical returns from this period (however long that might take them), auditors will be carefully reviewing every company’s IPT obligations to ensure the organisation has paid the tax expected of them.
At this moment in time, it’s unclear and highly unlikely that tax authorities will grant reprieves for this period because of the exceptional circumstances, so it’s safer and wiser, reputationally and financially, to correctly calculate your IPT and to file it in line with the constantly evolving guidance issued.
