The Spanish tax system is one of the most complex in Europe. If the tax system and surcharges are not fully understood it can be a real challenge for insurance companies writing business in Spain or for those that want to start their business in this country. Spain has different taxes and reports that must be declared each month to multiple tax administrations, public entities and organizations.
Three of the most important businesses:
Insurers registered to write business in Spain must be aware of their responsibility to comply with the following tax administrations, public entities and bodies:
- Tax Authorities (IPT): Spain has both central and provincial tax administrations. To be more precise, there is a central administration (AEAT) and four provincial administrations (Alava, Guipuzcoa, Navarra and Vizcaya). Each province holds its own tax administration and has its own authority and capacity to control and collect the tax due. An insurance company should be registered with each of them if they write business located in these provinces.
- Consorcio de Compensación de Seguros (CCS): CCS is a state-owned enterprise entity that operates as an instrument at the service of the Spanish insurance sector. It performs multiple functions including those related to the coverage of extraordinary risks, mandatory automobile insurance, combined agricultural insurance and the liquidation of insurance companies.
- Gestora de Conciertos para la Contribución a los Servicios de Extinción de Incendios (Gestora): Gestora is part of UNESPA, the Spanish Association of Insurers and Reinsurers and represents over 96% of insurers in Spain. Gestora is the body in charge for centralising the collection of the contribution to Firefighting Services in Spain which is then transferred to local municipalities.
Insurance Premium Tax (IPT) must be declared in each of the five tax authorities in Spain. To determine which is the correct tax authority it’s important to identify the location of the risk insured. This is done through post codes. Each province has its own set of post codes and once the code related to the policy is known, IPT can be declared to the correct province.
Surcharges for CCS: 2019 saw the introduction of a new digital reporting requirement in the premium tax world. A data file must now be uploaded to a web portal which contains more detailed information for each policy. The portal, with the information contained in the data file uploaded, determines the period declaration for each transaction, the tax payment, and any interest payment due. The portal links the payments due directly to the bank account, meaning payment is made by direct debit and the transfer happens automatically as soon as CCS receives confirmation.
Fire Brigade Charge (FBC): FBC applies on those insurance policies which include fire and mult irisk. The calculation of this surcharge can be complex for insurers because it can take four years to declare the FBC due for a one year period as the process includes annual premium reports, prepayments and adjustments.
With such complexity in Spain’s tax regime, it’s important that insurers writing business in the country stay up to date with changing requirements in order to remain compliant.
To learn more about Spain’s reporting requirements, listen to our recent webinar Spain: how to stay compliant in a complex tax jurisdiction.