There is a wide variety of indirect taxes and parafiscal charges that apply to the different elements of coverage that can be included under a motor insurance policy in Spain. You can read our blog to learn more about taxation of motor insurance policies in Europe, this blog focuses on some of the specifics to consider in Spain.
Which taxes are payable in relation to motor insurance policies in Spain?
The application of Insurance Premium Tax (IPT) and a surcharge to finance winding-up activity are common across all classes of insurance typically found in a motor insurance policy, with the latter being declared to Consorcio de Compensación de Seguros (“Consorcio”). For coverage such as roadside assistance and legal protection, this is likely to be the extent of the taxes due.
Additional Consorcio surcharges are due on other elements of the cover. For example:
- Personal accident coverage attracts a separate surcharge for direct damages to person.
- Motor damage and motor third-party liability insurance entail the application of fixed fees on a per-vehicle basis.
- Contributions to the Motor Guarantee Fund in Spain (also administered by Consorcio) are currently due on compulsory motor third-party liability coverage. It is worth highlighting that this obligation should cease for insurers writing on a freedom of services or establishment basis in light of Directive 2021/2118, subject to domestic implementation of the Directive expected by 23 December 2023.
- The Green Card regime applies to compulsory motor third-party liability coverage per Green Card issued. If no Green Card is issued, this does not apply.
How are taxes on motor insurance policies calculated in Spain?
Most motor insurance taxes and parafiscal charges are calculated as a percentage of the taxable premium. These taxes are then added to the premium and charged directly to the insured.
There are some exceptions including direct damages surcharge and fixed fees. The direct damages surcharge applicable to accident coverage is a percentage that applies to the sum insured rather than the taxable premium.
Additionally, there are fixed fees due to Consorcio on motor damage and motor third-party liability coverage that vary based on the type of vehicle. Categories with their own fixed fee include mopeds, passenger cars, and industrial vehicles, amongst many others.
The fixed fee for the Green Card should be treated as insurer-borne and is therefore not a cost directly passed onto the insured.
What vehicles are exempt from tax?
Spain has a fairly narrow scope for any IPT exemption under a motor insurance policy in comparison to other European jurisdictions.
As a rule, there are currently no exemptions that apply to particular categories of vehicle but there is an exemption for certain international coverage. In the case of any goods in transit insurance relating to cross-border transport that is included under a motor policy, that portion can be treated as exempt from IPT. The Consorcio Surcharge to Finance Winding-up Activity would remain applicable in these circumstances though.