Liechtenstein is one of many countries with Insurance Premium Tax (IPT) requirements, specifically the Swiss Stamp Duty and Liechtenstein Insurance Levy.
This blog provides an overview of IPT in Liechtenstein to help insurance companies remain compliant.
In Liechtenstein, there are two types of taxes that apply to premium amounts received by insurance companies:
These taxes complement each other. LIL is only applicable if CHSD is not applicable.
Swiss Stamp Duty is applicable in Liechtenstein based on Customs Union Treaty of March 29, 1923, which regulates the federal rules of stamp duties. Liechtenstein levy on Insurance premium amounts only applies if the Swiss stamp legislation does not apply.
It is necessary to highlight that Liechtenstein is a member of the EEA. As a result, the Location of Risk provisions outlined in the Solvency II Directive apply to LIL.
Therefore, to determine whether a premium amount triggers LIL, the rules of the referred Directive should be applied. This is not the case for Swiss Stamp Duty.
Premium payments made by Liechtenstein resident policyholders and/or to insurance companies based in Liechtenstein are generally subject to Swiss Stamp Duty.
Premiums on non-life insurance policies are taxable at the rate of 5% and life policies at a rate of 2.5%, unless one of the exemptions listed in the regulations apply. These rates and exemptions apply to both CHSD and LIL.
Examples of exemptions include:
For the Liechtenstein Insurance Levy, the taxable basis is the premium payments based on an insurance relationship created by an insurance policy where the location of risk is deemed to be in Liechtenstein.
Whereas, for the Swiss Stamp Duty, the taxable basis is the premium payments for insurance:
CHSD is filed on a quarterly and paid alongside the submission of the tax return. On the other hand, LIL is due biannually.
Each return is due within 30 days following the last day of the reporting period.
In case of late payment, a default interest should be paid on the amounts paid late. The interest rate is determined by the Swiss Federal Department of Finance.
The main challenge is to determine which tax is due, CHSD or LIL. Secondly, it is challenging to determine whether the premium amount and the risk covered are exempt from taxation. The list of exemptions is long.
If LIL is due, these returns can only be filed by a fiscal representative based in Liechtenstein. It can be challenging to find one locally.
Read more about IPT in general here: IPT Guide
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In the next edition of our series of blogs in Insurance Premium Tax (IPT) prepayments, we look at a less familiar regime to many, the Austrian IPT Prepayment.
Those who are well versed in the IPT sphere will be perplexed at this blog, as they most likely will never have paid a prepayment in Austria.
This is because the prepayment is only due in the event of the November tax period being paid late. Due to the elongated deadline of Austrian IPT and Fire Brigade Tax (FBT) this rarely happens in practice. As a reminder, the tax payment in Austria must be made by the 15th day (due date) of the second consecutive month (i.e January 2022 period due 15 March 2022).
But what if the November deadline isn’t paid in full by the 15 December? A special advance payment of 1/12 of the sum of the calculated tax amounts of the last 12 tax return periods must be made. This special advance payment is credited against a subsequent self-calculation for the declaration period of November.
With respect to IPT, FBT and Vehicle Insurance Tax (VIT), the rules are as follows:
Insurers should be aware that whilst tax payments are paid monthly, the return is due on an annual basis, the deadline being 30 April. The return(s) includes the tax ID, name of the insurer, tax amount on a per month basis, and the amount paid in tax for the year in question thus far.
For FBT liabilities the amount is split evenly between the insured and the insurer. So, for a risk with 100% fire portion and €100.00 premium, in addition to the €11.00 IPT amount the insured would also pay €4.00 FBT. The remaining €4.00 of FBT would be from the insurer.
From an exemptions perspective there is quite an exhaustive list in Austria. Some of which are export credit, cross-border cargo, reinsurance, and livestock (If the insured amount doesn’t exceed €3.650, as well as insurance of livestock with a small livestock insurance association).
Keeping abreast of changes in IPT compliance requirements in Austria and across the EU can be challenging. Our team of experts can guide you through the details and ensure you are on the right compliance path.
An increasing insurance premium tax (IPT) trend is using transactional level information in various returns and reports. Preparation and education are key to ensuring details are being captured on an ongoing basis rather than at the last moment. Furthermore, in some cases where legacy systems are being utilised and don’t have the capability to capture all required fields, a software update may be required. All relevant parties in the data supply chain should educate themselves on the importance of collecting the details to avoid the often painstaking and time-consuming exercise of going back to the policyholder to collect the required information.
Many businesses initiated this trend because of the changes to the Consorcio de Compensación de Seguros (CCS) reporting system in 2019. However, this is not always the case as some countries have had transactional submission in place for some time. Two such examples would be Cyprus and Malta. For the former, Policy Number, Class of Business, Inception/Expiry Date, Premium and Tax Amount are required per policy. The same fields are required for the latter bar Inception/Expiry Dates. We rarely experience any difficulties for insurers collecting this information, as these are common fields often being collected at the source.
Whilst this may surprise some, Italy is another country where transactional level information is required to be recorded. The main difference here is that these details aren’t required for ongoing tax submissions but rather in the form of IPT books which must be regularly maintained and contain the transactional information for the preceding ten years. You can find more about the required details here.
The IPT books are mandatory for successful prepayment transfer following a Part VII portfolio transfer, general prepayment reclaims and historicals. Transactional details are also required for the Claims Report and Contract & Premium Report.
The changes in CCS submission brought the trend of transactional submission to the forefront of insurers’ thinking. A mandatory field for successful submission is the postcode, which many insurers weren’t capturing at the time. To help insurers with this change, there was a six-month transitional period where insurers could submit policies without the postcode. However, this field then became mandatory and the requirement was that the preceding six months of reports would need updating.
The introduction of the Greek Annual Report in 2019 brought another layer of complexity for insurers. The main issue was the requirement for the VAT/tax registration number to be populated. Where it was impossible to collect, insurers sometimes opted to submit incomplete reports. To date, we haven’t experienced pushback from the tax authority for omitting this detail, but we cannot guarantee this will continue to be the case.
The most recent change has been to Portuguese Stamp Duty submissions. This change brought elements of the Greek Annual Report and the CCS changes together, in the sense that the geographical area required population (Azores, Madeira, Mainland) and the tax ID of the policyholder were required. Unlike in Greece, there was no option of submitting incomplete reports; if all necessary details were not populated, the insurer couldn’t pay the tax.
The above list is by no means exhaustive but gives a good idea of the exponential complexity facing insurers for ongoing compliance. Simply put, the insurer must have agile systems to deal with any potential changes. We believe that more countries will implement transactional reports in the coming years, so it would be prudent to set up certain controls now to help prepare and ease the burden later.
As the world of IPT compliance is so fragmented across territories, keeping abreast of changes in reporting requirements can be challenging. Our team of experts can guide you through the details and ensure you’re on the right compliance path.
Need help ensuring your IPT compliance? Get in touch with Sovos’ team of experts to discover the benefits of a managed service provider.
The Belgian taxation landscape can be challenging for insurers if they are not well versed in the rules and requirements for ongoing compliance. Belgium ranks as one of the somewhat trickier countries to deal with in the Insurance Premium Tax (IPT) sphere with a plethora of different taxes due dependant on the class of business as well as IPT prepayment requirements.
There are two different tax bodies Belgium insurers should be aware of: the Service Public Fédéral Finances which covers IPT and the National Institute for Health & Disability (INAMI) which covers a vast range of parafiscal charges.
The standard rate of IPT in Belgium is 9.25% which is due on the total amount paid by the policyholder to obtain cover, inclusive of any third-party fees. Goods in Transit risks as well as specific motor risks are subject to a different rate, whilst certain life cover can also have varying rates.
The tax point is the date which triggers the tax, and in Belgium for all taxes it is triggered on the maturity date. This is formally defined as the contractual date when the policyholder pays the premium to the insurer.
Something which sometimes causes issues for insurers is the existence and application of the Belgian prepayment. The prepayment is based on the IPT figures for the October declaration and is due by 15 December.
Similarly to the Italian prepayment the rate stands at 100% but that is where the similarities end. Initially prepayment was only allowed to be offset against the IPT liabilities in the December declaration. However, we did experience some issues in receiving monies from the tax authority where the December liability exceeded the prepayment, thus resulting in a reclaim due.
In 2021 an exercise was undertaken whereby insurers were able to offset any excess prepayment not received in the previous four years against current IPT liabilities. In 2022 insurers have been able to utilise the prepayment up until the March declaration i.e four periods in total (December-March), thereafter if there is any prepayment remaining, in theory a reclaim should be received.
In certain circumstances an exemption was granted to not pay the prepayment. This was often with Captive insurers where they were paying liabilities solely in October on a yearly basis and didn’t expect any further liabilities until the following October. Such exemptions were negotiated directly with the tax office.
To ease the burden for insurers covering solely life insurance, such coverage is exempt from IPT prepayment.
There are seven different taxes covered by INAMI, five of which are due monthly, these are:
Taxes are due on certain motor and motor liability risks dependant on what the contract is covering, with the exception of fire. Some insurance policies are taxed with an element charged to the insured and an element charged to the insurer.
Fire risk is the most common parafiscal we see from the above and care should be taken in its application. Unlike other countries where the fire element percentage is largely determined by the insurer and the scope of the contract, fire risks in Belgium must be apportioned according to a predetermined set rate.
The hospitalisation INAMI charge is due on a biannual basis for ‘Sickness – Pre & Post Hospitalisation Costs’ on an individual and group level. For the charge to apply the insured must receive the benefits of Belgian healthcare insurance (not applicable to doctors, dentists, optician’s fees etc). The applicable rate is 10% on the taxable premium unless the insured’s benefit is less than EUR 12.39 per day, in which case a de minimis limit exemption applies.
Finally, we have the Security Fund for Fire & Explosion due annually, which is currently 3% on the taxable premium. This applies on compulsory liability insurance for fire and explosion in premises open to the public.
Navigating the rules and requirements in Belgium can be demanding for even the most experienced insurer. Sovos has a dedicated team of compliance experts to walk you through even the most challenging problems and ensure you are on the right compliance path.
Get in touch about the benefits a managed service provider can offer to ease your IPT compliance burden.
With a new month comes yet another report due in the Insurance Premium Tax (IPT) sphere. Insurance companies covering risks in Greece must report their insurance policies triggered in 2021 in the form of the Greek annual report. This is due by 31 March 2022.
Let us cast our minds back, in late 2019 this report came to fruition after previously being ratified in legislation released in 2016. At the time, due to the delay in implementation, the report was backdated, and insurers faced the challenge of submitting transactional level details for the period 2016-2018 in a short space of time.
There was however a precedent for such a dramatic change. And those who experienced the change with the Spanish Consorcio de Compensacion de Seguros submission would have experienced a sense of déjà vu with this development. Similarly, some insurers may be experiencing all too familiar issues now with the change in Portuguese Stamp Duty submission.
The market initially struggled with the Greek annual report due to the level of details required. In particular, the VAT/tax registration number was often not being collected from the Insured. Furthermore, with legacy systems still in use some of the other details in the report weren’t readily available. What this meant in a lot of cases for the Insurer was the painstaking and often time consuming process of going back to the policyholder to collect such information.
What about the report itself? The Greek annual report is a transactional level declaration on excel, which requires the following details to be populated:
The standard IPT rate in Greece is currently 15% with the 20% rate reserved for risks covering fire. Where there is a multi-risk policy covering both rates, the premiums must be apportioned on a per rate basis and therefore split out into two different lines.
Thankfully exempt premiums are not required on the report which somewhat eases the burden.
But what about cases where it was simply not possible to collect this information? This was an issue we’ve seen for some of our IPT customers where incomplete reports were submitted. So far, we haven’t experienced pushback from the tax authority for the omission of certain details, but we cannot guarantee this will continue to be the case.
Preparation is key. And education is key. This annual report is here to stay so the Insurer must be prepared well in advance that such details will be required and they should aim to collect this information on an ongoing basis rather than at the last moment. In some cases, an update in software will be required as the current systems may not have the capability to capture the required data. Furthermore, all relevant parties in the data supply chain should be educated on the importance of collecting the details. We believe that more countries will implement transactional reports in the coming years, so it would be prudent to set up certain controls now, to help prepare and ease the burden later.
As the world of IPT compliance is so fragmented across territories, keeping abreast of changes in reporting requirements can be challenging. Our team of experts can guide you through the details and ensure you are on the right compliance path.
Need help with IPT requirements in Greece? Get in touch about the benefits a managed service provider can offer to ease your IPT compliance burden.