It’s time to return to Insurance Premium Tax (IPT) prepayments – a continuation of our blog series on this important IPT topic. You can find the first entry in our blog series here.

Throughout Europe’s different countries and jurisdictions, IPT is declared and settled in different ways. Monthly, quarterly, biannually – this varies across Member States – and some jurisdictions request prepayments to ensure the liabilities due from insurance companies are collected in good stead.

Belgium is one country that states within its legislation that IPT prepayments are required.

What is a prepayment?

You can learn more about IPT prepayments in this blog however for those who missed our coverage on the topic, prepayments can be defined as a tax payment credit made to a tax authority before the payment is actually incurred.

This prepayment tax will be deducted to cover the tax liabilities until the total credit is used up and then current liabilities must be paid by the basis applied in each jurisdiction.

IPT prepayments in Belgium

Each jurisdiction uses a different method to apply prepayments and we explain how this is legislated in Belgium.

The prepayment is due no later than 15 December each year. The tax base for the prepayment will be the amount paid in November of the current year, that is based on the tax liabilities of the October period.

It’s important to follow the state on the Belgium tax law in order to pay and submit the return within the deadline because when the tax hasn’t been paid within the deadlines set out previously, penalties will automatically be due to the Belgium tax authority from the day the payment should have been made.

The previous prepayment will be deducted during the next tax period (December, January, February and March) correspondingly submitted in January, February, March and April.

Unused prepayments

What happens if an insurance company paid the prepayment but during the three first months, the insurance company has not used that credit, perhaps because no policies were subscribed and therefore no submission or payment was due?

In these cases, the entire, or part of the prepayment is still pending to be deducted and a formal reclaim should be requested to the tax authority in order to obtain the unused prepayment.

Although this appears to be a simple process, not following the rules or not processing the returns, payments, or refunds within the correct deadlines can see the insurance company receive penalties or obtaining the refund for the unused prepayment could be prevented.

Take Action

Speak to our team today for advice on how to navigate this often confusing tax procedure.

The Dutch government issued an updated Policy Statement for Insurance Premium Tax (IPT) on 12 May 2022. The first of its kind since February 2017, the update is intended to replace the 2017 version in full. While the majority of the content remained consistent, there were notable details pertaining to Netherlands storage insurance and ‘own transport’ insurance. These changes will be effective from 13 May 2023.

Storage insurance in the Netherlands

The change extends the scope of storage insurance that can still be regarded as goods in transit insurance, increasing from storage of up to one month to three months. It may even be possible to show goods in transit insurance applies for storage greater than three months, but the onus is on the insurer to prove an absolutely necessary connection between storage and transport.

It’s general market practice in the EU to consider storage of up to 60 days as being part of the goods in transit coverage, making the Dutch approach more flexible in this regard. Any goods stored beyond the 60 days are treated as a property risk, taxable where the goods are located and not where the policyholder has their establishment.

It’s useful to consider this change from the perspective of both IPT rate application and location of risk. In terms of the former, the IPT exemption applicable to all goods in transit insurance in the Netherlands widens this exemption to policies involving longer periods of storage.

Regarding location of risk, the relevant provisions in EU Directive 2009/138/EC determine that in the case of goods in commercial transit risks, the risk location (and therefore the country entitled to levy IPT and/or associated levies) is the policyholder’s establishment to which the contract relates. Where storage insurance does not constitute goods in commercial transit, the risk location is the location of the property itself.

As a result, goods stored in the Netherlands for more than three months as part of a transport policy will generally be taxable there, even where the policyholder’s establishment is elsewhere. Whereas goods stored in the Netherlands for less than three months will not be taxable in the country (unless the policyholder’s establishment is also in the Netherlands).

‘Own Transport’ insurance

The other key takeaway from the Policy Statement was on the subject of ‘own transport’. This is defined as transport ‘where no transport company is contracted, but commercial transport is involved’, confirming the exemption for transport insurance is equally applicable to scenarios where companies arrange for the transportation of commercial goods for their own benefit. As such, the exemption is not restricted to third-party contractors utilised for the transport.

The Policy Statement also states the exemption applies to:

However, the exemption does not apply to insurance of own goods which, although transported are not for the sole purpose of transferring it to another place of destination. This could include the tools of a contractor that are stored in his delivery van.

Is further change possible?

The changes outlined above are relatively minor given they relate solely to goods in transit business. One more fundamental change that had been mooted as a possibility was for the Netherlands to introduce stricter rules on the application of IPT to non-EEA risks, as we saw in Germany at the end of 2020.

The scope of the changes in Germany caused considerable confusion in the market at the time so it’s possible the Dutch government has put any potential plans on hold for now. This will be an interesting issue to monitor as countries seek out alternative ways to generate tax income.

Take Action

Want to understand more about how these changes affect your business? Get in touch with our team of experts to see how Sovos can help ease your IPT compliance burden.

There are some countries across Europe where declaring and settling insurance premium tax (IPT) and parafiscal charges on time is not enough to prevent late payment penalties. You may ask why. Or you may say it’s unfair. The answer is simple.

Some European countries collect insurance premium tax and parafiscal charges or part of them in advance before they become due for payment. We call these prepayments, advance payments or provisional payments. And missing the deadline for the prepayment can be penalised by the tax offices.

This blog will give you an overview of how prepayment regimes work. At the end of this blog, we’ll list the countries where prepayment rules are in place without detailed requirements. In later blog posts, we will discuss the detailed prepayment rules in these countries in depth.

How do IPT prepayments work?

Prepayment or advance payment in the taxation world is a payment that is paid before the tax is due. Therefore, when a prepayment is paid, it’s unknown how much the actual tax will be.

There are various prepayment tax calculation methods. In IPT, the most common calculation is when the prepayment amount is based on the tax amount paid for the previous reporting period. Either the same tax amount or maybe a certain percentage of this tax is required to be paid in advance. However, there are other methods used.

For example, in Poland, there is a quarterly prepayment obligation. The prepayment amount is based on the premium amounts collected in the current quarter. Another example is in Austria, where there is a unique prepayment approach. According to the regulation, you can opt not to pay the prepayment if you pay the IPT liabilities for the November period one month earlier than the standard deadline, so not by 15 January but on or before 15 December instead.

There are similarities in the legislation on how the amount of the prepayment is considered in the final tax due. In most cases, insurers can offset the prepaid tax amount against the future period`s tax obligation. But there are differences in the “how”.

For example, in Belgium, the prepayment made in December can be offset against the December liability. Also, in January and February (the Belgian Tax Offices recently added these two months), periods’ liabilities and the remaining should be reclaimed. In Italy, the prepayment made in November can be fully offset against the next year’s IPT liabilities and against the following tax years’ liabilities until it is used up entirely. Alternatively, insurers can also reclaim it from the Italian tax authority.

If we take a closer look at the calculation of the prepayment, we can conclude that it’s usually based on the tax amount of the same tax type. However, in Italy, the basis of the IPT prepayment isn’t only the paid IPT but also what has been paid for the 1% Consap parafiscal charge.

When do IPT prepayments need to be made?

The due dates to pay prepayments vary across Europe. Some due dates fall at the end of the year, such as Austrian IPT and the Italian IPT. However, for the Italian Hunting Accident Victims’ Fund (HAVF) and Road Accident Victims’ Fund (RAVF) and the Spanish Fire Brigade Tax (FBT), the advance payment is due in January. The advance payment for the Hungarian supplemental IPT is due in November and May. On the other hand, the prepayment is due every quarter regarding the Polish Ombudsman fee.

Where do IPT prepayment regimes exist in insurance taxation?

Without pursuing completeness, here is a list of the prepayment regimes across the EU:

Take Action

Contact our team of experts today for help with IPT compliance or download our e-book Indirect Tax Rules for Insurance Across the World.

Meet the Expert is our series of blogs where we share more about the team behind our innovative software and managed services.

As a global organisation with indirect tax experts across all regions, our dedicated team are often the first to know about regulatory changes and developments in global tax regimes, to support you in your tax compliance.

We spoke with Hector Fernandez, principal compliance tax services representative, who explained the complexities surrounding Spanish insurance premium tax (IPT) and how Sovos helps insurers operating in Spain.

Can you tell me about your role and what it involves?

I’m a principal compliance tax services representative at Sovos. As part of my role I work with the different teams helping them with the tax requirements of different tax authorities.

I also work with clients with IPT requirements in Spain, helping them with the many elements of tax compliance.

Ensuring compliance with Spain’s IPT reporting requirements is especially complex, why is this the case?

As mentioned in previous blogs about Spanish IPT, Spain has one of the most complex monthly and annual IPT reporting procedures. It’s challenging due to many factors such as multiple IPT tax authorities (national and provinces), additional entities to deal with including the Fire Brigade Tax (FBT) and the surcharges that must be paid to the Consorcio de Compensación de Seguro (CCS) or other bodies like Spanish Motor Insurers Bureau (OFESAUTO).

Modelo 480 – IPT Form:

In Spain, five tax authorities charge IPT: the National Tax Authority (AEAT) and four provinces (Alava, Guipuzcoa, Navarra and Vizcaya). They are responsible for the policies in those territories. The Modelo 480 contains the same information for different tax authorities, but the formats and requirements can vary.

The annual submission coincides with the December monthly period, which means that it occurs at the same time as submitting the last monthly submission of the year and the annual report.

The Modelo 480 is a yearly overview form submitted by insurance entities that summarise monthly returns and payments. Insurers must include exempt premiums written during the year on this form because this information is not included in the monthly returns.

The data provided in this summary form will be broken down by class of business and monthly payment. While this form is purely informative, it’s vital since it helps tax authorities to find any mistakes, inconsistencies or fraud that could have been committed in the monthly submissions.

Fire Brigade Charge:

There is a compulsory annual return for those entities that subscribe to Fire and Multi-risk policies in Spain (Class 8 & 9). The report is submitted through a specific portal provided by CCS. Insurers must submit the return before the last day of April.

In this report, the different Fire or Multi-risk policies must be declared and broken down by the postcode where the risk is located and include the taxable premium of each policy.

CCS will share this information with the local bodies with competencies to calculate and charge the Fire Brigade in Spain, including councils and provincial councils or the body that helps the insurance companies to deal with this surcharge such as GESTORA (Gestora de Conciertos para la Contribución a los Servicios de Extinción de Incendios).

Green Card:

Those insurance companies that provide car insurance must deal with the Green card surcharge paid to OFESAUTO, the body in charge of this surcharge. Companies must provide the number of car insurance policies issued during the year, and the body will issue the invoice.

How can Sovos help with these reports?

Spanish IPT complexity is based on the timing and the high amount of data that insurers must take into account to provide accurate data to the tax authority. It’s important to have software that can compile and process vast amounts of data in an accurate way.

Sovos’ team of IPT experts can help ease the burden of Spanish IPT compliance, through our managed services or consultancy offering as well as our IPT determination software.

Take Action

Still have questions about Spanish IPT? Sovos can help. Contact our team of experts today or watch our webinar on The Complexity of Insurance Premium Tax in Spain.

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.

Italian transactional trends

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.

Spanish transactional trends

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.

Greek transactional trends

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.

Portuguese transactional trends

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 trend towards transaction reporting will increase

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.

Take Action

Need help ensuring your IPT compliance? Get in touch with Sovos’ team of experts to discover the benefits of a managed service provider.

A parafiscal tax is a levy on a service or a product which a government charges for a specific purpose. It can be used to financially benefit a particular sector (public and private).

Unlike the drastic changes in Stamp Duty reporting within the Portuguese region, the parafiscal taxes have remained consistent and unchanged for many years. Sovos helps customers report the central parafiscal taxes within the region:

The reporting of these taxes is varied and comprehensive which can become confusing for businesses unfamiliar with the requirements. The parafiscal charges, more notably INEM and ANPC, are reported on a monthly declaration structure, whilst PR and FGA are reported on a quarterly structure, and ASF is reported on a half-yearly basis.

ANPC and INEM: monthly reporting

The ANPC and INEM are reported quarterly, and premiums concerning the Azores, Continent (mainland Portugal), and Madeira must be split. This should be identified by the insurer and declared to the corresponding tax authorities.

The tax ANPC (also known as the National Authority for Civil Protection Contribution) can be applied in classes 3 – 13 and is commonly applied at 13% of the fire risk premium. However, this rate is not consistent for all classes of business and can fluctuate accordingly.

Moreover, the tax INEM (also known as the National Institute of Medical Emergency Contribution) can be applied to classes 1, 2, 3, 10 and 18 and at 2.5% of the taxable premium. The rate of 2.5% is consistent between all classes of business and reported on the compliant tax point with Portugal, which is the cash received date (much like ANPC, FGA, PR and ASF). Finally, an annual report for INEM needs to be reported directly to the tax authorities, confirming the total liabilities due throughout the fiscal year.

FGA and PR: quarterly reporting

The reporting of FGA and PR is completed quarterly and submitted on two separate returns. The tax PR is reported at 0.21% of the premium (relating to motor insurance) for classes of business 1, 3 and 10; whilst an FGA rate of 2.5% of the premium (relating to Compulsory Third Party Liability) is only applicable to class 10.

ASF: half yearly reporting

The ASF tax is applied at a tax rate of 0.242% of the taxable premium and is calculated on all classes of business. The rate of 0.242% is confirmed annually by ministerial order within Portugal. So, the tax authority can effectively change the rate annually. It’s also important to mention that a separate rate of 0.048% applies to life insurance and is included within this return.

Take Action

Need to ensure your business is fully compliant with the ever-changing IPT requirements in Portugal? Get in touch with Sovos’ tax experts.

Update: 26 January 2023 by Edit Buliczka

Hungary: Return template for 2023 published

The Hungarian Tax Office (HUTA) released the 2023 insurance premium tax (IPT) return template last month.

According to the government decree of 465/2017, return templates must be made available at least 30 days before the due date. The first IPT return of the year is due by 20 February 2023, pertaining to the monthly IPT liabilities for January 2023.

The new IPT return template replicates the template from 2022, though the code, rates and scales for 2023 extra profit tax (EPTIPT) are different.

Coding of the tax returns in Hungary are usually formatted so that the first two digits indicate the tax year – in this case, 23 for 2023 – and the remaining digits, which are typically numbers, specify the type of tax. IPT and EPTIPT fall under the same tax code of 20. Therefore, the IPT/EPTIPT return code for 2023 is 2320.

Based on advice obtained from HUTA, it was confirmed to Sovos that the return template will not refer to the declared EPTIPT prepayment. Instead, the difference between the final EPTIPT liability and the declared EPTIPT prepayment will be recorded as an additional debt or overpayment on the HUTA tax account. As a result, insurers must manually calculate the payable EPTIPT and make their payments accordingly.

Download our free IPT compliance eBook for additional information or read our guide to Insurance Premium Tax.

 

Update: 30 December 2022 by Edit Buliczka

Hungary: Increased insurance Extra Profit Tax 2023 rates

It’s been less than a month since the Hungarian Tax Office (HUTA) published instructions for insurance premium tax (IPT) for 2023 and the rules have already been amended.

The amendment is in line with the recently issued government decree (No. 582/2022) published on 24 December 2022. This alters the tax rates for 2023.

The update affects the final scale (premium collected in 2023 exceeding 36 billion Hungarian Forints) in relation to non-life and life insurance premiums.

The rates for premium amounts collected from non-life policies climbed from 7% to 12%. Rates for premium amounts collected from life policies grew from 3% to 5%.

Need more information about Hungary’s Extra Profit Tax? Speak with our Insurance Premium Tax experts.

 

Update: 15 December 2022 by Edit Buliczka

Hungarian Tax Office publishes extra profit tax and prepayment rules for 2023

On 29 November 2022 the Hungarian Tax Office (HUTA) published instructions for the insurance premium tax (IPT) rules applicable for 2023 liabilities. This guidance includes the rules for extra profit tax and extra profit tax prepayment payable for 2023.

The information provided for 2022, including the section about the overpayment of the extra profit tax prepayment, is essentially repeated in this guidance. It states that reclaims are possible for any overpaid prepayment. The question is how? Even if the HUTA hasn’t released the referenced 2320 declaration form yet, if the 2320-04 additional profit tax settlement page of the return doesn’t change, the oddity we highlighted in our earlier update on 14 November  2022 still exists. The anomaly is: Is the entire declared extra profit tax payable again? Can we deduct the prepayment that was previously made? If yes, how?

Another notable piece of information in the new guidance is the date of the extra profit declaration for 2023. It states that the due date is 30 January 2024. This date is 31 January 2024 according to the government decree.

We are hoping these anomalies will be cleared before the extra profit tax for 2022 is due, that is by 31 January 2023. We are going to update this blog once new information is available.

Read our IPT compliance guide for further information.

 

Update: 15 November 2022 by Edit Buliczka

Hungary: anomalies around insurance premium extra profit tax

On 2 November 2022 the Hungarian Tax Office (HUTA) published the declaration form for settling the insurance premium extra profit tax or supplemental insurance premium tax (EPTIPT) prepayment and the extra profit tax.

In this update we will be discussing anomalies around the declaration form’s publish date, its content, and its guidance.

Facts about insurance premium extra profit tax in Hungary:

The publish date of the extra profit tax declaration form

1. In its guidance issued to Sovos, HUTA confirmed that if an insurance company with Hungarian tax registration terminates its taxable activity in Hungary, deregistering between July 2022 and the issuance of the declaration form, the company is liable to declare its extra profit tax liabilities at the date of the deregistration. HUTA adds that since the Decree determined a final settlement deadline of 30 November for extra profit tax prepayment and 31 January 2023 for extra profit tax, the deregistering insurer can and should fulfil its obligation before these final deadlines. The compliant approach for the date of deregistration in Hungary is 15 days following the termination of the activity.

Anomaly: How it is possible to settle extra profit tax liabilities and submit a declaration (online submission is compulsory in Hungary), for example on 15 September, if the declaration form has not been published by that date?

 

2. According to a government decree (No. 465/2017 on the detailed rules of tax administration) the declaration forms should be published at least 30 days before the tax due dates unless there were adjustments in the regulation during this period.

Anomaly: Although both 31 October and 1 November were public holidays in Hungary in 2022, the phrase “at least” suggests the form was published before the public holidays, leaving more than 30 days for taxpayers to prepare rather than less.

Extra profit tax declaration form and guidance

1. Separate sheets were created in the declaration form for ‘normal’ or monthly insurance premium tax (IPT), the insurance premium extra profit tax prepayment and the insurance premium extra profit tax. The sheet for the settlement of extra profit tax does not include a line to deduct the amount of the prepayment.

In the guidance issued by HUTA to Sovos, it states that as the monthly insurance premium tax, the extra profit tax prepayment and the extra profit tax have the same tax code (No. 200), all payments can be automatically offset against each other.

Anomalies:

2. Based on the guidance and as per the declaration form, corrective/substitute return should be submitted in relation to ‘normal’ IPT, extra profit tax prepayment and extra profit tax if the amount of these liabilities appears to be incorrect following the submission of the return.

Anomalies

The above anomalies are just examples around the extra profit tax prepayment and extra profit tax declaration. Sovos submitted queries to HUTA to clarify these anomalies. We predict some of these anomalies will be clarified soon with the issue of an adjusted declaration form and an amended guidance.

Still have questions about Hungary’s extra profit tax? Get in touch with our Insurance Premium Tax experts.

 

Update: 11 July 2022 by Edit Buliczka

As of 1 July 2022, Hungary introduced an Extra Profit Tax scheme, which levies supplemental Insurance Premium Tax (IPT) on insurance premiums. The introduction of the Extra Profit Tax scheme is a temporary measure and aims to cover the increased governmental costs caused by the conflict in Ukraine. The Extra Profit Tax scheme is applicable not only for the insurance sector but also for other sectors, including airlines, medical, energy, telecommunications and banking.

The following blog gives an overview of this tax, highlighting some interesting features and anomalies around this tax.

What is Hungary’s Supplemental IPT?

On 4 June 2022, a Government Decree was published in the Hungarian Official Gazette, numbered 197/2022, with the title “About Extra Profit Taxes”. One may wonder why a government decree regulates a new tax method. To answer this question, we need to research and read the Hungarian Constitution and another law about special measurements in case of catastrophes. Adding two new sections to the mentioned law on 25 May 2022 made it possible for the government to introduce the Extra Profit Taxes in a government decree instead of adjusting the relevant laws. The Extra Profit Tax scheme includes the Supplemental IPT. Although the Government Decree refers to particular tax laws, such as the 102/2012 IPT Law, the Extra Profit Tax regulations are not and will not be built into these tax laws.

Overview of the Supplemental IPT

Supplemental IPT is a temporary tax effective as of 1 July 2022 for 18 months and will end on 31 December 2023. This tax is due on non-life and life insurance policies written by both Freedom of Establishment and Freedom of Services insurers. A similar sliding scale system on the income collected is applicable for this new supplemental IPT as it is for the existing IPT. The scales for 2022 are as follows:

  1. Under 1 billion Hungarian Forint (HUF)
  2. Over 1 billion and below 18 billion HUF
  3. Over 18 billion HUF

While for 2023, the scales are the following:

  1. Under 2 billion HUF
  2. Over 2 billion and below 36 billion HUF
  3. Over 36 billion HUF

The rates vary depending on when the taxpayer collected the premium and the type of insurance policies. In 2022 the rates are higher for non-life and life insurance policies than in 2023, also noting that the life rates are half of those applied to non-life policies. For further details about the rates, please read our tax alert, Hungary: Supplemental IPT Introduced Due to Ukraine Conflict.

The declaration and the payment are due by 31 January 2023 and 31 January 2024, respectively. There is also a prepayment obligation for both years with due dates of 30 November 2022 and 31 May 2023. For further details about the prepayment, please also refer to the abovementioned tax alert.

Interesting features about the Supplemental IPT

The introduction of this tax is one of the features which is unique in taxation. In Hungary, in normal circumstances, taxes are introduced, or the existing taxes are modified via laws. Generally, tax laws should be published at least 30 days before they come into effect. In the case of the Extra Profit Tax scheme, the legislative body fulfilled none of the above.

Another interesting feature to mention is that although it is called supplemental insurance premium tax, it is also due on life insurance policies. In Hungary, there is no existing insurance premium tax on life policies as these policies are exempt.

No prepayment is due for the existing IPT, but prepayment is due to be paid for the supplemental IPT.

Supplemental IPT is a type of Extra Profit Tax, but it seems that there is no separate tax code given to it. The Supplemental IPT should be declared on the IPT declaration form and paid to the same Hungarian Tax Office account as the existing IPT.

Anomalies and open questions around Supplemental IPT

The base period to calculate 2022 prepayment is one year, although the supplemental tax is due only for the second half of 2022. On the other hand, the prepayment for the whole 2023 year is equal to the amount of the half-yearly 2022 supplemental tax. As such, insurance companies will likely overpay the tax with the 2022 prepayment. This overpaid tax will then need to be reclaimed or can be offset against the existing IPT or used for the 2023 prepayment or 2023 supplemental IPT. Is it for purpose or just a mistake and it will be amended?

In the guidance issued by the Hungarian Tax Office on 1 July 2022 on supplemental insurance tax rules for 2022, the tax authority mentioned that taxpayers should declare the supplemental tax on the standard IPT tax declaration form, 2220. However, the tax authority did not update the form by 1 July 2022. As the due date of the prepayment and the supplemental tax differ from that of the existing IPT, there is still an open question of how the form will look to make the distinction between the existing IPT, the prepayment and the supplemental tax. Hopefully, a new return template will be published soon to answer these questions.

As explained above, there is still ambiguity and questions around this new tax. Sovos is dedicated to keeping our clients up to date and informing you as soon as the clarified information is available. Please contact our dedicated IPT compliance team if you have any questions.

Take Action

Still have questions about Insurance Premium Tax? Download our IPT Guide, written by our team of IPT experts.

The complexities of Spain’s insurance premium tax regulations can be daunting for anyone responsible for IPT reporting and compliance for this country.

Apart from the different tax authorities involved with Spanish IPT reporting and various submission processes, there are also many different declarations that tax compliance teams must be aware of.

Here we’ll look at some of the more challenging aspects of IPT reporting.

What is a Modelo 480 form?

Although the Spanish tax authorities receive declarations monthly for insurance premium tax they also require an annual declaration. The annual declaration form is referred to as a Modelo 480. This form contains a monthly summary of information by class of business and a section to provide exempt premiums. Modelo 480 is also due to the four tax authorities for the Basque region provinces, which are different formats but contain the same information. The deadline remains in January alongside the December declarations.

What is the Modelo 50?

Most of the insurance classes include a charge for the Fund for Winding up of Insurers (or the Modelo 50) even if the policy is exempt from IPT. The Modelo 480 acts as another form of review by the Spanish authorities to ensure they receive the correct amount of tax. They can cross reference the premium amount declared for the Fund for Winding up of Insurers against the premium reported on Modelo 480.

Spain’s Fire Bridge Charge

Another of the more notorious annual reports is the Fire Brigade Charge. The Fire Brigade Charge report can take around four years to complete one tax period. With prepayments and adjustments, incorrect submissions can take equally as long to fix. Reports require careful attention to detail as taxpayers cannot make corrections after submission.

Historically, an insurer could apply either a 2.5% for a multi-risk policy or a 5% rate for pure fire and be confident that the total requested by the tax authority would be around that number. More recently, this is no longer the case with the change in economic climates and more instances where the claims are higher.

How to comply with Spain’s Fire Brigade Charge reporting

The process begins with a report concerning Property and Fire policies written in the previous year. At the beginning of the following year, the taxpayer makes a prepayment based on that report. The year after, the taxpayer submits a report with the actual premiums written during the previous year. Finally, in the fourth year, the difference between the prepayment and actual premiums written is confirmed and adjusted should there be any discrepancies. Simply put, the 2022 Fire Brigade tax period will be closed in 2026!

Modelo 0-6 becomes obsolete

Another of the more complicated annual reports was the Modelo 0-6, which became obsolete with the introduction of the new reporting system. This report focused on the Extraordinary Risk taxes due on Property Damage, Fire, Business Interruption and Accident. The new system allows real-time information to be accessed should a claim against a policy be made.

Take Action

Still have questions about IPT in Spain? Get in touch with Sovos’ team of IPT experts or watch our webinar on The Complexity of Insurance Premium Tax in Spain.

Identifying the location of risk for Insurance Premium Tax (IPT) purposes is the first step to ensuring IPT compliance in a given territory. This area perhaps isn’t as straightforward as it first seems for marine insurance.

As with the location of risk rules for all classes of insurance in Europe, the starting point for marine insurance is the Solvency II Directive (2009/138/EC), in particular Article 13(13). Article 13(13)(b) refers to ‘vehicles of any type’, which is generally understood to include not just motor vehicles but also ships, yachts and aircraft within its scope. Based on this, the location of risk for marine insurance is identified by the ‘Member State of registration’. As this phrase is not defined in the Directive, there has been some confusion about what ‘registration’ refers to in this context. This is illustrated nicely by a case heard in the European Court of Justice (ECJ) in April last year.

North of England P&I Association v German Federal Central Tax Office (C-786/19)

This case involved insurance contracts with companies established in Germany and entered into the register of companies held by the District Court in Hamburg. The owners entered the vessels into the shipping register maintained by the same court in Germany. The case arose because the vessels were temporarily authorised to fly the national flags of Malta and Liberia. The German tax authority argued that German IPT was due on these contracts because the vessels remained on the German shipping register throughout the flagging out period.

In contrast, the insurer contested that the risk location should be determined by the Member State that certified that the ship is fit for use and whose flag the ship flies. Malta treats marine insurance as exempt from its Stamp Duty regime, so if the insurer was successful with its argument, then no taxes on its insurance premiums would be due in the European Union.

The ECJ held that the location of risk was in Germany despite the temporary flagging out of the vessels. This decision was because the vessels remained on the Hamburg District Court’s register, which had the primary function of proving ownership. As the owner has the primary interest in insuring the vessel to protect their financial interest in it, the register evidencing ownership was key.

What next for the marine insurance location of risk rules?

It is worth highlighting that it is unclear how much weight should be placed on this case. This is for a couple of reasons. Firstly, the Ordinance for the implementation of the relevant German legislation refers specifically to ‘shipping registers kept by the local courts’ as being determinative, which differs from the position of other territories. Additionally, a significant issue not addressed by the case is what happens when a Member State doesn’t have a shipping register.

We at Sovos haven’t seen a major shift in the approach taken by insurers since the judgment, meaning in many instances that the ship’s flag is continuing to be seen as pertinent by the market. It will be interesting how the ECJ deals with similar future cases.

We’re happy to help any insurers writing business in Europe that have questions about the location of risk rules, whether concerning marine insurance or any other insurance to ensure taxes are correctly declared.

Take Action

Contact Sovos’ team of experts for help complying with marine location of risk rules or download our Location of Risk Rules for IPT eBook for more information.

Meet the Expert is our series of blogs where we share more about the team behind our innovative software and managed services. As a global organisation with indirect tax experts across all regions, our dedicated team are often the first to know about regulatory changes and developments in global tax regimes, to support you in your tax compliance.

We spoke with Manisha Patel, senior compliance services representative – Insurance Premium Tax (IPT), about their role, how they support Sovos clients and their top compliance tips for captives.

Can you tell me about your role and what it involves?

I’m a senior compliance services representative – IPT at Sovos. I joined the company over five years ago.

My role at Sovos is multi-faceted. My primary responsibility is to oversee IPT compliance for an extensive portfolio of clients, specifically within the captives practice.

I help ensure that all clients’ tax requirements are met, including checking and signing off tax returns and ensuring that correct payments are made to relevant tax authorities within specified statutory deadlines. Additionally, I help advise clients on more complex or urgent queries that have been escalated within the team.

What is a P&I Club?

A P&I Club is a non-profit cooperative association of marine insurance providers that provides P&I insurance to all its member companies. A P&I Club covers a broad range of liabilities, including loss of life, personal injury, cargo loss or damage, pollution via hazardous substances, wreck removal, collision and property damage.

These clubs offer ship owners the highest limits and broadest ranges of coverage. Through their participation in a P&I Club, the member clubs share claims above an individual’s retention via a pooling structure. Pooling together allows members to provide the insurance

cover needed by ship owners and their ships to trade while meeting compulsory insurance and financial security requirements.

What are your tips for captives to ensure IPT compliance?

Increasing numbers of global tax authorities are switching to digital submissions and, in some cases, require more detailed information to complete these submissions.

My tip for captives would be to invest time learning about these ever-changing requirements for your relevant territories and organise yourself in a way that you can easily and readily have the information you need to hand. This will reduce your business’s risk of errors and non-compliance when settling IPT.

What are the most common ways Sovos helps captives?

Sovos’ Captives Team caters to the specific needs of captive insurers. Our team can review any program a client may have before the program’s renewal, where we can assist with premium tax calculations, validate applicable country tax rates and prepare payment summaries. Due to limited in-house expertise, we recognise that sometimes additional guidance is needed.

Our IPT Managed Services Team offers a vast amount of knowledge, providing the expertise to our Captive clients through webinars, tax alerts and newsletters to boost their confidence with tax filing and reporting. Additionally, our Consultancy Team can assist with any further queries.

Take Action

Have questions about IPT compliance? Speak to our experts or download our e-book, Indirect Tax Rules for Insurance Across the World.

Insurance Premium Tax in Italy is complex. This blog helps insurers navigate challenges in Italy, from IPT rates to reporting requirements. You can find all recent updates on IPT in Italy below in the update section.

Read our Insurance Premium Tax guide for an overview of IPT in general.

Update: 1 September 2023 by Edit Buliczka

Italian Tax Reform

The Italian Tax Reform Bill went into effect on 29 August 2023. The bill was adopted by the Italian Parliament on 9 August and published in the Italian official gazette on 14 August.

Only the general principles of the execution of the tax reform were laid down in this bill; no specifics or changes to existing tax legislation were made. On the other hand, the bill includes information about the timeline for these changes, stating: “The Government is delegated to issue, within twenty-four months from the date of entry into force of this law, … one or more legislative decrees that revise the tax system.

Among other key taxes, such as VAT and the Corporation Income Tax (CIT), Article 17 featured a change in the timeframes for assessing IPT. The revision’s goal is to bring it in line with other indirect taxes. It also necessitates changes to the IPT penalty structure, as well as the procedures and criteria for tax application. Finally, it is said that the new guidelines should rationalise the applicable IPT rates.

The bill also includes generic principles that are applicable to all taxes, such as:

Article 21 envisages an Italian Unified Tax Code to be implemented by 29 August 2024. It will reorganise and combine existing tax legislation into a comprehensive tax code.

This tax code will be divided into two parts: a general part with unified regulations for the common elements of tax systems and a particular section with regulations for individual taxes.

Sovos will keep a close eye on the Italian Tax Reform process, so stay tuned for updates or contact our experts if you have any special queries.

 

Update: 28 June 2023 by Edit Buliczka

What is the IPT rate in Italy?

Different IPT rates are applicable in Italy, depending on the type of insured risk provided to the policyholder. The rates vary from 0.05% to 21.5%.

For example, the highest IPT rate applies to legal expenses, whilst payments received from insurance policies covering risks of navigation of ships registered in Italy are subject to 0.05%. Some premium amounts are exempt from IPT.

It is important to note that the Italian class of business does not correspond to the European Solvency II Directive class of business. There are 33 business classes in Italy, numbered from AB1 to AB33.

What are the penalties and interest for IPT in Italy?

Italy is known for its strict application of laws and harsh penalty regime, charging up to 400% of the tax liabilities due. Penalties and interest for late payments are time-sensitive, calculated daily and payable alongside tax liabilities.

What is the basis of Italian IPT calculation?

The taxable premium is the income generated under an insurance contract, comprised of the premium plus any accessory fee stated in the contract of insurance (without any deductions). Any amount paid by the policyholder to the insurer is a taxable premium.

What parafiscal charges exist in Italy on the top of IPT?

Beyond IPT, premium amounts derived from various risks trigger parafiscal charges. The most significant parafiscal charge is the CONSAP (Solidarity Fund for Extortion and Usury Victims) with a rate of 1%.

Parafiscal charges are also due on risks such as:

Is IPT due on returned premiums in Italy?

If an insurance company receives a premium, IPT is due even if the insured is subsequently reimbursed.

IPT credits relating to policy cancellations or adjustments are not permitted and should not be reclaimed from the Italian tax authorities, nor offset against current liabilities. According to art. 4. Law 1216/1960, IPT “does not cease to be due even if the premium is fully or partially returned to the policyholder for any reasons”.

Italian trade body ANIA clarified the applicability of this provision, permitting tax reclaims only if the tax has not been fairly collected. This provision includes clerical errors or an incorrect qualification of the risk or scope of the insurance contract based on the information available when the policy was written.

For example: if the insurer mistakenly overcharged the policyholder and the policyholder overpaid the tax, the overpaid IPT can be deducted from tax liabilities arising in the same reporting period, i.e., the calendar year.

What are the IPT filing and payment frequencies in Italy?

Italian IPT is payable monthly, whereas the return is due annually. Prepayment is also necessary with a deadline of November and equals 100% of the IPT plus CONSAP paid in the previous calendar year.

Some parafiscal charges such as EMER are declared and paid alongside the IPT, whilst others like RAVF and HAVF have different deadlines.

Although insurers pay tax liabilities monthly, and file declarations annually, there is a legal obligation to maintain IPT books. IPT books are chronological ledgers on a policy level that must be readily available should the Italian tax authorities request the company records. The authorities mainly request IPT books for tax office audits, investigations or to support formal requests by an insurer.

What are the prepayment rules in Italy?

Insurers are required to make an annual prepayment to the Italian tax authorities in anticipation of future tax liabilities. Prepayment is due by 16th November each year. It is calculated as a percentage (100% for 2022) of total IPT and Consap contribution made in the previous year, deducting any IPT paid in respect of Motor Third-Party Liability business.

Once settled, this prepayment can be offset against IPT liabilities (excluding Motor Third-Party liabilities) arising from February, when the January tax liabilities are due.

Are life and sickness policies exempt from Italian IPT?

Life plans are exempt from IPT in Italy unless they have been written prior to 1 January 2001. If the life insurance policy was purchased before this date, the premium is subject to a 2.5% IPT rate.

What reports do foreign insurance companies in Italy have to submit?

On top of the annual IPT return, insurance companies must file a variety of reports to several governmental agencies including the Italian Tax Office. The Motor report is embodied in the annual IPT return. There is an obligation for domestic and EU and EEA-based foreign insurance companies to submit separate reports about written insurance contracts, premiums and claims.

There are also a growing number of reports that foreign insurance companies need to submit to the Italian Supervisory Authority (IVASS).

Learn more about additional reporting requirements in Italy.

What are the IPT challenges in Italy?

Many factors make IPT in Italy unique and one of the most challenging jurisdictions from a compliance perspective. This includes monthly tax settlements, an annual declaration, prepayment rules, treatment of negative premiums and the various reports that need submitting to the Tax Office, regional municipalities or IVASS.

Updates on Insurance Premium Tax in Italy

28 June 2023

Italian Tax Office postpones penalty regime application date

The Italian Tax Office released a new circular on 19 April 2023 granting the opportunity to benefit from the 1/18 penalty regime. This follows the Legislative Decree n. 34/2023 from 30 March 2023.

With Circular No. 9/E, the Italian Tax Office has clarified the procedure, the extent of the measure and the ways of access. The circular emphasises that payments can be made in instalments, up to 20 equal payments over a five-year period.

The application date has been pushed out from 31 March 2023 to 30 September 2023.

22 March 2023

Italy implements new tax break measures

The 2022 Italian Budget (Law 197/2022) introduced new measures under the ‘tax break’ scheme (“tregua fiscale”) to promote the settlement of tax irregularities and pending tax assessments.

The Italian tax authority (Agenzia delle Entrate) issued Circular letter no. 02/2023 to provide further clarification and guidance on the new tax measures.

The new regulation allows taxpayers the choice to regularise their tax positions for prior years up to 2021. If they choose to do so, the penalty associated with the regularisation decreases to 1/18th of the minimum penalty – provided that they complete the regularisation by 31 March 2023. In addition to submitting the corrective tax returns, taxpayers must pay the outstanding taxes, penalties and interest by this date.

The law allows taxpayers to make the payments in eight quarterly instalments, with the first due by 31 March 2023. An interest rate of 2% per year applies to the following instalments, which they must pay by 30 June, 30 September, 20 December and 31 March each year.

Additionally, the legislator extended the application of the reduced penalty regime to tax assessments and tax notifications (“avvisi di accertamento, rettifica o liquidazione”) which are already submitted. This ruling applies if the submitted regularisation was not appealed before 1 January 2023, when the regulation came into force, as long as payment is made by 31 March 2023.

12 December 2018

Italian parliament approves changes to IPT prepayment rates

The Italian Parliament approved the 2019 Budget Act on 30 December 2018. As anticipated, the approved budget includes increased IPT prepayment rates. The approved rates are as follows:

For completeness, these new rates overrule those approved in last year’s Budget Act. However, the deadline remains 16 November each year.

Take Action

At Sovos, our experienced IPT specialists can help your business ensure compliance in Italy. Get in touch about the benefits a managed service provider can offer to ease your IPT compliance burden.

The most recent update to the Portuguese Stamp Duty system has included some of the most comprehensive tax reporting changes seen in recent years. Stamp Duty is the oldest tax in Portugal and has been around since the Royal Decree in 1660. Considering its age, updates to bring it in line with the global standard of tax reporting were much needed. Although the tax rates within Portugal have remained unchanged, the reporting process to incorporate the provincial liabilities within one return has been greatly appreciated.

Portuguese Stamp Duty – Required information

The additional information that insurers are obliged to collect, disclose and submit in their Stamp Duty Declaration is as follows:

Negative impacts of Portugal’s stamp duty reporting changes

It’s important to note that the ability to offset taxes relating to previous periods has been revoked by Law Decree no. 119/2019, which allowed insurers to report reduced tax amounts for overpaid liabilities. The modifications to the reporting procedure enable companies to amend previous periods through their internal system. Consequently, this permits adjustments to prior periods and the reclaiming of overdeclared liabilities directly from the Portuguese tax authority. It is our understanding that reclaims will be reimbursed to the client two months after an amended return is submitted.

How can Sovos help with reporting?

Sovos has developed a unique relationship with the Portuguese tax authority, allowing for comprehensive reporting between Sovos systems and the Portuguese API. The reporting procedure can confirm validated IDs to ease data validation and reporting. This collaborative process has allowed Sovos to provide our customers with a smoother and more fluid submission process for Stamp Duty reporting.

Take Action

To understand more about Portugal’s Stamp Duty and how it impacts your IPT compliance, get in touch with our team of experts.

Learn more about the latest rates, rules and regulation of Insurance Premium Tax in our e-book, IPT Compliance – A Guide for Insurers.

There are many taxes (IPT) and parafiscal charges levied on insurance premiums throughout Europe. As a consequence of the lack of tax harmonisation, no general rules can be applied to establish which taxes exist in which countries and how to calculate the correct IPT amounts.

Some insurers do not have a dedicated IPT team; this is usually the case with smaller insurers. This could lead to IPT miscalculation and can trigger penalties. Without the proper and up-to-date knowledge, it is easy to be lost in the rules and regulations.

IPT amount calculation methods

There are two basic tax calculation methods in the European IPT world

  1. Percentage of the premium
  2. Fixed amounts

In the first instance, there is a tax rate. For example in Bulgaria (2%) businesses can easily determine the tax amount by multiplying the taxable basis with this tax rate. Fortunately, several IPT calculations are based on this so-called basic rate model.

While in the second case, the local regulations determine the tax amount which needs to be settled on the insurance policies. Irish Stamp Duty can be mentioned as an example.

One can say that this is not rocket science. Furthermore, it is easy. These calculation models are just the basics. IPT regulations are built on these basic models adding several specific rules making the IPT calculations fairly complex.

Rules for IPT amount calculation

Here are some examples of these specific rules:

Reverse tax calculation

To add further colour to this topic, we can mention that reversing a policy line in the calculation does not always result in the same tax amount in a negative position. The best example is Malta, where the same amount of Stamp Duty is not refunded when the policy is cancelled after the cooling-off period. Instead of getting back the same stamp duty paid, an additional EUR 2.33 Stamp duty is triggered if certain conditions are met.

Check the rules before IPT amount calculation

Although this is a unique regulation this highlights that when it comes to reversing a policy line, it is strongly recommended to check the rules beforehand and clarify whether or not the negative IPT can be offset or reclaimed and adjust the calculation method accordingly.

Take Action

IPT amount calculation requires detailed knowledge of the rules and regulations. Sovos has a dedicated team of IPT compliance experts to walk you through even the most challenging calculations.

Contact our team today to learn more about how we can help with calculating IPT correctly or take a look at our comprehensive guide about Insurance Premium Tax.

Meet the Expert is our series of blogs where we share more about the team behind our innovative software and managed services.

As a global organisation with indirect tax experts across all regions, our dedicated team are often the first to know about new regulatory changes and the latest developments on tax regimes across the world, to support you in your tax compliance.

We spoke to Hooda Greig, compliance services manager about ways insurers can make the Insurance Premium Tax (IPT) process more efficient.

Can you tell me about your role and what it involves?

I lead an IPT team that delivers compliance services in Europe. I oversee the day-to-day management and delivery of IPT compliance for an extensive portfolio of global clients. We are the first point of contact between Sovos and our clients. My focus is ensuring all tax requirements for the clients are met, that is filing and paying their liabilities to the various territories they are registered in. I also work closely with other departments within our company, particularly our consulting team to assist with more technical aspects of IPT compliance.

How can insurers make the IPT process more efficient? What are your top tips?

Modernising the tax process will help insurers operate efficiently. There are still many insurers reliant on manual reporting methods for IPT. Strategic management of the end-to-end process is key to improving efficiencies, with a focus on managing risks by investing in digitization. Tax technology tools will make compliance for insurers simple, as will collaborating with tax teams with specialised IPT knowledge at a local level.

My top tip to manage risk is the use of tax technology. Tax authorities are introducing more demanding reporting requirements and digitization of filing and reporting processes can result in efficiency, accuracy, and cost reductions.

What are some of the issues insurers face with IPT?

Efficiency, accuracy, and the costs of getting it wrong are concerns for insurers. The consequences of IPT non-compliance are not limited to statutory or legal penalties, the indirect costs to insurers are often more significant, the cost of correcting a mistake and non-compliance could also have an impact on the company’s reputation. Tax authorities are becoming more stringent in their reporting requirements. It’s important for insurers to work closely with a managed services team to help meet all their tax obligations and in preparation for future IPT requirements to ensure compliance now and in the future.

How can Sovos help insurers with their IPT requirements?

To minimise risks, we’re seeing an increasing number of insurers looking to technology solutions to change the way they operate. Sovos’ mission is to solve tax for good and we specialise in tax technology and data analysis with specialised knowledge at a local level, ensuring insurers’ compliance requirements are met. Keeping abreast of all regulatory changes can be difficult, Sovos issues regular tax alerts, newsletters and hosts webinars to keep clients up to date with the latest IPT updates.

Take Action

Have questions about IPT compliance? Speak to our experts or download our e-book, Indirect Tax Rules for Insurance Across the World.

France is known for its challenging Insurance Premium Tax (IPT) filing system. Understanding which tax authorities you need to register with, file with and talk to when you have questions is essential to meeting your business’s IPT compliance obligations. In this blog, we identify France’s IPT tax authorities and explain what makes IPT so different in this European country.

IPT tax authorities in France

There are three different tax bodies in France in charge of collecting IPT. They are the Business Tax Department (Service des Impôts des Entreprises) (SIE), the Compulsory Damage Insurance Guarantee Fund (Fonds de Garantie des Assurances Obligatoires de Dommages) (FGaO), and the Union for the Collection of Social Security Contributions and Family Allowances (Union de Recouvrement des Cotisations de Sécurité sociale et D’allocations Familiales) (URSSAF).

Dealing with France’s tax authorities can be challenging, especially once an insurance company obtains authorisation from the Prudential Control and Resolution Authority (Autorite de Controle Prudentiel et de Resolution) (ACPR).

Why is France a challenging territory for insurance companies?

  1. Registration: Each insurance company needs to be registered with all three tax authorities, starting with the SIE, who releases a Tax ID number (Numero SIRET). Once the Tax ID is obtained, the insurer can ask to be registered with the FGaO if its policies cover risks from insurance classes 3 to 10. In cases where the client sells insurance class 2 sickness products, then registration with the URSSAF is required, and a second Tax ID is issued.
  2. Location of Risk: When it comes to the location of risk, the mainland office is also in charge of IPT collection for some of the overseas territories while others have their own tax offices.
  3. Tax Settlement and reporting process:
  1. A different tax rate is used ranging from 6.27% to 35% and a different fixed charge from €5.90 to €25.00 depending on the type of insurance policy.
  2. Cancellation and mid-term adjustments are allowed. The treatment differs from one office to another.

Take Action

Have questions about IPT compliance? Speak to our experts or download our e-book, Indirect Tax Rules for Insurance Across the World.

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.

IPT in Belgium

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.

INAMI in Belgium

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.

Take Action

Get in touch about the benefits a managed service provider can offer to ease your IPT compliance burden.

Ensuring Insurance Premium Tax (IPT) compliance can be a complex task. With tax rates and filing varying from country to country, many organisations choose to work with Sovos to ease their IPT compliance workload and for tax peace of mind.

We spoke to Neal Bazeley, supervisor of client money about Sovos’ solution for IPT compliance payments and why customers value this service.

What is Client Money for IPT?

Unlike other IPT compliance providers, for our customers we provide a simple endpoint to settle international tax liabilities in a single payment. Through our network of international subsidiaries and partners, we can pay taxes in over 30 countries.

As a team, we’re responsible for client funds from the moment they’re credited to our account to the point the monies arrive at the respective tax office.

We currently have bank accounts in 13 different currencies with our main bank provider here in the UK. We offer clients the choice to send in funds to us in the currency of the territories they have liabilities in or send all combined funds to one account and we transfer accordingly.

Using our proprietary software, we manage the funds sent to us and allocate to each client account accordingly. This software works with Sovos IPT to ensure funds are linked to liabilities. When payments are due, we use Sovos IPT to generate the necessary payment file that is uploaded to our bank online portal. This then creates a payment in the correct format required by the respective tax authorities.

At the start of each month we generate a statement of account for all clients showing funds in and payments made in the preceding month. We work tirelessly to ensure that every statement is entirely accurate and reflects the period’s transactions.

Issues can occur when clients send funds with no clear indication of which entity they relate to or when tax offices collect payment or refund differences without communication. We pride ourselves on ensuring that these issues are dealt with as they arise so our customers can be confident in the knowledge that their statement is entirely representative of the work we do on their behalf.

IPT payments in Greece, Italy, Portugal and Spain

In most cases the central government is responsible for taxation and finance and will accept any payment method, providing it is full and accurate. There are however some exceptions. We maintain currency accounts domiciled in Greece, Italy, Portugal and Spain as these territories require payments to be made from a local account. Italy and Spain present challenges because they require each payment to be routed to each commune or region where tax is due. To complicate matters further, they have specific payment types which cannot be accessed by the layman. These territories are exceptions.

Cross-border IPT payments

While it may seem that cross-border payments are simple, this isn’t the case. No two countries are the same, with each territory having their own set of rules and regulations. We are constantly updating our processes to adapt to any changes that occur to ensure our customers remain compliant.

Brexit has changed the way we work as a team. Legislation has meant our preferred method of SWIFT payments became prohibitively expensive overnight. We therefore amended our payment deadlines to take these changes into account. We responded quickly to the developing situation – having no prior notice of the change – to ensure we wouldn’t have to pass on these extra fees to our insurance customers.

Paired with Brexit, the Coronavirus pandemic forced our banking partners to begin implementing negative interest rates in currencies where central banks had to adjust their rates to counteract the economic downturn. Being a large client fund we had to implement a system that accurately predicted and recharged the constantly changing fees that were being incurred. Within the space of a couple of months, we had to overhaul our operation to ensure that funds were received and paid by strict deadlines, avoiding negative interest charges on stagnant deposits and leaving enough time for payments to be processed accurately.

Take Action

Want to learn more about how IPT Client Money can ease your IPT compliance burden? Get in touch.

Meet the Expert is our series of blogs where we share more about the team behind our innovative software and managed services.

As a global organisation with indirect tax experts across all regions, our dedicated team are often the first to know about new regulatory changes and the latest developments on tax regimes across the world, to support you in your tax compliance.

We spoke to Rahul Lawlor, Senior Compliance Services Representative – IPT, about his top compliance tips for large and small insurers.

Can you tell me about your role and what it involves?

I’m a senior compliance services representative – IPT at Sovos. I joined the company just over five years ago and in that time have dealt with insurers of all sizes, from multinationals to startups, domiciled in a plethora of different countries in the EU and beyond.

I oversee the compliance activities of a portfolio of insurers. As part of my team there are associates and representatives handling more of the day-to-day data, who I oversee to ensure everything’s on track. Queries from our customers are escalated to me and I also approve returns for customers as well as assisting with reports and annual requirements.

What are the differences and different IPT requirements of large and small insurers?

In terms of rules and regulations there is largely no difference in IPT requirements for large and small insurers, one exception could be in Hungary where the IPT rate applied is based on the volume of business.

I would say the main difference between large and small insurers is how they approach IPT compliance. Small insurers don’t tend to have dedicated tax teams – we tend to speak to finance departments who handle invoices and have also been tasked with IPT. When filing IPT in other countries outside their domicile, smaller insurers might not have the language or tax expertise required to file returns or register IPT. Whereas large insurers have specialised teams spanning the globe who deal with a variety of complex tax issues.

Small insurers tend to need more assistance, we help them through the IPT compliance process from start to finish, whereas larger insurers broadly understand IPT and often come to us with queries about more complicated IPT requirements.

What are your top IPT tips for small insurers?

Small insurers are often still using legacy systems that were designed before the IPT revolution when the requirements weren’t as extensive as they are now. This means that the information and data necessary for IPT submissions isn’t always being collected at source and on occasion we notice there are elements missing. This then requires going back to policyholders to retrieve the additional information, which can cause submission delays.

Not having the information required for IPT submissions can lead to some countries not accepting the risks and not accepting reports. The cost of non-compliance outweighs the cost of staying with a cheaper system. Setting up a new system might feel like a significant undertaking but in the long-term it provides benefits and minimises the risk of reputational damage associated with not filing risks on behalf of policyholders.

My top tip for small insurers is to educate themselves on IPT, especially if they are writing risks in countries where the tax points aren’t uniform and could pose issues for their systems. The tax point is the date which triggers the tax but it can vary – often it’s cash received, but in can be issuance, written date, maturity date (the list goes on).

Always allow plenty of time ahead of filing and reporting deadlines, especially when entering new markets. We’ve helped many insurers with registration and IPT requirements to avoid any surprises.

What are your top IPT tips for large insurers?

Don’t rest on your laurels. Large insurers are more experienced with IPT but when there are wholesale changes, details can sometimes be missed or not fully understood. Make sure you are expanding your horizons and always learning. When changes are required, for example when Portugal went from return to transactional filing or when Spain announced a rate change, it’s important to understand the effect this will have on systems and consequently submission.

Don’t be afraid to ask for help beyond your team. At Sovos we deal with a wide range of insurers and have a wealth of experience, so we’ve most likely helped with a similar query and our team of experts are up to date with the latest IPT requirements.

Don’t be scared to reach out and get a second opinion if you’re unsure, we can help guide you.

Do you have any advice about IPT compliance for all insurers, regardless of their size?

Preparation and education are key! There are various stakeholders in the data supply chain, and it is important that everyone is uniform in their understanding of the requirements needed for ongoing compliance.

How can Sovos help large and small insurers?

For small insurers who are still using legacy systems, Sovos’ IPT Determination software can integrate with legacy systems to ensure relevant details are captured. We’ve helped many small insurers with IPT registrations, assisting with the process from preparation stage, submitting documents on a client’s behalf, and advising once registration is complete. You can lean on our expertise to save you time and enable you to focus on your business.

Implementation of Sovos’ IPT Determination software is not limited to solely smaller insurers. For large insurers we also offer an end to end to end solution. Furthermore, our IPT consultancy is on hand to advise on complex tax issues, to give you confidence in high-level decision making.

We have extensive relationships with tax authorities and we have local representatives and associates in countries across the globe who can assist us and our clients with the most complex of IPT queries and requirements.

Take Action

Have questions about IPT compliance? Speak to our experts or download our e-book, Indirect Tax Rules for Insurance Across the World.