In a previous blog, we provided an overview of the current and proposed natural disaster-related measurements in some European countries and Australia. In this blog, we will focus on the possible EU-level solution proposed by the European Central Bank (ECB) and the European Insurance and Occupational Pensions Authority (EIOPA) in their latest discussion paper, issued in December 2024.
The proposal, as was also in the case of their discussion paper from April 2023, focuses on the growing “insurance protection gap” in Europe. It highlights that Europe is the fastest-warming continent in the world. If we look back at only the last six months, there were at least three severe climate-related catastrophes in Europe: Portugal wildfires and the Spanish and the Czech Republic Floods.
Among other significant economic consequences of the increasing frequency and severity of natural catastrophes, we need to highlight the impact of these events on insurance businesses and indirectly on the taxation of the insurance premium amounts.
The paper summarises 12 existing national natural catastrophe insurance schemes which we are going to brief in our blog series – adding the current tax treatment of these schemes. In this blog, we provide an overview of the EU-level solutions as proposed by the paper and a summary of the approaches followed by the EU countries.
A two-pillar solution was included in the referenced document. The two pillars are:
Both of these pillars could potentially affect the amount of tax payable by the insurance companies on the collected premium amounts. The first pillar might indirectly increase the tax amount levied on the reinsured premium amount, such as in the case of France CCR (Caisse Centrale de Réassurance), where IPT (and contributions to the Major Risk Prevention Fund) is due on the CATNAT premium. The second pillar may trigger newly introduced contributions that might be levied on the insurance premium amounts.
The current national schemes aim to broaden insurance coverage. Some countries, like Italy most recently, make certain natural catastrophe risks such as earthquakes, floods and landslides compulsory to be insured by either or both entities or individuals.
In other cases, compulsory reinsurance involving public-private sector coordination exists. The most well-known reinsurance system exists in France, the so-called CCR. However, there is a reinsurance system in Iceland, where insurers collect CATNAT premium amounts and pay them towards NTI (Icelandic Natural Disaster Insurance).
It remains to be seen the extent to which the proposals are acted upon and the impact that they may have on premium taxation regimes in the EU. As it is such a significant topic in insurance currently, Sovos will be keeping a close eye on developments in this area.
In Italy, the insurance premium tax (IPT) code (which is being revised as of the date of this blog’s publication) and various other laws and regulations include provisions for taxes/contributions on motor hull and motor liability insurance policies.
This article covers all you need to know about this specific indirect tax in the country.
As with our dedicated overviews of the taxation of motor insurance policies in Spain, Norway and Austria, this blog will focus on the specifics in Italy. We also have a blog covering the taxation of motor insurance policies across Europe.
In Italy, there are four types of charges payable on motor insurance policies:
Whilst motor insurance policies can include various coverages as add-ons, this blog’s main focus is on motor hull and motor liability.
Calculating taxes on land vehicles, i.e., motor hulls (Class 3), is simple. There is only IPT at 12.5% and CONSAP at 1%.
The taxable premium is the basis of these taxes. Both taxes are declared in the annual IPT return and payable monthly.
The taxation of insurance policies against civil liability arising from the circulation of motor vehicles is more complex.
The IPT rate (so called Responsabilità Civile Auto or RCA tax) is determined on a provincial level. Legislative Decree 6 May 2011, No. 68 quotes that the rate of the RCA tax is equal to 12.5%. However, this can be increased or decreased by the province or metropolitan city by a maximum of 3.5%. That is why RCA tax rates are sometimes referred to as a tax with a rate ranging from 9-16%.
In Italy, there are 20 regions, each with one or more autonomous provinces or cities. To complicate matters further, the province or city can modify the tax rates within the tax year.
CONSAP does not apply on motor liability policies, however EMER is at a rate of 10.5% with an additional 2.5% required for RAVF.
RCA and EMER are declared in the annual IPT return, and payments are due monthly.
Although RAVF is also declared annually, the declaration process differs, and there is also a prepayment obligation. The actual amount of RAVF depends on the management fee set annually by the Italian insurance supervisory body (IVASS) – the percentage of which is published during November for the next year.
As previously stated, IPT/RCA regulations are undergoing major renewal (during 2024). The legislation governing the tax provisions on private insurance and life annuities (Law 29 October 1961, No. 1216) is part of the Italian Government`s tax reform initiatives.
According to the available draft legislation, the IPT law will be divided into three parts:
The government extended the deadline for enactment of the new regulation to the end of 2025.
There are not many exemptions available for IPT/RCA tax, nor for CONSAP, EMER and RAVF. However, cars registered in Italy to NATO Allied Force benefit from an exemption from IPT/RCA.
If you still have questions about the taxation of motor insurance policies or IPT in Italy, speak to our experts.
Following the publication of various circulars by the Federal Ministry of Finance in Germany in 2021, rules on the taxation of guarantee commitments were made effective 1 January 2023. This blog explains how this affects insurers and other suppliers.
The Ministry of Finance published its initial circular in May 2021. This was in response to a Federal Fiscal Court judgment. It concerned a seller of motor vehicles providing a guarantee to buyers beyond the vehicle’s warranty.
In these circumstances, the circular confirmed that the guarantee is not an ancillary service to vehicle delivery but is deemed to be an insurance benefit. As such, it would attract IPT instead of VAT – unless the guarantee is considered a full maintenance contract.
The circular did not prompt immediate concern within the insurance sector. Markets outside the motor vehicle industry weren’t concerned either. The presumption was that it was limited to the specific context of the motor vehicle industry.
Matters changed the following month. The Ministry of Finance clarified that the tax principles it outlined in fact applied to all industries. As a result, the scope of these rules became potentially limitless in Germany. All guarantees provided as additional products to goods or services sold are now within the scope of the application of IPT.
The clarification could impact industries like those organisations selling electrical items and household appliances.
The effect on traditional insurance companies should be relatively limited as they do not usually provide guarantees as part of the sales of goods and services. There could arguably be a significant impact on other suppliers that do provide such guarantees.
First and foremost, there is a potential increase in the cost of providing the guarantees caused by the application of IPT. Unlike input VAT, a supplier cannot deduct IPT from its taxable income – it must either increase prices to compensate or accept a less favourable profit margin.
Any companies that purchase the guarantees cannot reclaim the IPT either, as they can do with VAT. The standard IPT rate of 19% in Germany is high compared to most European countries. This exacerbates these issues.
There are also practical considerations to bear in mind for suppliers obliged to settle IPT with the tax authority. They are presumably required to be registered for IPT purposes like insurers, although the Ministry of Finance has not formally confirmed this.
Perhaps more difficult is the issue of licensing. The Ministry of Finance circulars focus on taxation, leaving it unclear whether other suppliers are now required to obtain a license to write insurance under German regulatory law.
Looking for more information on general IPT matters in Germany? Speak to our expert team. For more information about IPT in general read our guide for insurance premium tax.
Registering for Insurance Premium Tax (IPT) with tax authorities across Europe can be challenging and complex, particularly when multiple territories are involved. There are many elements businesses must consider when registering for IPT. What are the required supporting documents? Who can sign? Do documents need to be legalised? Is there a two-step process? These are just a few of the questions you may ask yourself during the registration process.
Based on common pain points we come across with our IPT customers, we’ve put together our five top tips to help make your IPT registration journey easier:
Your company is likely already writing business in the territories you need to register with. Therefore, it’s important the registration is completed promptly to avoid sanctions that some tax authorities may impose. We recommend signing and returning the documents as soon as possible to avoid such complications.
European tax authorities are very specific with their requirements, and depending on the EU Member State, the rules may be different. Generally, supporting documents should be dated within the last six months and clearly legible. Some tax authorities require documents to be notarised and apostilled, some accept electronic signatures and some do not. The registration process can be delayed when supporting documents are incorrect, or templates are completed incorrectly. To avoid delays in your registration submission, be sure to pay close attention to the instructions provided.
Whilst some requested information may seem intrusive and personal, there is always a reason for the request. We will never ask you to provide anything more than what the tax authorities require to complete an IPT registration. Your personal data is always treated with the strictest confidentiality, security and complies with GDPR standards.
Timelines for IPT registration in EU Member States can vary. Some tax authorities, such as Germany, confirm registration within a week of submission, whereas Greece can take 8-12 weeks. Don’t be concerned if your registration is not confirmed as fast as you had expected.
We are keen to have your registration completed as efficiently and swiftly as possible. If you have any queries, your registration representative is always here to help. We can address your questions by email or arrange a call to go over the entire process if this is preferable to you.
Sovos’ IPT Managed Services provides support from our team of experts using software that is updated in real-time. Additionally, our team of regulatory specialists monitor and interpret global IPT regulations, so you don’t have to.
Contact our team of experts to discover how your business can benefit from a complete end-to-end IPT offering, or download our e-book, IPT Compliance: A Guide for Insurers, to learn more about IPT across Europe.