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: 16 August 2024 by James Brown
IPT Treatment on Used Vehicle Warranty Services
On 21 May 2024, the Italian tax authority published ruling No. 110/2024 on the IPT treatment of warranty services provided concerning the sale of used vehicles.
The ruling dealt with a scenario in which a company provided warranty services to dealers within the same company group, with the latter offering these warranties to the purchasers of the vehicles. The company also entered insurance contracts with an insurance company to obtain coverage for the costs it incurred in repairing the vehicles sold when required under the terms of the warranty.
The insurance contract concluded between the Applicant and the insurance company would only be subject to IPT in Italy if the policyholder’s relevant establishment was in Italy, which is in line with the location of risk rules.
Find out more about the applicability of IPT to warranty services in Italy.
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:
- Simplifying the assessment procedures
- Enhancing the use of digital technologies, including the use of Artificial Intelligence (AI) systems
- Introducing measures to encourage voluntary compliance
- Reviewing the declaration and the payment systems
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:
- Emergency Fund (EMER)
- Road Accident Fund (RAVF)
- Hunting Accident Fund (HAVF)
- Builders Surety Fund (BSF)
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:
- 85% in November 2019 for tax year 2020
- 90% in November 2020 for tax year 2021
- 100% in November 2021 for tax year 2022 onward
For completeness, these new rates overrule those approved in last year’s Budget Act. However, the deadline remains 16 November each year.
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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.
