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.
