Understanding IPT Prepayments in Belgium

Hector Fernandez
August 31, 2022

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.

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Hector Fernandez

Hector, a principal compliance services representative, joined the country team at Sovos in 2019 and specializes in Spanish insurance premium taxes. He has eight years’ experience working in Spain (Broseta Abogados) and Dublin (HERTZ) in tax departments dealing with direct and indirect taxes and has completed a Degree in Law and a Masters in International and Community Taxes. He is a Member of the Bar association Law Madrid (ICAM).
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