Tax compliance in Italy – where do we start? From monthly tax settlements to an annual declaration, prepayment, additional reporting and treatment of negative premiums – all these factors make Italy unique and one of the most challenging jurisdictions from an insurance premium tax (IPT) compliance perspective.

Let’s break it all down:

Insurance taxes

IPT rates range from 0.05% to 21.25%, depending on the class of insurance written. In addition to Italian IPT, there are also several insurance parafiscal charges:

Filing and settlement frequency

Monthly payments are due by the end of the month following the reporting month, except in December. The payment for November liabilities is brought forward to 20 December. Whilst, the annual declaration is due by 31 May following the calendar year.

IPT books

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

Additional reporting

In addition to the monthly payments and annual declaration, the following reports are also required in Italy:

We explained additional reporting requirements in Italy in a previous blog.

Prepayment

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.

In some cases, insurers can be required to hand over significant amounts of money to the tax office who will hold those amounts, in some cases for several years. Although prepayment should not represent an additional cost to insurance transactions, it can pose some cash flow considerations for insurers. Important to note is that the prepayment is due on a historical basis and cannot be settled based on an estimate of future tax liabilities. Businesses can use excess prepayment to offset tax liabilities in the next period or offset against the next prepayment.

Return premium

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”. Therefore, if the insurance company receives a premium, IPT is due even if this is subsequently reimbursed to the insured.

ANIA (the Italian trade body) has provided some clarifications to the market on 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/scope of the insurance contract based on the information available when the policy was written.

An example of this is if the insurer mistakenly overcharged the policyholder, and the policyholder overpaid the tax. In such instances, the overpaid IPT can be deducted from tax liabilities arising in the same reporting period, i.e. the calendar year.

Penalties and interest

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

Given its unique reporting standards, we recommend that insurers underwriting business in Italy are familiar with the intricacies and requirements in this jurisdiction. This will help them maintain compliance and avoid costly mistakes that could take significant time to resolve.

Take Action

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

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 these 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.

The following blog gives an overview of the tax calculation methods highlighting some unique elements of the IPT calculation.

Tax calculations 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. 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.

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

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.

Croatia currently levies an Insurance Premium Tax (IPT) on insurances written under the Freedom of Services (FoS) duty. The IPT in Croatia applies only for specific classes of business, such as Motor and Fire coverage. Both taxes, Motor IPT (MIPT) and Fire Brigade Contribution (FBC), are calculated on the insurance policy premium charged to the policyholder. The insurer is liable for all taxes.

Motor Insurance Premium Tax 

There are currently two different IPT tax rates in force for motor insurance in Croatia: 

Motor vehicle IPT is an insured borne tax that is required to be reported monthly and payable within 15 days following the end of the month. The tax point for this type of IPT is set as the date the policy is signed, and businesses should make payment in local currency: Croatian Kuna (HRK). The exchange rate for those payments should be set to the rate published on the last working day by the Croatian National Bank. 

Its important to remember that two different sets of returns should be filed for each risk of motor insurance covered. Also, companies should make the payment under the correct corresponding reference number according to the associated insurance risk.   

Croatian Motor IPT requirements: 

Currently, there is no obligation to submit a Motor IPT return when no taxes have been paid for the reporting period (NIL). 

The penalty for a late payment is generally 12% communicated by the Zagreb Regional Tax Office (Porezna Uprava).   

The annual Motor IPT Report must be submitted on 31 January following the end of the reporting year.   

Croatian IPT: Fire Coverage

The Fire Brigade Contribution (FBC) tax is levied on the payment of premiums for insurance contracts concluded in Croatia. The local law on Fire Prevention and Firefighting requires insurance companies covering a fire risk to contribute 5% of the fire insurance premium. The 5% contribution should be apportioned to the fire risk element of the insurance policy.  

The FBC is an insurer borne tax that is required to be reported quarterly and payable within 30 days following the end of the quarter. The tax point for this type of IPT is the date payment is made, and businesses should make the payment in Croatian Kuna to the Croatian Firefighting Association (Hrvatska Vatrogasna Zajednica). There is no requirement for businesses to submit NIL returns.  

The FBC breakdown is as follows:   

The insurer is liable for all taxes. If the insurer doesnt declare and remit taxes, the relevant authority may impose a fine and undertake an assessment of the tax. 

Take Action

Speak to our IPT experts about Croatia’s IPT requirements and keep up to date with ever-changing European IPT rules by following us on LinkedIn and Twitter

Insurance Premium Tax (IPT) in Luxembourg moved to online filing from the first quarter 2021 submission. Alongside this, they also changed the authority deadline to the 15th of the month following the quarter. This change caused some upheaval as many insurance companies were already pulling data from the underwriting systems, reviewing the information (sometimes manually), and ensuring the declarations would be correct for other territories also due by the 15th.

More European tax authorities going digital

Luxembourg wasn’t the first or last territory to move to an online platform. Germany and Ireland followed within a year of Luxembourg’s implementation. In contrast, French authorities have delayed implementing their online filing process until 2023. Additionally, more tax authorities require accounts for Direct Debit set up rather than the usual SEPA or priority payments being made with specific references.

Why is tax filing moving online?

It’s clear why tax authorities are moving to online platforms. Having a digital filing process is an easier and more efficient process for what could be thousands of declarations being submitted by various sources. Plus, online filing gives tax authorities greater visibility, meaning they have more opportunities for analysis. What puzzles us, is why so many tax authorities choose to have their deadlines on or around the 15th? This deadline only provides a short timeframe for insurance companies to close the month, pull the data and make the declarations.

IPT changes in Luxembourg

Apart from these updates, Luxembourg hasn’t implemented many changes in the past, regarding IPT. The most recent that we can recall is the introduction of the Tax for Rescue Services on Motor Class 10 policies, which came into effect on 1 October 2016.  As the tax rates are relatively low compared to other territories, it’s entirely plausible that we could see a future increase.

IPT is a niche tax that isn’t always at the forefront of the business radar. It wasn’t until we began to look at the actual process of filing the online declarations did we realize that the process is an adaption of what is used for VAT and other taxes or designed around domestic insurers rather than freedom of services. At least that’s what it seems for Luxembourg.

Over the past year, we have found that the online filing system has become quicker and easier to navigate, with the delays between authentication of a declaration taking seconds rather than minutes. The declaration is still similar to what was submitted on the paper form, breaking down the liabilities per class of business, entering the premiums and then an automatic application of the percentage rate.

Is this the end of territories moving to an online filing solution? Probably not. Will there be more digitization from tax authorities to bring IPT in line with most other tax reporting? We think so.

Take Action

Need to understand Luxembourg’s IPT requirements? Get in touch with our experts and keep up to date with ever-changing European IPT rules by following us on LinkedIn and Twitter.

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 Russell Brown, senior IPT consulting manager, about Sovos’ IPT consultancy, supporting tax teams and his thoughts about the future of IPT.

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

I head up the Insurance Premium Tax (IPT) consultancy practice within Sovos. We’re responsible for providing advice, mostly to compliance clients on tax issues of different types of insurance that they write in EU and non-EU countries. We provide clarity on applicable tax rates and their compliance requirements in various countries, as well as location of risk queries.

One of my main responsibilities is to review and approve the reports written by consultants in the team. I also assist our sales team with clients interested in registering for IPT in different countries. This involves discussing the insurance the client provides and the countries involved and helping to onboard new customers. I also participate in writing regular IPT blogs and articles on a variety of subjects, and in webinars and other client events where we discuss a wide range of IPT issues around the world.

We also assist the compliance managed services team with any questions from their clients that they need help with. This can include legislative references or just confirmation of tax rates.

Can you tell us about Sovos’ IPT consultancy and typical projects you help with?

The short answer is we help insurers with their IPT compliance queries but that can vary from project to project.

A typical project for the consultancy team would be for a client to approach us and say, “We’re thinking of writing this type of insurance policy in 10 countries. Could you please tell us all the taxes and tax rates that apply, who bears the cost of those taxes and how they’re calculated. Could you also provide us with guidance on the compliance requirements in each country?”. This could be for EU and non-EU countries.

Another common project is to look at insurance policies and confirm the type of insurance to ensure its taxed correctly or looking at location of risk for an insurance type. This will involve analysing a sample policy from the client to confirm what the insurable risk is so that the correct rules are applied on taxing it in the relevant countries.

Sovos’ IPT customers tend to deal in non-life insurance; we’re often asked to look at property policies or liability risks. Spain, France, Portugal and Belgium are the countries we’re asked most about due to their complicated IPT and parafiscal charges regimes and different rates.

We are also asked questions about non-admitted insurance. For example, if a company is writing insurance but isn’t licensed in that country, they might have questions about how the taxes are calculated, who is liable for the taxes, who should settle taxes etc. These questions tend to be from non-EEA insurers writing policies in EEA countries.

Brokers are another type of client we deal with, or as part of discussions with insurers when there are queries around who is responsible for settling taxes on premiums. We’re able to offer advice to both the insurer and the broker in these cases.

Where do tax teams need support and how does Sovos help?

Tax teams want certainty that they’re charging the correct taxes, and that they’re compliant in settling those taxes with the relevant countries’ authorities. That’s where we come in, providing guidance as well as reporting. We’ve received feedback from clients saying the reports have been especially useful to show senior stakeholders that tax compliance is being maintained. The reports are also an important document to have on file that demonstrates that there was an issue identified and they received external advice. Having this activity on record for senior managers and both internal and external auditors is important. If a tax team is asked any questions by tax authorities, they can provide evidence.

We tend to work with tax teams in the planning stages, when an organisation wants to identify any potential tax issues ahead of time to ensure systems are updated and compliant from day one.

What are your thoughts about the IPT landscape the future of IPT?

I have a few thoughts.

The first is about Germany’s IPT laws. When the country changed its IPT law at the end of 2020, the authority extended the scope of who could potentially be taxed for German IPT. There was some thought that other countries in Europe might try to do the same, the Dutch being a good example where current legislation does potentially allow this under certain circumstances. But because the application of Germany’s law wasn’t the most successful, there’s a feeling that other countries are unlikely to follow this path for the moment.

There is also the question whether or not IPT will be abolished in the UK and replaced with VAT. The government is in the process of starting a VAT consultation on financial services, and it’s likely that this proposal will be included in the discussions between HMT, HMRC and the insurance market including both insurers and brokers. This consultation will likely run for a couple of years, so we won’t know the results for some time, and it is possible that any decisions on this point may be delayed by the timing of the next general election.

There is also always the discussion of the digitization of IPT. There hasn’t been much movement on this recently. Ireland is in the process of digitization and France was due to follow suit but has postponed until next year. We are already helping our customers to possess the ability to file IPT online when this does become a requirement.

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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. 

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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.

With a new month comes yet another report due in the Insurance Premium Tax (IPT) sphere. Insurance companies covering risks in Greece must report their insurance policies triggered in 2021 in the form of the Greek annual report. This is due by 31 March 2022.

Let us cast our minds back, in late 2019 this report came to fruition after previously being ratified in legislation released in 2016. At the time, due to the delay in implementation, the report was backdated, and insurers faced the challenge of submitting transactional level details for the period 2016-2018 in a short space of time.

There was however a precedent for such a dramatic change. And those who experienced the change with the Spanish Consorcio de Compensacion de Seguros submission would have experienced a sense of déjà vu with this development. Similarly, some insurers may be experiencing all too familiar issues now with the change in Portuguese Stamp Duty submission.

The market initially struggled with the Greek annual report due to the level of details required. In particular, the VAT/tax registration number was often not being collected from the Insured. Furthermore, with legacy systems still in use some of the other details in the report weren’t readily available. What this meant in a lot of cases for the Insurer was the painstaking and often time consuming process of going back to the policyholder to collect such information.

Greek annual IPT report

What about the report itself? The Greek annual report is a transactional level declaration on excel, which requires the following details to be populated:

The standard IPT rate in Greece is currently 15% with the 20% rate reserved for risks covering fire. Where there is a multi-risk policy covering both rates, the premiums must be apportioned on a per rate basis and therefore split out into two different lines.

Thankfully exempt premiums are not required on the report which somewhat eases the burden.

But what about cases where it was simply not possible to collect this information? This was an issue we’ve seen for some of our IPT customers where incomplete reports were submitted. So far, we haven’t experienced pushback from the tax authority for the omission of certain details, but we cannot guarantee this will continue to be the case.

Easing the pain of IPT reporting in Greece

Preparation is key. And education is key. This annual report is here to stay so the Insurer must be prepared well in advance that such details will be required and they should aim to collect this information on an ongoing basis rather than at the last moment. In some cases, an update in software will be required as the current systems may not have the capability to capture the required data. Furthermore, all relevant parties in the data supply chain should be educated on the importance of collecting the details. 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 are on the right compliance path.

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Need help with IPT requirements in Greece? Get in touch about the benefits a managed service provider can offer to ease your IPT compliance burden.

The global tax landscape is rapidly changing. More tax jurisdictions require electronic filings, with Ireland being the latest country to follow this trend. The Irish tax authority has announced changes to how Stamp Duty, Life Levy, Government Levy and the Compensation Fund are declared and paid from the Quarter 1 2022 submission period (i.e. 25 April 2022).

What is changing for Ireland’s Insurance Premium Tax (IPT) requirements?

From Q1 2022, businesses will be required to file all returns via the Irish online portal and pay taxes due via direct debit.

The Irish Revenue issued notification of the filing requirement changes in December 2021. The Irish Revenue has an online service with a digital pay and file facility for Stamp Duty on insurance levies which will be available via Revenue Online Services (ROS).

What happens next?

Registered insurers will have an individual ROS account. By the end of February 2022, insurers will be issued new ID numbers (TRN numbers), and the 4-digit file reference number will be discontinued. Insurers will need a TRN number to register for a ROS account to file declarations online via ROS. Payments made online are required to be via direct debit instruction.

Although many authorities still rely on paper returns, online filing and payment systems are becoming more common place.  In Europe alone, Spain, Finland, Portugal, Hungary, Italy and the UK are just a few who have adopted digital tax approaches.

More tax authorities are now adapting to online submissions to fill the gap for further transparency and accuracy in collecting taxes, causing increased challenges for insurers when ensuring premium tax compliance.

This change in Ireland is just another example in the list of tax authorities requesting additional information on a more frequent basis to increase efficiency, minimise tax gaps and boost revenue. We don’t see this trend disappearing and recommend that insurers stay abreast of the latest regulations to be prepared for more countries who will undoubtedly follow this approach. Insurers need to be aware of compliance responsibilities by keeping pace with this heightened degree of complexity, scrutiny and change. This will result in system and process changes and any digitisation will inevitably impact IT systems and budgets.

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Keeping up to date with changing tax rates, different filing formats and deadlines and understanding interpretations of local rules can be challenging especially when writing across multiple territories. If you have questions about IPT, get in touch with us and we’ll be happy to help.

Annual reporting requirements vary from country to country, making it complex for cross-border insurers to collect the data required to ensure compliance.

Italy has many unique reporting standards and is known for its bureaucracy across the international business community. Italy’s annual reporting is different due to the level of detail required. The additional reporting in Italy requires an in-depth list of policies and details including inception and expiry dates, cash received dates, policyholders’ names, addresses, fiscal codes and premium values. This makes the annual reporting a significant undertaking.

Contracts and Premiums Report – due by 16 March each year in respect of previous calendar year

The Italian legislation and regulations require insurance companies writing business in Italy to submit annual reports with the purpose of collecting information that facilitates the tax authorities’ control of activities on taxpayers.

These reports should list all the insurance contracts in place in the relevant year with a policyholder (individual or entity) subject to Italian taxes. Policies covering Liability, Assistance and any risks written as ancillary to an underlying Liability or Assistance policy don’t need to be included in the report.

If there were no contracts in place in the previous calendar year, there is no requirement to submit a Nil report.

Claims Report – due by 30 April each year in respect of previous calendar year

Claim payments made during the previous year in favour of beneficiaries (individuals or entities) who possess an Italian fiscal code must be reported to the Italian tax authorities by the end of April.

Details required in the report include:

If there are no claims to be reported for the previous year, Nil reports are not required.

Motor Report – part to the annual IPT report due by 31 May each year in respect of previous calendar year 

As an integral part of the annual Insurance Premium Tax (IPT) return due by the end of May, insurance companies writing compulsory motor third-party liability must report the amount of IPT paid in the previous year to each of the Italian provinces. Details required include province policy number, fiscal code, vehicle plate number, premium, IPT rate and IPT.

Why planning ahead of the reporting season is vital

The additional reporting in Italy requires that certain elements are present before submission. To submit the Contracts and Premiums report an insurance company needs:

Many insurance companies work with third parties, and the policy information they collate might not always include all required details. Incomplete and incorrect data prevent the successful submission of the annual reports and can lead to costly fines and reputational damage.

Navigating annual reporting alongside regular monthly and quarterly reporting can feel overwhelming. The more that can be prepared in advance, the smoother the reporting process. Understanding Italy’s specific annual reporting requirements will ensure insurers remain compliant and avoid any unnecessary delays or corrections.

Take Action

Need to ensure compliance with the latest regulations in Italy? Get in touch with our tax experts for more information.

Insurance is a dynamic sector in constant flux to accommodate with insured’s needs. An increase in holidays abroad following WWII saw the need for Assistance insurance for any unforeseen events that occurred away from the insured’s home country. Council Directive 84/641/EEC regulated Assistance insurance for the first time, and a new class of insurance was created. This was in addition to the 17 previously regulated classes outlined in Directive 73/239/EEC of non-life insurance and was called Assistance (Class insurance 18).

Travel insurance evolution

Initially, the insured was covered by a policy that provided aid for any event travelling abroad (loss of passport, assistance with any problem in the car etc). The insurer created a range of support with call centres, supplier networks and additional services to help solve difficulties when travelling abroad.

Subsequently, following the insured’s requirements, insurance companies and travel agents created travel insurance that includes a wide range of services. These consist of several protections within different classes of business. This is where the tax complexity of travel insurance policies begins. It’s an amalgamation of coverages, and the application of the correct fiscal treatment needs to be analysed in each territory.

Correct tax treatment in travel insurance

When weighing the correct application of tax for travel insurance, businesses must consider the following: location of risk (LoR), class of businesses and the correct tax approach.

Location of risk: Directive 2009/138/EC Article 13 must be followed in the following circumstances:

Class of business affected: As mentioned previously, one of the complexities of travel insurance is determining the classes of business affected. It’s common to see, in these policy types, multiple coverages such as medical assistance cover, loss or damage to baggage, travel delays or cancellations, loss of documents or money, personal accident, repatriation etc. Insurers must adequately identify these coverage details to ensure the compliant tax treatment is used.

Taxability: This step is crucial. The correct treatment of the policies could vary the liabilities to be paid, the different taxes and/or levies and parafiscal charges to be included in the tax calculation. This means that the tax treatment can change by country. It’s necessary to identify the tax liability or exemption based on the class of business and the geographical location.

Insurers must understand the importance of the vital details associated with travel insurance. Determining LoR, class of business affected and taxability ensures the correct amount is paid and submitted to the proper jurisdictions.

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Download out IPT Compliance Guide to find out more about how to stay compliant or get in touch with our IPT experts.

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 is often the first to know about new regulatory changes and the latest developments on tax regimes worldwide to support you in your tax compliance.

We spoke to Khaled Cherif, senior client representative here at Sovos to discover more about Insurance Premium Tax (IPT) and, in particular, the complexities of France and the French overseas territories.

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

I joined Sovos as part of the IPT team in June 2017. My role is senior client representative and I mostly work with our French and Italian clients, which is around 54 organisations.

I am the first point of contact so my role along with the rest of the team is to provide clients with all the assistance that they require, including helping them with filing their liabilities and ensuring they are compliant with the relevant regulations.

Can you explain IPT in France and what is particularly complex about the country’s IPT regulation and requirements?

IPT in France is quite complex as there are many parafiscal charges that can apply to insurance premiums. There are also multiple IPT rates depending on the type of risk being covered. This can range from 7% IPT rate to as high as 30%. As well as the different IPT rates there are also 10 parafiscal charges that could be due on insurance premiums and again all with varying rates.

There are also French overseas territories to be considered. There are two groups of French overseas territories, the Départements and Régions d’Outre-Mer (DROMs), and Collectivités d’Outre-Mer (COMs).

What top tips do you have for insurers that have IPT obligations in France and other EU countries?

It’s important to understand the differences in IPT requirements with the French overseas territories.

DROMs (French Guyana, Guadeloupe, Martinique, Mayotte, and Reunion) are treated the same as mainland France for premium tax purposes. Premiums covering risks located in these territories should be declared in the same way, except for Guyana and Mayotte where the IPT rates applicable are reduced by half.

For COMs the local tax authority for the territory can levy taxes on insurance premiums. Most have set up their own IPT regimes, often requiring insurers to appoint a fiscal representative. In some COMs territories the tax ID issued for Mainland France can be used.

As many French and international organisations have subsidiaries in overseas French territories it’s important to understand how the different IPT rates and filings affect compliance. Not being based in the territory where IPT needs to be filed can make things complicated, so working with local partners or representatives can ease the burden.

How can Sovos help insurers?

Sovos has a team with global IPT expertise, meaning we can help organisations understand their IPT requirements wherever they operate, including in France and the French Overseas Territories.

Sovos has in-depth knowledge of local requirements, laws and regulations as well as local partners and representatives to assist with IPT requirements.

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Need help with IPT compliance? Speak to our experts to see how Sovos can help you solve tax for good.

Identifying the Location of Risk in the case of health insurance can be a tricky subject, but it’s also crucial to get it right. A failure to do so could lead to under-declared tax liabilities in a particular territory and the potential for penalties to be applied once these deficits are identified and belatedly settled. We examine the situation from a European perspective.

Legal background

The starting point in this area is the Solvency II Directive (Directive 138/2009/EC). Notably, Article 13(13) outlines the different categories of insurance risks that are used to determine risk locations. As health insurance doesn’t fall within the specific provisions for property, vehicles and travel risks, it is dealt with by the catch-all provision in Article 13(13)(d).

This Article refers to the ‘habitual residence of the policyholder’ or, where the policyholder is a legal person, ‘that policyholder’s establishment to which the contract relates’. We will consider these scenarios separately, given the distinction between individuals and legal persons.

Where the policyholder is an individual

For natural persons, the situation is generally straightforward. Based on the above, the key factor is the habitual residence of the policyholder. The permanent home of the policyholder tends to be relatively easy to confirm.

More challenging cases can arise where someone moves from one risk location to another. For example, when an individual purchases insurance in a particular country, having lived there for a significant period before moving to another country soon afterwards, the Location of Risk will be the original country. As EU legislation does not go into detail on the point, examples of no apparent habitual residence will be dealt with on a case-by-case basis.

Where the policyholder is a legal person

In this scenario, we have to consider the ‘policyholder’s establishment to which the contract relates’ in the first instance. The establishment is treated quite broadly, as evidenced by the European Court of Justice case of Kvaerner plc v Staatssecretaris van Financiën (C-191/99), which pre-dates Solvency II.

Notwithstanding the above, the habitual residence of the insured should be used to identify the risk location even where the policyholder is a legal person in certain circumstances. This will occur when the insured is independently a party to an insurance contract, giving them a right to make a claim themselves rather than through the corporate policyholder.

This logic can also potentially be extended to dependents of the insured person added to the policy and who can also separately claim under the contract. They will also create a risk location, although this will often be in the same country as the insured person. Ultimately, the compliant approach will be dictated by the overall set-up of the policy.

If any insurers writing business in Europe have any questions on the location of risk rules, whether concerning health insurance or any other insurance, then Sovos is best placed to provide advice to ensure taxes are being correctly declared.

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Contact us for help with complying with health insurance location of risk rules or download our Location of Risk Rules for IPT e-book for more information.