Update 7 October 2024 by Edit Buliczka
The procedure necessary to correct an underdeclared premium figure in Hungary can be complicated. The complexity of a correction for return form 2320 has become even more challenging.
Following a Sovos query, the Hungarian Tax Office (HUTA) updated the 2320 form and issued new guidance for this declaration on 11 September 2024.
This update affects the correction of the final settlement of the extra profit IPT (“EPTIPT”) for 2023. The issue was incorrectly created references on 2320-02, the page dedicated to correcting declared IPT and EPTIPT figures.
The form referred to the whole yearly EPTIPT sum rather than half of the annual sum for the 1st or 2nd instalments (due by 31 January and 31 July, respectively). This resulted in a difference for the whole year rather than a difference regarding the appropriate instalment (half of the annual amount).
Below is an example, using fictitious numbers, to help understand the update.
| Thousand HUF | |
| Original amount of the annual EPTIPT for 2023 | 1,000.00 |
| Half of the original amount of the annual EPTIPT for 2023 (to declare as 1st and 2nd instalment by 31 January and 31 July 2024) | 500.00 |
| Additional EPTIPT liability for 2023 (annual figure) | 600.00 |
| Half of the additional liability for 2023 (to declare as an addition to the 1st and 2nd instalment by 31 January and 31 July 2024) | 300.00 |
| Form 2320, Page 02, Row (C) 8 | Original amount | Correct amount | Difference |
| Sheet 2320-02 before the update (INCORRECT) | 1,000 | 1,600 | 600 |
| Sheet 2320-02 after the update (CORRECT) | 500 | 800 | 300 |
As the table shows, before 11 September 2024, the underdeclared amount was shown as the total annual difference rather than the underdeclared 1st or 2nd instalment (i.e. half of the total annual liability).
This amount was then recorded as the underdeclared liability on the HUTA tax account, which was requested to be paid alongside the submission of the corrective tax return. The self-revision fee should have been calculated on this amount (i.e. double the actual underpayment).
Not paying this double amount could have resulted in an underpayment on an insurer’s HUTA tax account. This underpayment then will have been subject to the late interest fee payable in November 2025.
In summary, the incorrect formula on page 2320-02 could have resulted in:
Based on guidance received by Sovos, HUTA will soon rectify the incorrectly recorded correction of 2023 EPTIPT. This will have a consequence of avoiding the imposition of the late interest fee in 2025 for 2024.
If you are in this situation and need help, please do not hesitate to contact our expert team.
Update: 20 May 2024 by Edit Buliczka
In May 2023, the Hungarian government extended the extra profit tax on insurance premium amounts (EPTIPT) for another year.
It updated the regulations again in January 2024, adding the fourth amendment to the two-and-a-half-year history of this tax (this tax was supposed to be repealed from 2025). This time, the final settlement and prepayment declaration and payment rules were modified.
According to the new rules, both the final settlement and prepayment must be paid in two installments. The same exact amount should be settled four times over the year – as follows:
Both the final settlement and the prepayment installments should be equally split between these deadlines.
If an insurance company needs to correct the declared premium amount for 2023, for example, in August 2024, it must submit four corrective tax returns in a row:
If such an error is discovered after 15 November 2024, the number of corrective returns will rise to five. Taxpayers would also need to submit the corrective 2024 EPTIPT second installment prepayment return.
Do these changes add administrative burden to your organisation? Speak to Sovos about how we can help.
Update: 26 January 2023 by Edit Buliczka
The Hungarian Tax Office (HUTA) released the 2023 insurance premium tax (IPT) return template last month.
According to the government decree of 465/2017, return templates must be made available at least 30 days before the due date. The first IPT return of the year is due by 20 February 2023, pertaining to the monthly IPT liabilities for January 2023.
The new IPT return template replicates the template from 2022, though the code, rates and scales for 2023 extra profit tax (EPTIPT) are different.
Coding of the tax returns in Hungary are usually formatted so that the first two digits indicate the tax year – in this case, 23 for 2023 – and the remaining digits, which are typically numbers, specify the type of tax. IPT and EPTIPT fall under the same tax code of 20. Therefore, the IPT/EPTIPT return code for 2023 is 2320.
Based on advice obtained from HUTA, it was confirmed to Sovos that the return template will not refer to the declared EPTIPT prepayment. Instead, the difference between the final EPTIPT liability and the declared EPTIPT prepayment will be recorded as an additional debt or overpayment on the HUTA tax account. As a result, insurers must manually calculate the payable EPTIPT and make their payments accordingly.
Download our free IPT compliance eBook for additional information or read our guide to Insurance Premium Tax.
Update: 30 December 2022 by Edit Buliczka
It’s been less than a month since the Hungarian Tax Office (HUTA) published instructions for insurance premium tax (IPT) for 2023 and the rules have already been amended.
The amendment is in line with the recently issued government decree (No. 582/2022) published on 24 December 2022. This alters the tax rates for 2023.
The update affects the final scale (premium collected in 2023 exceeding 36 billion Hungarian Forints) in relation to non-life and life insurance premiums.
The rates for premium amounts collected from non-life policies climbed from 7% to 12%. Rates for premium amounts collected from life policies grew from 3% to 5%.
Need more information about Hungary’s Extra Profit Tax? Speak with our Insurance Premium Tax experts.
Update: 15 December 2022 by Edit Buliczka
On 29 November 2022 the Hungarian Tax Office (HUTA) published instructions for the insurance premium tax (IPT) rules applicable for 2023 liabilities. This guidance includes the rules for extra profit tax and extra profit tax prepayment payable for 2023.
The information provided for 2022, including the section about the overpayment of the extra profit tax prepayment, is essentially repeated in this guidance. It states that reclaims are possible for any overpaid prepayment. The question is how? Even if the HUTA hasn’t released the referenced 2320 declaration form yet, if the 2320-04 additional profit tax settlement page of the return doesn’t change, the oddity we highlighted in our earlier update on 14 November 2022 still exists. The anomaly is: Is the entire declared extra profit tax payable again? Can we deduct the prepayment that was previously made? If yes, how?
Another notable piece of information in the new guidance is the date of the extra profit declaration for 2023. It states that the due date is 30 January 2024. This date is 31 January 2024 according to the government decree.
We are hoping these anomalies will be cleared before the extra profit tax for 2022 is due, that is by 31 January 2023. We are going to update this blog once new information is available.
Read our IPT compliance guide for further information.
Update: 15 November 2022 by Edit Buliczka
On 2 November 2022 the Hungarian Tax Office (HUTA) published the declaration form for settling the insurance premium extra profit tax or supplemental insurance premium tax (EPTIPT) prepayment and the extra profit tax.
In this update we will be discussing anomalies around the declaration form’s publish date, its content, and its guidance.
1. In its guidance issued to Sovos, HUTA confirmed that if an insurance company with Hungarian tax registration terminates its taxable activity in Hungary, deregistering between July 2022 and the issuance of the declaration form, the company is liable to declare its extra profit tax liabilities at the date of the deregistration. HUTA adds that since the Decree determined a final settlement deadline of 30 November for extra profit tax prepayment and 31 January 2023 for extra profit tax, the deregistering insurer can and should fulfil its obligation before these final deadlines. The compliant approach for the date of deregistration in Hungary is 15 days following the termination of the activity.
Anomaly: How it is possible to settle extra profit tax liabilities and submit a declaration (online submission is compulsory in Hungary), for example on 15 September, if the declaration form has not been published by that date?
2. According to a government decree (No. 465/2017 on the detailed rules of tax administration) the declaration forms should be published at least 30 days before the tax due dates unless there were adjustments in the regulation during this period.
Anomaly: Although both 31 October and 1 November were public holidays in Hungary in 2022, the phrase “at least” suggests the form was published before the public holidays, leaving more than 30 days for taxpayers to prepare rather than less.
1. Separate sheets were created in the declaration form for ‘normal’ or monthly insurance premium tax (IPT), the insurance premium extra profit tax prepayment and the insurance premium extra profit tax. The sheet for the settlement of extra profit tax does not include a line to deduct the amount of the prepayment.
In the guidance issued by HUTA to Sovos, it states that as the monthly insurance premium tax, the extra profit tax prepayment and the extra profit tax have the same tax code (No. 200), all payments can be automatically offset against each other.
Anomalies:
2. Based on the guidance and as per the declaration form, corrective/substitute return should be submitted in relation to ‘normal’ IPT, extra profit tax prepayment and extra profit tax if the amount of these liabilities appears to be incorrect following the submission of the return.
Anomalies
The above anomalies are just examples around the extra profit tax prepayment and extra profit tax declaration. Sovos submitted queries to HUTA to clarify these anomalies. We predict some of these anomalies will be clarified soon with the issue of an adjusted declaration form and an amended guidance.
Still have questions about Hungary’s supplemental insurance premium tax? Get in touch with our Insurance Premium Tax experts.
Update: 11 July 2022 by Edit Buliczka
As of 1 July 2022, Hungary introduced an Extra Profit Tax scheme, which levies supplemental Insurance Premium Tax (IPT) on insurance premiums. The introduction of the Extra Profit Tax scheme is a temporary measure and aims to cover the increased governmental costs caused by the conflict in Ukraine. The Extra Profit Tax scheme is applicable not only for the insurance sector but also for other sectors, including airlines, medical, energy, telecommunications and banking.
The following blog gives an overview of this tax, highlighting some interesting features and anomalies around this tax.
On 4 June 2022, a Government Decree was published in the Hungarian Official Gazette, numbered 197/2022, with the title “About Extra Profit Taxes”. One may wonder why a government decree regulates a new tax method. To answer this question, we need to research and read the Hungarian Constitution and another law about special measurements in case of catastrophes. Adding two new sections to the mentioned law on 25 May 2022 made it possible for the government to introduce the Extra Profit Taxes in a government decree instead of adjusting the relevant laws. The Extra Profit Tax scheme includes the Supplemental IPT. Although the Government Decree refers to particular tax laws, such as the 102/2012 IPT Law, the Extra Profit Tax regulations are not and will not be built into these tax laws.
Hungary’s Supplemental Insurance Premium Tax is a temporary tax effective as of 1 July 2022 for 18 months and will end on 31 December 2023. This tax is due on non-life and life insurance policies written by both Freedom of Establishment and Freedom of Services insurers. A similar sliding scale system on the income collected is applicable for this new supplemental IPT as it is for the existing IPT. The scales for 2022 are as follows:
While for 2023, the scales are the following:
The rates vary depending on when the taxpayer collected the premium and the type of insurance policies. In 2022 the rates are higher for non-life and life insurance policies than in 2023, also noting that the life rates are half of those applied to non-life policies. For further details about the rates, please read our tax alert, Hungary: Supplemental IPT Introduced Due to Ukraine Conflict.
The declaration and the payment are due by 31 January 2023 and 31 January 2024, respectively. There is also a prepayment obligation for both years with due dates of 30 November 2022 and 31 May 2023. For further details about the prepayment, please also refer to the above mentioned tax alert.
The introduction of this tax is one of the features which is unique in taxation. In Hungary, in normal circumstances, taxes are introduced, or the existing taxes are modified via laws. Generally, tax laws should be published at least 30 days before they come into effect. In the case of the Extra Profit Tax scheme, the legislative body fulfilled none of the above.
Another interesting feature to mention is that although it is called supplemental insurance premium tax, it is also due on life insurance policies. In Hungary, there is no existing insurance premium tax on life policies as these policies are exempt.
No prepayment is due for the existing IPT, but prepayment is due to be paid for the supplemental IPT.
Supplemental IPT is a type of Extra Profit Tax, but it seems that there is no separate tax code given to it. The Supplemental IPT should be declared on the IPT declaration form and paid to the same Hungarian Tax Office account as the existing IPT.
The base period to calculate 2022 prepayment is one year, although Hungary’s supplemental insurance premium tax is due only for the second half of 2022. On the other hand, the prepayment for the whole 2023 year is equal to the amount of the half-yearly 2022 supplemental tax. As such, insurance companies will likely overpay the tax with the 2022 prepayment. This overpaid tax will then need to be reclaimed or can be offset against the existing IPT or used for the 2023 prepayment or 2023 supplemental IPT. Is it for purpose or just a mistake and it will be amended?
In the guidance issued by the Hungarian Tax Office on 1 July 2022 on supplemental insurance tax rules for 2022, the tax authority mentioned that taxpayers should declare the supplemental tax on the standard IPT tax declaration form, 2220. However, the tax authority did not update the form by 1 July 2022. As the due date of the prepayment and the supplemental tax differ from that of the existing IPT, there is still an open question of how the form will look to make the distinction between the existing IPT, the prepayment and the supplemental tax. Hopefully, a new return template will be published soon to answer these questions.
As explained above, there is still ambiguity and questions around this new tax. Sovos is dedicated to keeping our clients up to date and informing you as soon as the clarified information is available. Please contact our dedicated IPT compliance team if you have any questions.
Still have questions about Insurance Premium Tax? Download our IPT Guide, written by our team of IPT experts.
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.
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.
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.
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.
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!
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.
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.
Identifying the location of risk for Insurance Premium Tax (IPT) purposes is the first step to ensuring IPT compliance in a given territory. This area perhaps isn’t as straightforward as it first seems for marine insurance.
As with the location of risk rules for all classes of insurance in Europe, the starting point for marine insurance is the Solvency II Directive (2009/138/EC), in particular Article 13(13). Article 13(13)(b) refers to ‘vehicles of any type’, which is generally understood to include not just motor vehicles but also ships, yachts and aircraft within its scope. Based on this, the location of risk for marine insurance is identified by the ‘Member State of registration’. As this phrase is not defined in the Directive, there has been some confusion about what ‘registration’ refers to in this context. This is illustrated nicely by a case heard in the European Court of Justice (ECJ) in April last year.
This case involved insurance contracts with companies established in Germany and entered into the register of companies held by the District Court in Hamburg. The owners entered the vessels into the shipping register maintained by the same court in Germany. The case arose because the vessels were temporarily authorised to fly the national flags of Malta and Liberia. The German tax authority argued that German IPT was due on these contracts because the vessels remained on the German shipping register throughout the flagging out period.
In contrast, the insurer contested that the risk location should be determined by the Member State that certified that the ship is fit for use and whose flag the ship flies. Malta treats marine insurance as exempt from its Stamp Duty regime, so if the insurer was successful with its argument, then no taxes on its insurance premiums would be due in the European Union.
The ECJ held that the location of risk was in Germany despite the temporary flagging out of the vessels. This decision was because the vessels remained on the Hamburg District Court’s register, which had the primary function of proving ownership. As the owner has the primary interest in insuring the vessel to protect their financial interest in it, the register evidencing ownership was key.
It is worth highlighting that it is unclear how much weight should be placed on this case. This is for a couple of reasons. Firstly, the Ordinance for the implementation of the relevant German legislation refers specifically to ‘shipping registers kept by the local courts’ as being determinative, which differs from the position of other territories. Additionally, a significant issue not addressed by the case is what happens when a Member State doesn’t have a shipping register.
We at Sovos haven’t seen a major shift in the approach taken by insurers since the judgment, meaning in many instances that the ship’s flag is continuing to be seen as pertinent by the market. It will be interesting how the ECJ deals with similar future cases.
We’re happy to help any insurers writing business in Europe that have questions about the location of risk rules, whether concerning marine insurance or any other insurance to ensure taxes are correctly declared.
Contact Sovos’ team of experts for help complying with marine location of risk rules or download our Location of Risk Rules for IPT eBook for more information.
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 regulatory changes and developments in global tax regimes, to support you in your tax compliance.
We spoke with Manisha Patel, senior compliance services representative – Insurance Premium Tax (IPT), about their role, how they support Sovos clients and their top compliance tips for captives.
I’m a senior compliance services representative – IPT at Sovos. I joined the company over five years ago.
My role at Sovos is multi-faceted. My primary responsibility is to oversee IPT compliance for an extensive portfolio of clients, specifically within the captives practice.
I help ensure that all clients’ tax requirements are met, including checking and signing off tax returns and ensuring that correct payments are made to relevant tax authorities within specified statutory deadlines. Additionally, I help advise clients on more complex or urgent queries that have been escalated within the team.
A P&I Club is a non-profit cooperative association of marine insurance providers that provides P&I insurance to all its member companies. A P&I Club covers a broad range of liabilities, including loss of life, personal injury, cargo loss or damage, pollution via hazardous substances, wreck removal, collision and property damage.
These clubs offer ship owners the highest limits and broadest ranges of coverage. Through their participation in a P&I Club, the member clubs share claims above an individual’s retention via a pooling structure. Pooling together allows members to provide the insurance
cover needed by ship owners and their ships to trade while meeting compulsory insurance and financial security requirements.
Increasing numbers of global tax authorities are switching to digital submissions and, in some cases, require more detailed information to complete these submissions.
My tip for captives would be to invest time learning about these ever-changing requirements for your relevant territories and organise yourself in a way that you can easily and readily have the information you need to hand. This will reduce your business’s risk of errors and non-compliance when settling IPT.
Sovos’ Captives Team caters to the specific needs of captive insurers. Our team can review any program a client may have before the program’s renewal, where we can assist with premium tax calculations, validate applicable country tax rates and prepare payment summaries. Due to limited in-house expertise, we recognise that sometimes additional guidance is needed.
Our IPT Managed Services Team offers a vast amount of knowledge, providing the expertise to our Captive clients through webinars, tax alerts and newsletters to boost their confidence with tax filing and reporting. Additionally, our Consultancy Team can assist with any further queries.
Have questions about IPT compliance? Speak to our experts or download our e-book, Indirect Tax Rules for Insurance Across the World.
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
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
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:
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
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.
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.
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.
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:
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.
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.
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.
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.
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.
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.
28 June 2023
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
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
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:
For completeness, these new rates overrule those approved in last year’s Budget Act. However, the deadline remains 16 November each year.
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.
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.
The additional information that insurers are obliged to collect, disclose and submit in their Stamp Duty Declaration is as follows:
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.
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.
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.
There are two basic tax calculation methods in the European IPT world
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:
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.
IPT amount calculation requires detailed knowledge of the rules and regulations. Sovos has a dedicated team of IPT compliance experts to walk you through even the most challenging calculations.
Contact our team today to learn more about how we can help with calculating IPT correctly or take a look at our comprehensive guide about Insurance Premium Tax.
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.
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.
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.
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.
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.
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.
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).
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Have questions about IPT compliance? Speak to our experts or download our e-book, Indirect Tax Rules for Insurance Across the World.
Under the Freedom of Services (FoS), Croatia currently levies an Insurance Premium Tax (IPT), Compulsory Health Insurance Contributions (CHIC) and Fire Brigade Charge (FBC) on the premium amounts of insurance policies written by EU and EEA insurance companies.
In Croatia, IPT only applies to selected classes of business such as motor coverage, which includes the mandatory Motor Third Party Liability insurance policies. Only the latter policies are subject to CHIC. FBC is applicable only to fire premium amounts.
Read on to understand the different IPT requirements and classes of business in Croatia.
There are currently two different IPT tax rates in force for motor insurance policies 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. There is an annual Motor IPT Report obligation too, which must be submitted on 31 January following the end of the reporting year.
This contribution is payable to the Croatian Institute of Health Insurance but must be disclosed quarterly to the Croatian Tax Office. In addition, the annual return must be submitted to the Tax Office by 30 April.
Until 31 March 2023 the rate of the contribution rate was 4%. The rate was raised to 5% as of 1 April 2023.
The Act on Firefighting governs the fire brigade regime in Croatia. The FBC rate on fire insurance premiums is 5%.
The law does not include a definition for the fire premium. Sovos gained clarification on the definition of the fire premium from the Croatian Financial Services Supervisory Agency (HANFA), the body which supervises FBC. HANFA indicated there is no specific definition of the fire premium, but the insurance company should determine this amount on a case-by-case basis.
The declaration on the fire premium is due annually, by the end of February following the payment year. The return should be submitted to the Croatian Firefighter Association.
There is no set date in the law for the payments, but payments are said to be due at least quarterly.
5% FBC payments should be split and sent to:
If you would like to settle this tax compliantly:
Firstly: You need to know the postcode of the property. But what is the postcode of an immovable property?
Secondly: You need to match a county with a postcode. This would not be too challenging as the first two digits of the five-digit Croatian postcode reveal the county’s name if you search Croatian postcodes online.
Thirdly: You need to know your local firefighting organisation’s name and bank account number or, if these organisations have established an association, the association’s name and bank account number. That is difficult but not impossible if you know where to look.
Finally: In the annual return you need to list each payment you made in the previous year.
Following the complaint method might be time-consuming if the insurance firm has written multiple fire businesses in Croatia. Because there is no minimum contribution threshold, even EUR 0.01 cent FBC should be paid to the local firefighter’s organisation or association (i.e., 40% of FBC)
Sovos has developed a robust system to settle your Croatian fire brigade charges. We have also established a constructive relationship with the Croatian Firefighters Association and HANFA.
Please contact our representative for information, or if you would like to appoint Sovos as your IPT representative in Croatia.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Need help with IPT compliance? Speak to our experts or download our e-book, Indirect Tax Rules for Insurance Across the World
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.
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.
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.
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.
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.
IPT in Ireland reflects the dynamic shifts in the global tax landscape. With an increasing number of tax jurisdictions adopting electronic filings, Ireland has joined this progressive movement. 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).
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).
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.
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 in Ireland, get in touch with us and we’ll be happy to help.