There are a variety of different approaches to Insurance Premium Tax (IPT) treatment for marine insurance across Europe. Before looking at how individual countries treat marine insurance, it is worth noting the challenges in determining the country entitled to levy IPT and any associated charges.
The location of risk relating to marine vessels falls within article 13(13)(b) of the Solvency II Directive. This outlines that in the case of ‘vehicles of any type’ the risk location is the ‘Member State of registration’. There is no definition provided for ‘vehicles of any type’. So there is some uncertainty as to whether this is limited to land motor vehicles or whether it extends to marine vessels and aircraft. Most EU jurisdictions adopt the latter, broader approach, but Malta limits it to motor vehicles.
Marine Insurance IPT Across Europe
Additionally, the German tax authority has been known to rely on a 2017 decision made by the Cologne Fiscal Court to levy IPT in circumstances where a P&I club member had a registered office in Germany, but no ship was registered there. This raises the possibility of double taxation. This is with IPT potentially levied in both Germany and the country of the registration of the vessel. The Law on the Modernisation of Insurance Tax passed in December last year.
Once an insurer has navigated the choppy waters of the location of risk rules, regimes across Europe vary considerably. Marine insurance is a class of business that sees a number of IPT exemptions. Some countries like Bulgaria and Ireland offer fairly broad exemptions for damage and loss to marine vessels.
Other countries adopt a more nuanced approach in distinguishing between commercial vessels and pleasure craft. Belgium offers an exemption in the case of the former, whereas they levy IPT as normal in the case of the latter. A similar distinction exists in France between vessels conducting commercial activities and those operating for pleasure.
Germany has a reduced IPT rate of 3% in relation to marine hull. Where the ship exclusively serves commercial purposes and has insurance against perils of the sea.
Denmark has an exemption for its tax on non-life insurance, but it does impose a separate tax on pleasure boats. Denmark calculates on the sum insured of the vessels themselves.
Reduced Rate Extension
One final point of note is the extension of the regime for the reduced rate, like that in the Portuguese territory of Madeira, in April. The extension lasts until the end of this year at least. The European Commission has extended the State aid initiative which gave rise to the reduction until 31 December 2023, so it may be that this will be reflected in Portuguese legislation in due course.
It’s essential for insurers to understand the tricky location of risk rules associated with marine insurance. In addition to the various approaches taken by different countries in Europe. This ensures companies pay the correct amount of Marine Insurance Tax to the correct administration.
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IPT compliance – taking care of the detail so you don’t have to
Insurance premium tax (IPT) is a complex thing to deal with. Get it wrong and the implications can be problematic.
At Sovos we take care of the detail, giving you the complete peace of mind you need. We are compliance specialists and we solve tax for good. IPT is one of our specialisms, so we know it well. We’ve been in it from the start and, as a result, many of the world’s largest insurers trust us with their IPT compliance business.
As regulations change and become more complicated throughout Europe, you need the certainty that you can trade effectively and without problems. That’s what we provide. Our team of tax compliance specialists cover over 100 countries and know the ins and outs of each jurisdiction. It’s this depth and accuracy of knowledge that ensures you have the right level of compliance, are only paying what you need to pay, while having the latest information to always keep you aware of changes and stay ahead of the curve.
Compliance peace of mind
Our leading software gives you the freedom to achieve this yourself. It integrates seamlessly into your existing system and is easy to use. Simplify the preparation of IPT and parafiscal returns and use accurate, real-time rates and calculations to help you reduce both the amount of errors and reprocessing needed.
Or, if you prefer, we can manage it all for you, from registration through to fiscal representation. Either way, we’re always here for you to make the process simple and smooth no matter what the future holds. And because our team works together in the same location and knows how different tax authorities prefer to operate, you can be sure that whether you’re trading in a new jurisdiction, or across multiple different jurisdictions, the process will be fast and free from any niggles, big or small.
We’re a market leader for IPT compliance in Europe with award winning solutions.
IPT Determination – calculate and apply global IPT rates at quotation
IPT Reporting – generate returns needed for IPT compliance on a global basis
Full managed service solution
Fiscal representation
Consultancy
Bespoke approach to meet your changing business needs
Trusted by Fortune 500 companies
We actively work with 80% of insurers across Europe including many of the top 100 UK insurers, FTSE Eurotop 100, in addition to Fortune Global 500 companies.
As the challenges and complexities of IPT compliance continue to rise, more companies are realising the benefits of taking both a holistic and global approach. Sovos was built to solve the complexities of the digital transformation of tax with complete connected offerings for tax determination, and tax reporting and more.
IPT in Spain is complex. Navigating the country’s requirements and ensuring compliance can feel a difficult task.
Sovos has developed this guide to answer prominent and pressing questions to help your understanding of Insurance Premium Tax in the country. Originally created following a Spain IPT webinar we hosted, the guide contains questions asked by industry insiders and answered by legislative experts.
What is the IPT rate in Spain
The current IPT rate in Spain is 8%, as of 2022 and is applied to all classes of insurance, with some exemptions. Classes exempt from IPT include life, health, reinsurance, group pensions, export credit, suretyship, goods and passengers in international transit, agricultural risks, aviation and marine hull insurance.
What makes Insurance Premium Tax in Spain challenging?
The most challenging aspect is correctly submitting to the five different tax authorities: Alava, Guipuzkoa, Navarra, Statal and Vizcaya.
What is the Basis of Spanish IPT Calculation?
The basis of the IPT calculation is the total amount of the premium payable by the insured, excluding funds for the insurance of extraordinary risks and fire brigade tax. Companies must show the tax in addition to the premium.
Spanish IPT Liability
The insurer is liable for calculating and paying the tax. EEA insurers operating under the Freedom of Service regime must appoint a fiscal representative in Spain.
Is all health insurance exempt from IPT in Spain?
Health and sickness insurance is exempt from IPT in Spain, under Article 5 of the IPT law. However, this doesn’t include Accident cover which should be taxable at 8%.
International insurance risks belong to the exemptions. Is this also true for international freight forwarder liability insurance? And for international marine cargo insurance?
Article 5 of the IPT law provides an exemption for “insurance operations related to ships or aircraft that are destined for international transport, except for those that carry out navigation or private recreational aviation”.
Under Act 22 of Law 37/1992 (VAT Law), “international transport is considered to be that which takes place within the country and ends at a point located in a port, airport or border area for immediate dispatch outside the Spanish mainland and the Balearic Islands”.
Therefore, we understand insurance, such as freight forwarder liability and marine cargo, gain the IPT exemption, to the extent they relate to international transport.
I’m preparing CCS monthly reporting manually in Excel. Is there a Microsoft tool that can create the final report?
We’re unaware of any Microsoft tools to prepare the CCS file for monthly reporting. This file can be complex.
What is CLEA?
CLEA is the surcharge to fund the winding-up activity of insurance undertakings. It was included in the Modelo 50 CCS and is due for all insurance contracts signed on risks in Spain. This excludes life insurance and export credit insurance on behalf of or with the support of the State.
The type of surcharge destined to finance the winding-up activity of insurance companies is made up of 0.15% of the premiums above.
Do insurers have to be registered in all the provinces in Spain?
All insurers should register in the provinces where the location of risk is. It is a compliant requirement because insurers must declare premium taxes to the correct tax authorities according to the location of risk.
Policies can be submitted monthly to Consorcio even if the postcode is wrong. How should we proceed in the future for Insurance Premium Tax in Spain?
The postcode is compulsory data that must be sent to the Consorcio monthly, as the CCS needs to know the Location of the risk for each policy subscribed in Spain.
The Fire Brigade Charge (FBC) annual reports are also submitted through the CCS portal. The postcode is a compulsory field that helps the different Councils identify the policies that were subscribed in their territories and collect their portion of FBC accordingly.
When reporting Consorcio liabilities in Spain, should the lead insurer declare on behalf of its co-insurers?
Insurers can elect to declare only their share of the co-insurance agreement, should that be the agreement amongst the insurers that are party to the contract.
Where Consorcio cannot recover an outstanding sum from a co-insurer, it will likely hold the lead insurer accountable for that amount. Alternatively, the lead insurer can pay the surcharges for all fellow insurers. So there is, to some extent, an element of discretion by the relevant insurers.
Is there a list or explanation of each movement and declaration type to report to Consorcio?
We’re able to provide this to our customers upon request. Get in touch with our IPT experts for support.
More Questions about Insurance Premium Tax in Spain?
It’s difficult to pinpoint exactly when new taxes or tax rate increases will happen. Covid-19 has impacted almost everything, including a massive deficit in the economy. Many banks have applied negative interest and governments have put funding in place to aid recovery. It’s highly likely that tax authorities will be looking at ways to bring in additional funding, including Insurance Premium Tax (IPT) rate increases.
Europe’s IPT rate increases
Some of the steepest increases across Europe can be recognised not as an instant from one rate to another but a gradual incline.
The Dutch IPT regime is one of the highest rates across Europe, currently at 21%. Until 2008, the IPT rate was 7% and raised in various stages, finally settling at 21% in 2013. An increase of 14% in a five-year period!
Why the sudden rate increase? Was it because the Dutch tax authorities realised theirs was one of the lowest rates in Europe? Was it due to the economic climate at the time to gain extra revenue? Or was it because tax authorities were beginning to realise IPT was becoming a more recognised tax?
The Netherland’s isn’t the only country to have experienced a dramatic IPT rate increase over a short period of time.
HMRC, the UK tax authority, has also taken the opportunity to implement more rigorous increases, especially with their standard rate. In 2011, the rate increased to 6%, increasing at various intervals until stabilising at 12% in 2017. The rate doubled in a five-year period!
The similarity between the two territories and the way they have increased their rates is uncanny. The five-year structure of rate changes either by 1 or 2%, ultimately reaching much higher rates than initially expected in the market. Looking back at the economy during the time of the increase, Europe was beginning to recover from a recession that hit most territories hard with rising interest rates on loans and mortgages and increased unemployment.
There are changes in the market now that could influence IPT rates. Many insurance companies have increased the scope of insurances offered. Classes of business are more varied and premiums quoted are higher. Emphasis is on ensuring the invoicing is correct with the insurer versus carefully considering insured taxes.
What’s Next?
Many territories now require more granular detail for submissions. Will this trigger more audits? Will it cause more tax authorities to analyse this information to enforce their penalty regimes? Or will there be a number of rate increases across the board? Increases could begin at 1 or 2% and follow the trend of five years as set out above. Either way, there is a financial gap which will need to be filled.
We’ll be keeping a close eye on the latest Insurance Premium Tax rate updates to see how tax authorities respond to this current economic climate.
Insurance Premium Tax (IPT) in Spain is tricky. There are national and regional tax authorities. Let’s not forget numerous IPT variations. Compliance requires in-depth and far-reaching knowledge – mountains of which have been added to our ebook.
We’re here to help. The Sovos IPT team has created this ebook to help explain the rates, exemptions, settlements and penalties.
Use this practical guide to stay on the right side of risk.
Understand IPT in Spain on a macro and micro level
Minimise compliance and business risk
Written by IPT experts who know Spain top to bottom
Download now to navigate the nuanced IPT landscape in Spain, no matter where your company is based within the country or from afar.
As well as IPT on a national and regional level, it breaks down the fundamental components of the Consorcio de Compensación de Seguros (CCS) and the Fire Brigade Tax.
Overview of IPT
IPT rates and exemptions, challenges, settlement and penalty regime
Overview of the CCS
CCS rates and exemptions, challenges, settlement and penalty regime
Overview of Fire Brigade Tax (FBT)
FBT rates and exemptions, challenges and settlement
IPT is complex and failing to comply can have serious implications.
At Sovos, we focus on the details to provide you with peace of mind. We’re global tax compliance specialists. Our team of regulatory specialists monitor and interpret regulations around the world, so you don’t have to.
From understanding and meeting the demands of national IPT regulations to delivering dedicated fiscal representation and payment solutions, our business is in helping your business meet its specific regulatory requirements.
Sovos is a market leader for IPT compliance in Europe, filing up to 30,000 tax returns annually valued at €600m+ for our insurance clients. We do this in over 100 countries and 19,000+ jurisdictions around the world.
Ease your IPT compliance burden
Whether it’s meeting the demands of specific country IPT declarations or providing dedicated fiscal representation and payment solutions, our combined approach of people, skills and software can help you stay ahead of the constantly changing filing requirements.
Navigating Location of Risk can be quite daunting. This ebook is your compass, helping you sail smoothly to IPT compliance. With use cases and examples to follow, this ebook will help you successfully navigate one of the more complex elements of insurance premium tax.
This ebook will help you navigate Location of Risk and the rules that apply in the 27 member countries of the European Union (EU), the European Economic Area (EEA) and the UK.
It guides you through the countries where the rules apply, the legal framework that prompted the rules, examples of the criteria used to determine Location of Risk, local implementations that differ from the norm and how premium allocation works in practice.
Geopolitical background
Legal framework
Solvency II Directive 2009/138/EC, Article 13(13) including examples of the four criteria to determine Location of Risk
Solvency II Directive 2009/138/EC, Article 157(1)
Local implementation of Location of Risk rules – Switzerland, Liechtenstein, United Kingdom and Germany
Following the Solvency II Directive 2009/138/EC, Article 13(13) enables insurers to identify the correct Location of Risk. This directive, amongst other things, defines the four criteria to determine which territory the risk is deemed to be located in and where it should be taxed.
After identifying Location of Risk, Solvency II Directive 2009/138/EC, Article 157(1) outlines that the Member State can tax that premium.
Consider these three points when determining Location of Risk:
1
IPT is not harmonised
Consider local IPT law when determining Location of Risk
2
Risk determines the criterion
Assess the risk to know what criterion to use: e.g. property, vehicle, holiday or travel, other
3
Non-EU / EEA region
Local rules typically differ from EU/EEA Location of Risk rules
If you need more information, use our chat box to chat with our experts right away.
IPT is complex and getting it wrong can have serious implications.
At Sovos, we take care of the detail, giving you the peace of mind you need. We’re global tax compliance specialists and we solve tax for good. Our team of regulatory specialists monitor and interpret regulations around the world, so you don’t have to.
Whether it’s meeting the demands of specific country insurance premium tax declarations or providing dedicated fiscal representation and payment solutions: easing your IPT compliance burden is our business.
Sovos is a market leader for IPT compliance in Europe filing up to 30,000 tax returns annually valued at €600m+ for our insurance clients. We do this in over 100 countries and 19,000+ jurisdictions around the world.
Whether it’s meeting the demands of specific country IPT declarations or providing dedicated fiscal representation and payment solutions, our combined approach of people, skills and software can help you stay ahead of the constantly changing filing requirements.
The Danish government has introduced new law creating a state-owned insurance scheme for compensation for losses arising from a terrorist attack using chemical, biological, nuclear and radioactive (CBNR) weapons. The scheme comes into effect on 1 July 2019. There had been concerns that CBNR terror coverage available in the market was limited and, as it is not a mandatory cover, many insurers were considering whether to continue to offer it at all.
In basic terms, under the new scheme, the financial risk of a CBNR attack in Denmark will initially be borne by the State, but those costs are subsequently recovered from policyholders. It is the way those amounts are recovered, however, which will be of interest to tax managers. Following a CBNR attack and the State paying claims, a 5% levy will be applied to policies covering fire risks in relation to buildings, land, moveable property, railway vehicles, motor vehicles and ships.
Insurers will be required to collect the additional amount from their policyholders along with the first premium of the next calendar year. This will then be remitted in to a fund on a quarterly basis until the cost of the claims are fully recovered by the State, at which point the contributions will cease and any excess amounts held by the fund will be refunded to policyholders proportionally.
This way of funding terrorism cover is a less common approach. Additional (re)insurance pools, such as Pool Re in the UK or ongoing charges including the Victim of Terrorism Contributions to the Fonds de Garantie in France, are more frequently used forms of funding.
This ‘after the event’ method of collection means that hopefully the levy will never need to be collected. However, insurers writing risks in Denmark should be aware of their potential obligations under the new law.
