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.
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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.
Insurance Premium Tax (IPT) regulations in Spain are among the most intricate within the European Union.
Compliance is particularly challenging due to the involvement of multiple tax authorities. These include the central tax administration – commonly referred to as “HACIENDA/AEAT” (Agencia Estatal de Administración Tributaria) – as well as four provincial tax offices in the Basque Country: Álava, Guipúzkoa, Navarra, and Bizkaia.
In addition to IPT, insurers are also subject to extraordinary surcharges on some of the risks. These surcharges must be paid to the Consorcio de Compensación de Seguros (Consorcio). Furthermore, fire brigade contributions are due either to GESTORA (Gestora de Conciertos para la Contribución a los Servicios de Extinción de Incendios) if the insurance company is a member of GESTORA, or to over 300 municipalities without membership. Municipal FBC (MFBC) may also be payable to certain municipalities within the Madrid region.
Given this complex landscape, navigating Spain’s IPT framework and maintaining compliance can be particularly demanding. To support insurers in this effort, SOVOS has developed this guide to address key questions and provide clarity on the nuances of Insurance Premium Taxation in Spain.
The Spanish Insurance Premium Tax (IPT) landscape
While not all taxes apply to every insurance risk, the applicable obligations vary based on the nature of the coverage. Navigating Spain’s Insurance Premium Tax (IPT) framework requires a solid understanding of more than five distinct taxes and contributions.
Below are the most encountered taxes and surcharges in Spain:
Insurance Premium Tax (IPT)
Additional surcharges:
CCS surcharges: MOD10, MOD11, MOD20, MOD50
Fire Brigade Charges: FBC and MFBC (municipal FBC)
Carta Verde (Green Card)
Environmental Damage Compensation Fund Contribution (ENV)
Basics for Insurance Premium Tax (IPT)
Where should IPT be filed?
Insurance Premium Tax (IPT) in Spain must be paid to one of five different tax authorities, depending on the postcode of the insured risk location. While most liabilities are reported to the central tax administration, known as “Hacienda” (Agencia Estatal de Administración Tributaria), some Basque regions have their own tax offices.
The first two digits of the five-digit Spanish postcode determine the appropriate tax authority for IPT reporting. If the postcode begins with one of the designated codes for the Basque provinces, as listed below, IPT must be paid to the corresponding regional tax office. For all other postcodes, IPT is payable to the central tax administration.
Navarra – 31
Álava – 01
Guipúzcoa – 20
Vizcaya – 48
In addition to registering with the central tax administration (Hacienda), insurers must register with the relevant provincial tax office corresponding to the location of the insured risk, where applicable.
What is the IPT rate in Spain?
The current IPT rate in Spain is 8% as of 2021, and it is applied to all classes of insurance, with some exemptions.
Are there IPT exemptions in Spain?
Certain classes of insurance businesses are exempt from Insurance Premium Tax (IPT) in Spain. These exemptions typically include life, health, reinsurance, export credit, suretyship, and international coverage across various sectors such as marine and aviation. Agricultural risks may also qualify for exemption, depending on the specific circumstances.
What is the basis of Spain’s IPT calculation?
The basis for calculating Insurance Premium Tax (IPT) in Spain is the total premium amount payable by the insured. Depending on how the Fire Brigade Charge (FBC /MFBC) is levied, it may also be included in the taxable base for IPT purposes.
Who is liable for IPT in Spain?
The insurer is responsible for calculating, collecting and remitting the Insurance Premium Tax (IPT) to the appropriate tax authority, in accordance with the filing and submission requirements established by each respective office.
How to file IPT in Spain?
Although Insurance Premium Tax (IPT) is classified as an indirect tax, insurance companies are not currently required to submit real-time transactional data through Spain’s Immediate Supply of Information (SSI) system, which is already in use for VAT reporting. However, future developments are expected to move IPT submissions toward greater automation, aligning more closely with VAT processes. At present, IPT reporting involves both monthly and annual declarations:
Monthly Declaration – Modelo 430
Central Administration (Hacienda) and Navarra: Due by the 20th of the month following the reporting period
Álava, Guipúzcoa, and Vizcaya: Due by the 25th of the month following the reporting period
Annual Declaration – Modelo 480 Due by end of January of the year following the reporting period
IPT filings in Spain are submitted online and may require varying levels of detail, such as a breakdown by covered risks.
Basics for Other Taxes
CCS or Modellos
CCS or Modelos are administered by Consorcio de Compensación de Seguros (Consorcio). One of the Consorcio’s primary responsibilities is to compensate policyholders when the Spanish government officially declares an extraordinary risk event.
Extraordinary risks generally fall into the following categories:
Natural disasters, such as floods or earthquakes
Violent acts, including terrorism, civil unrest, and similar events
Actions by armed forces or law enforcement during peacetime
Each Modelo is subject to its own tax rate and calculation methodology. Below is a high-level summary:
MOD10 and MOD11: The calculation for Modelo 10 is relatively complex. The applicable rate depends on several factors, including the type of risk covered, policy duration, taxable base, and indemnity limits. The sum insured typically serves as the basis for calculation.
MOD20 (NGF): A rate of 1.5% applies to the taxable premium for compulsory coverage. If the coverage is not mandatory, NFG is not due.
MOD50 (CLEA): A flat rate of 0.15% applies to the taxable premium across all classes of business, with limited exemptions.
Returns must be submitted on a monthly basis via a dedicated online portal that requires detailed policy-level information. Payment is made through direct debit, which is automatically triggered upon submission of the return.
Fire Brigade Charges (FBC and MFBC)
The Fire Brigade Charge (FBC) is a surcharge applied to insurance premiums that include fire coverage. Depending on the nature of the policy, the tax may be levied on the full premium or only on the portion attributable to fire risk.
Provided that the insurance company is a member of Gestora de Conciertos para la Contribución a los Servicios de Extinción de Incendios (GESTORA), the collection of FBC is centralized by this body. This body operates under the umbrella of UNESPA—the Spanish Association of Insurers and Reinsurers—and represents over 96% of insurance companies in Spain.
However, in the absence of membership, the insurance company should deal with 300+ municipalities in Spain because FBC amounts must be paid individually to the respective municipalities based on the postcode of the insured risks. Therefore, it is strongly recommended to become a member of GESTORA, as this significantly reduces the administrative burden associated with FBC payments.
Two standard rates apply:
5% for standalone fire policies
5% (i.e., 5% applied to 50% of the premium) for multi-risk policies that include fire coverage
Joining GESTORA is administratively challenging, as new members are accepted only once per year. Insurers must submit a formal application during a limited registration window – typically one month in the spring.
FBC settlement spans five years and consists of four phases:
Prepayment: Based on an annual report of property and fire policies written in the previous year, insurers make a prepayment at the beginning of the following year.
Annual Declaration: In the second year, insurers submit actual premium data for the prior year.
Adjustment: In the fourth year, the difference between the prepayment and actual premiums is reconciled.
Final Adjustment: In the fifth year, any remaining discrepancies are corrected.
In addition to the National FBC, insurance companies may be subject to a Municipal Fire Brigade Charge (MFBC) if the insured risks are located in the Region of Madrid, because some Madrid Councils have implemented a municipal levy (MFBC). MFBC rates vary by municipality and coverage type, ranging from 5% to 30%, and may be structured as either fixed or variable. The declaration period is typically annual.
Need more information? Our team of tax experts are ready to help. Get in touch today.
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.
