Poland: Insurance Ombudsman Contribution

Update: 12 January 2024 by Edit Buliczka

Upcoming Submission Deadline for Polish Claims Report

The Polish Financial Ombudsman Office (Rzecznik Finansowy), like other regulatory bodies such as the Italian IVASS, requires insurance companies to submit various reports about their activities. One of these is the Claims Report.

According to the Act on the Consideration of Complaints by Financial Market Entities and on the Financial Ombudsman (Act of 5 August 2015) a report titled “Handling of complaints and the number of cases” is due within 45 days of the reporting period ending.

Subsequently, the deadline for the 2023 reporting year is 15 February 2024. This report must be submitted through the Polish Financial Ombudsman Office’s website.

The regulation determines the scope of the financial market entities, including domestic insurance companies, branch offices and foreign insurance companies.

The form and instructions for producing this report are published on the ombudsman’s website during the first week of January.

The following information should be reported:

1) Number of complaints

2) Accepted and unacknowledged claims resulting from submitted complaints

3) Information on the value of claims submitted in lawsuits and amounts awarded by final court judgments to clients during the reporting period

For in-depth information on Insurance Premium Tax, read our guide.

Poland: Withholding tax not due on insurance income

Update: 16 October 2023 by Edit Buliczka

Withholding tax (“WHT”) is an income tax, not an insurance premium tax, and is governed by the Polish Corporate Income Tax Law (CIT Law). However, in the case of foreign insurers that are operating business in Poland on a Freedom of Services (FoS) basis, it could be an important element of the taxable base calculation for the Financial Ombudsman Charge (“FOC”).

In this blog, we will explain why the judgement of the Polish Administrative Supreme Court on the application of withholding tax is relevant from the perspective of IPT and FOC.

The Financial Ombudsman confirmed to Sovos that FOC is owed on the full premium amount as stated in the policy documents, with no deductions. This implies that even if the foreign insurer receives a reduced premium after deducting WHT, FOC will still be due on the whole amount of the premium.

The WHT was applied to insurance services because the Polish Tax Office considered insurance contracts to be “performance of a similar nature” to a guarantee under CIT Article 21(1)(2a) and so wanted to deduct WHT from the premium amount paid to a foreign insurer.

The Provincial Administrative Court in Wrocław in its decision on 24 August 2023 concluded that a contract whose content corresponds to the essentialia negotii (“essential elements”) of an insurance contract is not a “performance of a similar nature”. Therefore, Polish policyholders are not obliged to withhold income tax at source on insurance premium income.

This decision also determines that payments made by the Polish policyholder for intermediate insurance services, generally referred to as brokerage services, do not constitute payment for “performance of a similar nature.” As a result, the policyholder company is not required to deduct withholding tax on brokerage fees.

Looking for further information on the decision? Our Insurance Premium Tax specialists can help.

Update: 12 June 2023 by Edit Buliczka

Poland: Transitioning from the Insurer Ombudsman Charge (IOC) to the Financial Ombudsman Charge (FOC)

The first annual FOC return is complete, and the first payment for the newly imposed Polish Financial Ombudsman Charge (FOC) has been made. The Ombudsman Office implemented the new charge in 2023, with an effective date of 1 January 2023. The first settlement was due on 31 March 2023.

Sovos obtained knowledge during the settlement process on how to proceed with the settlement of this new charge and what the transitional procedures are for transitioning from IOC to FOC. In this blog update, we summarise what we learnt during this process.

This is what we learnt about the process:

• There is no need to re-register for the FOC. Firms can use the existing registration to report FOC obligations.
• If the starting date of writing insurance business in Poland is in 2023, there is no need to proceed with the registration in 2023 because the first settlement will be due in 2025.
• It was not possible to submit the quarterly IOC advance payment return for Q1 2023. This supports the advice Sovos received earlier from the Polish Ombudsman Office, which said that quarterly IOC advance payments are abolished, including for Q1 2023, based on premium amounts collected in Q4 2022.
• Following an upgrade, it is now possible to process historical declarations for IOC liabilities applying the correct rates.

Some questions remained:

• The 2022 IOC annual return: The IOC annual return was formerly due on 30 June. Is the 2022 IOC annual return still due in June 2023?
• Annual settlement: The Ombudsman Office used to issue the annual settlements during the October-November period of the year after the declaration period. Will this be sent this year for 2022?
• The premium collected in 2021 or 2022: Is it necessary to disclose IOC, FOC or both on these premium amounts?

Speak with our Insurance Premium Tax experts to learn more or read more about Insurance Premium Tax in our guide.

Update: 14 March 2023 by Edit Buliczka

Poland: New Ombudsman Charge introduced for 2023

Although Poland still lacks an Insurance Premium Tax (IPT) system, there are various other taxes and fees in the country. The Insurance Ombudsman Charge (IOC) implemented in 2014 is one of the most well-known parafiscal charges. As of January 2023, the Financial Ombudsman Charge (FOC) replaces the Insurer Ombudsman Charge regulation.

There are differences and similarities between the new Financial Ombudsman Charge (FOC) and the previous Insurer Ombudsman Charge (IOC). We have also noticed some anomalies which we will discuss.

How are FOC and IOC similar?

Both IOC and FOC are parafiscal charges that should be paid to the Ombudsman Office. Payment is still in PLN with a payment threshold of PLN 16.00.

As in the case of IOC, the FOC is declared online and with NIL report submission requirement.

Similarly to the IOC, the FOC is applicable to Domestic (DOM insurers) and foreign insurers writing business in Poland on a freedom of services (FOS) basis (FOS insurers). FOC rates for DOM and FOS insurers are different as was the case with the IOC regime.

The tax point date is the same for the IOC and the FOC and it is the date when the cash is received.

What is different about the Financial Ombudsman Charge?

1. Although the threshold is the same for FOC and IOC, the FOC threshold refers to an annual period rather than a quarter.
2. IOC triggered quarterly advance payments with an annual return by 30 June and an annual settlement. FOC is due annually without additional adjustment later on.
3. FOC rates are higher.
4. There are no advance payments for FOC.
5. The reporting period for FOC is the two years before the charge is due, while for IOC the reporting period was either the previous quarter (advance payments) or the previous year (annual report).

Anomalies around the Ombudsman Charges in Poland

Sovos contacted the Ombudsman office to clarify some questions raised around anomalies with the Financial Ombudsman Charge. We have received responses so please get in touch if you would like to learn more.

1. The legislation is silent about the transitional rule. More specifically, there is no mention whether Q1 2023 advance payment based on premium collect in Q4 2022 is payable. It is unclear whether the 2022 annual return is due or not and whether the Ombudsman office will issue settlement letters regarding 2022 reporting year.
2. FOC settlement is based on the premium amounts collected 2 years earlier. For example, premium collected in 2021 is the basis of the charge in 2023. If so, what is the compliant rule if an insurance company collects premium in 2023, does it need to register in 2023 or in 2025 only?
3. Why is the threshold of PLN 16.00 now applicable for an annual return?
4. If an insurance company has overpayment in IOC can it be used and offset against future FOC liabilities?

Do you still have questions about the new ombudsman charge? Speak with our IPT experts.

Update 15 December 2021 by Kateryna Binkowska

Currently, Poland doesn’t have an IPT. Instead, there is a parafiscal tax called Insurance Ombudsman Contribution (IOC). It is currently charged at a rate of 0.02% and was effective from 1 January 2020 for all insurance companies operating under Freedom of Services (FOS) in Poland.

IOC applies to all 18 classes of non-life insurance. It is applicable to all insurance companies either selling insurance in Poland or collecting premiums from Polish persons. Prior to its origination date of 1 February 2014, it only applied to domestic insurers or foreign insurers with Polish branches.

The basis for IOC is the premium that must be paid to the insurer to obtain the insurance cover.

Poland: Insurance Ombudsman Contribution Reporting

Reporting for IOC can be tricky because of the different name and numbering system for quarterly declarations. For Example: Quarter I (Quarter 1) of the current year covers October, November and December of the previous year. The quarterly submission is due 90 days from the reporting period. In this example, Q1’s declaration must be filed by 31 March of the current year.

All the payments made throughout the year are considered prepayments or advance payments. For instance, the liabilities that arose in Q1 2021 are declared in the Q2 2021 tax period as an advanced payment for Q2 2021.

The Annual Report is due by 30 June of the following year. This report is submitted to the Insurance Ombudsman summarising the actual premiums received in the previous year (i.e., for 2020, a report is submitted by 30 June 2021 summarising the total amount of premiums received by the insurer in 2020).

The Insurance Ombudsman then determines its funding requirements, and an adjustment is made based on the difference between the insurer’s share of the market percentage multiplied by the funding requirements and the previously made payments for the reporting year.

The Ombudsman’s adjustment may result in the tax authorities requiring additional funds or providing a refund. Either result is communicated by the authorities through Annual Settlement Letters that usually arrive by the end of October.

Insurers are obligated to keep records of insurance contracts and the documents required for tax declaration for five years from the contract’s expiry date.

If the taxpayer doesn’t declare and remit the tax in accordance with the regulations, the relevant authority may demand delayed interest and require an assessment of the tax. In such cases, the court can award a penalty fee and/or imprisonment of the company’s management for up to three years, as per the fiscal penalty code from 10 September 1999.

For any insurance company operating under FOS in Poland, understanding the details of the Insurance Ombudsman Contribution and the reporting requirements are key to ensuring compliance.