This guide to Insurance Premium Tax (IPT) is for insurers, brokers and anyone needing to understand IPT compliance. From tax managers to financial controllers and compliance managers, this guide provides information and advice for all those working in tax compliance.
There are five key elements to determining Insurance Premium Tax
Calculating Insurance Premium Tax varies by country. There are multiple ways to calculate Insurance Premium Tax, including percentage rate, fixed amounts, sliding scales and other models.
Use our Guide to IPT to understand all the elements of Insurance Premium Tax and how to navigate complex territories.
In the UK insurers and intermediaries who receive taxable insurance premiums must register and account for Insurance Premium Tax (IPT). Registration requirements vary by country so it’s important to comply with country specific registration requirements.
Registering for Insurance Premium Tax country to country. It’s important to follow the registration process, checking timelines and required documentation ahead of time to avoid delays and potential penalties.
Insurance Premium Tax rates can increase for different reasons. When announcing a rate increase, tax authorities will provide information about when the new rate comes into effect and any other changes that affect IPT payments and submissions.
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In the United Kingdom (UK) and European Economic Area (EEA) the responsibility generally lies with the insurer that has underwritten the policy. There are some cases where a policyholder or intermediary involved in an insurance agreement may need to settle the IPT.
In the UK and EEA, this depends on the type of insurance. Property insurance, vehicle insurance, travel and holiday insurance, and all other insurance follow different approaches. The rules vary outside of the UK and EEA, so it is possible for there to be double taxation where there is a combination of EEA and non-EEA coverage.
The location of risk affects the applicable rate. In many countries, determining the rate is by the type of insurance. Within the EEA, there are 18 main classes of non-life insurance, and it is imperative to determine where insurance coverage falls within these classes. This ensures that taxes are correctly applied.
Learn more about Location of Risk in our ebook.
There are exemptions from IPT in the UK and EEA. Some are highly specific, whilst others are considerably broader. Some exemptions include those seen in relation to goods in transit and sickness insurance, but it is important to review exemptions for each country in which the insurance relates.
Firstly, consider the date that triggers settlement of an IPT liability. This is usually referred to as a tax point date. It varies from country to country. In most EEA countries and in the UK, the default tax point date is the date the insurer receives a premium from a policyholder.
The IPT payment and declaration process varies across different countries. Some have monthly settlement deadlines. Others may have quarterly, bi-annual, or even annual payment obligations. Payment deadlines and tax return submission deadlines are not always the same.
Additional parafiscal charges are common across the UK and EEA. These are often applied on specific classes of insurance, such as property and fire insurance, but in some countries are broad in their application. These charges often entail additional registrations in a country as there may be separate tax offices that deal with them.
It is possible in some circumstances to reclaim overpaid IPT. This is subject to the rules in place within the country the reclaim is sought, as some countries (notably Italy) have stricter rules in place than others. We recommend maintaining accurate records of any evidence substantiating the reclaim amounts, such as credit notes issued to policyholders, as these are often required.