Global insurance tax newsletter 1-17 - EYFILE/EY_IPT_Newsletter_Issue_1_17.pdf · 1 eptember 01 in ondon. W elcome to th e latest issue! Is Global insurance premium tax newsletter

Insurance premium tax (IPT) is a global indirect tax that is receiving increased attention from tax authorities and subsequently tax/compliance officers of insurers, brokers and risk managers. The trend of rate increases continues. This year, the standard rate of IPT in the UK has been increased for the third time within the space of just 18 months — this saw the rate doubling from 6% to 12%. Insurers are also looking with interest at the introduction of IPT in Slovakia where the relatively short legislation has left many compliance questions unanswered.

IPT is not just an issue for insurers. The need for multinational groups to manage reputational and financial risk on IPT paid on insurance programs they take out has never been greater. Given far-reaching discussions on tax compliance, transparency, CRS (common reporting standard) and BEPS

(base erosion and profit shifting) many companies from various sectors are concerned about their IPT exposure. Usually the brokers/insurers are responsible for the calculation and settlement of taxes at a local level. However, if the insurer does not have a license in a country, IPT may still be applicable but needs to be settled by the policyholder. This can trigger a compliance issue for the multinational company and many of them have started talking to us.

If you have any questions please get in touch. For more information on our IPT Services offering please visit our IPT microsite at ey . com/ IPT

Please also contact us if you would like to attend our bi-annual IPT Briefing on 15 September 2017 in London.

W elcome to th e latest issue!

Issue No. 1, 2017

Global insurance premium tax newsletter

D av id B earman P a r t n er

Tom H ilv erk us S en i or M a n a g er

2 | Global insurance premium tax (IPT) newsletter Issue No. 1, 2017

O v erv iew

C anad a — Prince E d ward Island

Changes to premium tax and fire prevention tax

Ireland

Levy on health insurance increased

U nited K ing d om

IPT standard rate increased

C olombia

VAT increase announced

C anad a — S ask atch ewan

Scope of provincial sales tax extended to include insurance

Peru

VAT reduction proposal announced

F rance

Fund of guarantee for compensation of terrorist attacks’ victims increased

Italy

Provincial insurance premium tax changes for motor insurance

S lov ak ia

New non-life insurance levy introduced

E g y pt

VAT changes implemented

Ind ia

Update on GST situation

A ustralia

Update on GST for nonresident insurers

S ri L ank a

VAT developments

N eth erland s

Changes to IPT

U nited A rab E mirates

Update on VAT implementation

N ew Z ealand

Fire service levy rates increased

3Global insurance premium tax (IPT) newsletter Issue No. 1, 2017 |

A ust r a l i aU p d a t e on G S T f or n on r esi d en t i n sur er sThe Australian GST legislation has been amended to alter the GST treatment of cross-border supplies between nonresident businesses and Australian consumers effective 1 July 2017. Broadly, post 1 July 2017, a supply of an intangible (for example the creation of rights relating to insurance) will be considered to be connected with Australia if it is provided to an “Australian consumer” (e.g., an Australian resident who is not registered for GST).

Accordingly, insurers should be mindful that after 1 July 2017 premiums invoiced to Australian residents by nonresident insurers may potentially be subject to GST. While this change in GST treatment will only apply where the insured is not registered for GST, the amendments to the GST Act place the obligation to determine the residency and GST registration status of the recipient (e.g. the insured party) on the supplier (e.g., the insurer).

C a n a d a — P r i n c e Ed w a r d Isl a n dChanges to premium tax and fire prevention taxThere have been changes to premium tax and fire prevention tax rates from 1 January 2017. The premium tax rate for life, accident and sickness insurance has increased from 3.5% to 3.75%. The premium tax rate for all other classes of insurance has increased from 3.5% to 4%.

The fire prevention tax of 1% has been abolished.

Mutual insurance companies are required to pay tax on their gross premiums at the rate of 1.25%, effective 1 January 2017. Prior to that date, mutual insurance companies were exempt from tax under the Premium Tax Act, although they were required to pay the additional 1% tax under the Fire Prevention Act.

C a n a d a — S a sk a t c h ew a nScope of provincial sales tax extended to include insuranceAs part of its 2017–18 budget, Saskatchewan has extended the scope of provincial sales tax (PST) to include insurance contracts which will mean insurers have to register with the authorities. For all insurance premiums that are due on or after 1 August 2017, 6% will be charged on all insurance contracts (including insurance for vehicles registered under The Automobile Accident Insurance Act) regardless of when the policy was issued. PST will not apply on reinsurance, self-insurance, annuity contracts, contributions or premiums paid under the Canada Pension Plan, Employment Insurance Act (Canada) and The Workers Compensation Act, 2013, or insurance contracts purchased by Status Indians or Indian Bands to insure on-reserve property or activities.

C ol om b i aV A T i n c r ea se a n n oun c edVAT has been increased from 16% to 19% from 1 January 2017 for most existing taxable non-life policies with the exception of insurance policies under article 468–3 of the Colombian Tax Code (e.g., complementary/additional coverage health insurance plans), which remain taxed at 5%.


Eg y p tV A T c h a n g es i m p l em en t edEgypt issued VAT Law no. 67 of 2016 on 7 September 2016 in the Official Gazette to be effectively applied from the next day on 8 September.

The general VAT rate is 13% for the fiscal year ending 30 June 2017. From 1 July 2017, the general VAT rate increases to 14%.

It was subsequently clarified that the law included the insurance and reinsurance services among the 57 items exempted from VAT.

F r a n c eF un d of g ua r a n t ee f or c om p en sa t i on of t er r or i st a t t a c k s’ victims increasedThe fund of guarantee for the compensation of terrorist attacks victims increased from the lump sum of EUR 4.30 to EUR 5.90 per policy from 1 January 2017 for all existing taxable insurance policies.

In d i aU p d a t e on G S T si t ua t i onWith the presidential nod, the much-awaited indirect tax reform moves closer to its July roll-out. President Pranab Mukherjee gave his assent to four key goods and services tax legislations. The four key GST bills that were earlier passed by both the houses of Parliament are Central GST, Integrated GST, Union Territory GST and GST (compensation to states).

The GST Council have approved various rules in relation to valuation, input tax credit and invoicing in its meeting conducted on 18 and 19 May 2017.

The GST rate for general insurance and reinsurance is 18%. For life insurance products the tax rate is also 18%, but the effective rate can vary depending upon the type of policy and how the premium is paid. The exemptions that currently apply for Service Tax will also be present under the new GST regime.

Ir el a n dLevy on health insurance increasedThe levy on health insurers with regard to health insurance contracts will increase for all new contracts entered into and contracts renewed on or after 1 April 2017 with the new rates ranging from EUR 74 to EUR 444 per insured person depending on their age and level of cover.


It a l yProvincial insurance premium tax changes for motor i n sur a n c eIn Italy, there have been a couple of changes to the provincial insurance premium tax rates on motor insurance policies for cars registered in each province.

In the province of Sud Sardegna the tax rate has been increased from 12.5% to 16% from 1 January 2017.

In the province of Siracusa on 4 January 2017, the commissioner of the province issued the resolution no. 1 revoking the increase of the IPT rate on motor insurance that was previously approved. The IPT rate on motor insurance for 2017 is 12.5% starting from the date of revocation of 4 January 2017 and an increase of the IPT tax rate has been postponed to 2018.

C h a n g es t o c on t r i b ut i on s f or R oa d A c c i d en t V i c t i m s’ F un d a n d Hunting Accident Victims’ Fund parafiscal charges The percentage contribution of premiums subject to the Road Accident Victims’ Fund and Hunting Accident Victims’ Fund parafiscal charges has decreased from 96.4% to 96.34% with effect from 1 January 2017. The tax rate for the Road Accident Victims’ Fund is reduced from 2.41% to 2.4085% and for the Hunting Accident Victims’ Fund is reduced from 4.82% to 4.817%.

Net h er l a n d sC h a n g es t o IP TOn 14 February 2017, the Dutch State Secretary of Finance published changes to the existing Dutch insurance premium tax decree (IPT decree). The revised IPT decree contains the following items:

► A number of new topics

► Mortgage related interest insurance

► EU/EEA insurer where intermediaries are involved

► Export credit insurance

► Amendments to existing guidance

► Insurance for damage to ships

► Money transfer insurance

► Composite insurance

► Reinsurance

► Mandate designation of insurance broker

► Additional guidance on existing topics

► Definition of inland vessels

► Definition of pleasure crafts

► Co-insurance

It should be noted that the decree is in addition to the existing IPT legislation on and should be read in conjunction with the legislation to determine the liability to IPT on any premium, commission or fee.


New Z ea l a n dFire service levy rates increasedThe New Zealand government approved new fire service levy rates that will come into effect from 1 July 2017:

1. The levy for insured residential property increases from 7.6 cents to 10.6 cents per $100.00 of insured value for residential property (current caps on insured value are retained: $100,000 for buildings and $20,000 for contents)

2. An increase from 7.6 cents to 10.6 cents per $100.00 of insured value for insured non-residential property (no cap applying)

3. An increase from $6.08 to $8.45 per insured motor vehicle (below 3.5 tons)

4. The total levy on house and contents insurance will increase to $127.20 per year (approximately an extra $36 per year for households)

P er uV A T r ed uc t i on p r op osa l a n n oun c edOn 7 January 2017, the executive branch issued Legislative Decree 1,347, according to which the value-added tax (VAT) rate will be reduced from 16% to 15% as from 1 July 2017, provided some conditions related to fiscal policy are met (i.e., by 31 May 2017, the annual collection of VAT by the Treasury — net of VAT refunds up to such date — is equivalent to 7.2% of the gross domestic product).

Up to this date, VAT is levied at the single rate of 16%. In addition to VAT, the taxable amount is also subject to a 2% municipal sales tax, raising the effective rate to 18%.

If the conditions set forth in the Legislative Decree for reducing the VAT rate are met, the effective rate as from 1 July 2017 will drop from 18% to 17%.

SlovakiaNew non-life insurance levy introducedThe government has introduced a new insurance levy of 8% on new non-life insurance contracts concluded after 31 December 2016, with the exception of mandatory third-party motor liability insurance as this is already subject to a current 8% levy.

Although the new levy is intended to be a tax on insurers, the legislation does not contain any restriction on passing the economic burden on to policyholders, subject to market competition pressures.

The levy will apply to insurance policies underwritten by insurers that are situated in Slovakia, or are operating in Slovakia under Freedom of Services or are Slovak branches of foreign insurers from other states.


S r i L a n k aVAT developmentsVAT was increased from 11% to 15% from 2 May 2016 on non-life insurance policies, but life policies remained exempt. However, the Supreme Court subsequently suspended the VAT changes so the VAT rate has now returned to 11% as of 11 July 2016.

However, the Sri Lankan Government have now increased VAT again on all non-life insurance policies from 11% to 15% from 1 November 2016.

U n i t ed A r a b Em i r a t esU p d a t e on V A T i m p l em en t a t i onReports indicate that VAT will be levied in UAE and across the whole Gulf Cooperation Council from 1 January 2018 at 5% on all insurance contracts except for life insurance.

U n i t ed K i n g d omIP T st a n d a r d r a t e i n c r ea sedThe standard rate of insurance premium tax (IPT) has been increased from 10% to 12% for all premiums received where the cover begins on or after 1 June 2017. From 1 June 2018, all premiums received on or after this date are subject to the increased IPT rate regardless of when the cover for risks under these insurance contracts commenced.

The changes to the anti-forestalling rules that were mentioned in the 2016 Autumn Statement have been implemented as of 8 March 2017 and have repealed sections 67 to 67C of Finance Act 1994, replacing them with new anti-forestalling rules in sections 66A, 66B and 66C of Finance Act 1994. The new rules have removed the difference between insurers who account for IPT using the cash receipt method or special accounting scheme and introduced the 12-month transitional period. They have also clarified that the backstop date of 1 June 2018 does not apply to risks where the normal practice of the insurer is to provide cover that is longer than one year.

C ountry f ocus


As a general rule, Greek IPT is due on certain types of insurance contracts covering a risk that is deemed to be located in Greece. The rates for Greek IPT are as follows:

Greek IPT law follows the location of risk rules laid out in the insurance directives in the 1970s that were also reconfirmed through the Solvency II directive (see Section 3, Article 3 of EU Directive 2009/138/EC).

The basis for the IPT calculation is the total amount of the premium payable by the insured excluding parafiscal charges. The tax must be shown in addition to the premium. The insurer is liable for the tax calculation and payment. EEA insurers operating under the Freedom of Services basis are required to appoint a local IPT fiscal representative who is jointly liable for IPT due by the foreign insurer.

Exemptions from IPT apply to life insurance contracts with a duration of more than 10 years, marine and aviation hull and reinsurance. In particular, the new Independent Government Income Authority has recently tried to clarify these exemptions with a recent circular (POL. 1028/22.2.2017). The intention of this circular was that these exemptions were never abolished in the period from July 2015 (law 4334/16.7.2015) until the recent circular.

In the cases of motor insurance, additional levies are imposed, such as the Motor Insurance Bureau Levy (at a rate of 0.4%), the Motor Auxiliary Fund contribution (at 6% and 0.6%). Similarly, in the case of life insurance contracts an additional levy may be due for the Life Insurance Guarantee Fund depending on the class of insurance; the rates vary from 0.3% to 1.5%, depending on the total annual life gross written premiums. The upper limits for the contributions referred are €20,000.00 for lump-sum payments and €2,000 for periodic premium payments.

As of May 2017, we are still expecting a ministerial decision to clarify whether the (now abolished) TEAEAPAE Insurance Employees’ Pension Fund levy will be reintroduced for premiums written after 1.1.2016 and onward.

With regard to the statute of limitations period, the Greek tax administration claims that in case of non-filing of an IPT return a 15-year statute of limitations period can be argued for fiscal years up to 31 December 2013 (or a 20-year statute of limitations period for fiscal years after 1 January 2014). This theoretically means that EU insurers selling insurance contracts in Greece on a Freedom of Services basis but without having appointed an IPT fiscal representative nor accounted for Greek IPT may be subject to a tax audit. Penalties for a failure to account for IPT may reach 120% of the main IPT due, although Greece has introduced a tax amnesty law open until 30 September 2017, where a voluntary disclosure results in the imposition of considerably lower penalties.

Greece

2 0 % 4 % 1 5 %for fire insurance policies

for life insurance policies

for all other insurance policies


O ur contacts in Greece

N ik os E v ang elopoulosPartner, Ernst & Young Business Advisory Solutions S.A.

Tel: + 30 2102 886 163Email: [email protected]

M anos TountasManager, Ernst & Young Business Advisory Solutions S.A.

Tel: + 30 2102 886 387 Email: [email protected]


C ontacts

D av id B earman P a r t n er

Er n st & Youn g L L P Tel: + 44 20 7951 2249 Email: [email protected]

Tom H ilv erk us S en i or M a n a g er


R ussell B rown M a n a g er


S h ima H ey d ari S en i or M a n a g er

Ernst & Young Belastingadviseurs LLP Tel: + 31 88 407 1415 Email: [email protected]

A lex C otopoulis S en i or M a n a g er


C h ristian R eng ier Executive Director

Er n st & Youn g G m b H W i r t sc h a f t sp r ü f un g sg esel l sc h a f t Tel: + 49 89 14331 18031 Email: [email protected]


Not es:

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Global insurance tax newsletter 1-17 - EYFILE/EY_IPT_Newsletter_Issue_1_17.pdf · 1 eptember 01 in ondon. W elcome to th e latest issue! Is Global insurance premium tax newsletter