Session 3b Global Premium Tax Management for Captives
Karen Jenner, Client Director Jo Finbow, Insurance Manager Fiscal Reps Limited
What are the implications from a tax perspective of writing non admitted insurance into Australia versus having an admitted policy?
Are there any instances where a non EU direct write captive can insure EU located risk?
How many premium taxes are found in Iceland? Can you name them?
What is the tax point(s) in Spain?
Who is liable to register for Dutch IPT and is a Fiscal Rep required?
A ship is registered in the UK, the policyholder is located in France & the ship operates between Germany & Spain. Where is the Location of Risk for IPT purposes?
Who bears the cost of premium taxes in Austria? Insured or Insurer?
What are the implications from a tax perspective of writing non admitted insurance into Australia versus having an admitted policy? Answer: A withholding tax applies which could be as much as 3%
Are there any instances where a non EU direct write captive can insure EU located risk?? Answer: Aviation business
How many premium taxes are found in Iceland? Can you name them?
Answer: Stamp Duty, Building Safety Fee, Catastrophe Insurance, Prevention Tax (Avalanche & Landslide) & House Valuation Fee
What is the tax point(s) in Spain? Answer: Date of Inception (Consorcio) & Cash Received (IPT/Fire Brigade Charge)
Who is liable to register for Dutch IPT and is a Fiscal Rep required? Answer: Intermediary if located in The Netherlands; otherwise the insurer For EU insurers no Fiscal Rep required - insurer can register and file direct.
Quiz 6. A ship is registered in the UK, the policyholder is located in France and the ship operates between Germany and Spain. Where is the Location of Risk for IPT purposes? Answer: UK & Germany
Who bears the cost of premium taxes in Austria? Insured or Insurer? Answer: Both. IPT is borne by the Insured; FBT is split 50/50 between Insured and Insurer.
EU Premium Taxes 1.
IPT & London Fire Brigade Charge
IPT, Terrorism Fund, Major Risk Prevention Fund, Specific Contribution of Motor Insured’s, National Guarantee Fund, National Agricultural Catastrophe Fund, Universal Medical Cover (Gareat)
IPT, Fire Brigade Charge, Winding-Up Activity, Motor Vehicle Third Party Liability, ER – Direct Damages, ER – Loss of Profit
IPT, Solidarity Fund for Victims of Extortion and Usury, Emergency Fund, RAVF, Hunting Accidents Fund, Package Holiday Consumers Fund
Location of Risk EU Second Non-Life Directive 88/357/EEC Article 2 (d) ´Member State where the risk is situated' means:
the Member State in which the property is situated, where the insurance relates either to buildings or to buildings and their contents, in so far as the contents are covered by the same insurance policy, the Member State of registration, where the insurance relates to vehicles of any type, the Member State where the policy-holder took out the policy in the case of policies of a duration of four months or less covering travel or holiday risks, whatever the class concerned, the Member State where the policy-holder has his habitual residence or, if the policy-holder is a legal person, the Member State where the latter's establishment, to which the contract relates, is situated, in all cases not explicitly covered by the foregoing indents;
Location of Risk Article 25 Without prejudice to any subsequent harmonization, every insurance contract concluded by way of provision of services shall be subject exclusively to the indirect taxes and parafiscal charges on insurance premiums in the Member State in which the risk is situated within the meaning of Article 2 (d), and also, with regard to Spain, to the surcharges legally established in favour of the Spanish 麓Consorcio de compensaci贸n de Seguros' for the fulfilment of its functions relating to the compensation of losses arising from extraordinary events occurring in that Member State. By way of derogation from the first indent of Article 2 (d), and for application of this Article, the moveable property contained in a building situated in the territory of a Member State, except for goods in commercial transit, shall be a risk situated in that Member State, even though the building and its contents are not covered by the same insurance policy. The law applicable to the contract pursuant to Article 7 shall not affect the fiscal arrangements applicable. Each Member State shall, subject to future harmonization, apply to those undertakings which provide services in its territory, its own national provisions for measures to ensure the collection of indirect taxes and parafiscal charges due under the first subparagraph.
UK Public Notice IPT 1 (October 2011) 5.2.1 Location of Risk Rules The rules for determining whether a risk is located in the UK for IPT purposes broadly follow those set out in Article 2 (d) of the EC Second Non-Life Insurance Directive, which are reflected in UK law in the Financial Services and Markets Act 2000 (Law Applicable to Contracts of Insurance) Regulations 2001 (SI 2001/2635). A risk is located in the UK if the insurance: a) b) c) d)
relates to buildings and/or their contents, and the building is located in the UK (whether or not the contents are covered by the same policy as the one which covers the building); relates to any vehicle of any type which is registered in the UK (â€œvehicleâ€? includes motor vehicles, ships, yachts and aircraft); is a policy of up to 4 months duration which covers a travel or holiday risk when the policy is taken out in the UK; or is of a type not covered in (a) to (c) above and the policy holder is either:
an individual habitually residing (see paragraph 5.2.6) in the UK at the date when the contract is entered into; or a business, and the establishment (see paragraph 5.2.5) to which the policy relates is in the UK.
EU Commission We see no reason why the term 'vehicles of any type' under Article 2(d), second indent, of the Second Non-life Insurance Directive should be construed in a broad sense and encompass terrestrial vehicles as well as ships. We would, therefore, conclude that the localisation of risks for marine hull, marine liability insurance and the abovementioned insurance add-ons should fall under Article 2(d), fourth indent, of the Second Non-Life Insurance Directive, i.e. the Member State where the ship operator is established.
Malta Article 2 (1) of the Insurance Business Act (IBA) holds that a risk is situated in Malta: a)
where the insurance relates either to buildings or to buildings and their contents, in so far as the contents are covered by the same insurance policy, any risk related to property situated in Malta; where the insurance relates to vehicles of any type, any risk related to any vehicles registered in Malta; where the insurance relates to travel or holiday risks, whatever the class concerned, any risk related to travel or holiday if the policy covering the risk is of a duration of four months or less and the policy is taken out in Malta; where the insurance relates to any risk of any kind, other than a risk specified in the foregoing paragraph (a), (b) or (c), any risk of any such kind if the policyholder has his habitual residence in Malta or, where the policyholder is a legal person if the establishment, to which the contract relates, is situated in Malta.
"vehicle" has the same meaning as is assigned to motor vehicle by Article 2 of the Motor Vehicle Insurance (Third Party Risks) Ordinance)
Location of Risk – ECJ • • • • • • • • • • •
Advocate General’s Opinion RVS Levensverzekeringen NV v BelgischerStaat Dutch insurer concludes life policy with Dutch P/H IPT exempt policy in NL Dutch P/H move to Belgium Belgian IPT rate of 1.1% applies Where is the Location of Risk (Habitual Residence)? EUR 16,542 (2006 & 2007) Static interpretation – where the contract was concluded Dynamic interpretation – where the P/H resides when premiums are paid The findings shall relate only to life assurance contracts
“In my opinion the AG's opinion is a prime example of European legal uncertainty. Indeed, as the text of the directive is unclear the AG has to examine, in order to arrive to a conclusion, a certain number of arguments which "tend" one way or another, and in the end has to decide which are more important.”
Switzerland Location of Risk = Location of the Policyholder
Global/European policy by country – Other countries legislation/Guidelines!
Rates – just and reasonable (Section 69 of the Finance Act6 1994)
Tax Points Across Europe • • • • • •
Cash received Date of issue Inception date Invoice date Maturity Date Premium Booked
What is the taxable premium? • • • • •
Net Premium Gross Premium Policy Fees (e.g. Greece) Administration Fees (e.g. UK) Broker’s Commission