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FiscalReps Newsletter July 2013 10th edition

What’s new – Premium Taxes

Croatia – Update Following EU Accession Our local associates in Zagreb informed us that FoS insurers may be liable for three premium taxes in Croatia, namely Motor IPT, Motor Third Party Liability IPT and Fire Brigade Tax. It is their opinion that the “tax authorities have not given any thought to FoS insurers and premium taxes” although the Croatian Insurance Act states that FoS insurers are liable for domestic premium taxes on the date of accession to the EU on 1 July 2013. However, there does not appear to be a mechanism in place for FoS insurers to register for premium taxes, file returns or settle premium taxes. FiscalReps is arranging a meeting with the Ministry of Finance to confirm our understanding on all points.

Ireland – Revenue’s Review of Non-Life Insurance Taxes

UK – Introduction of New ‘Flood Levy’

During May and June the Revenue Commissioners issued letters to all insurers that are authorised under Freedom of Services to write non-Life insurance policies in Ireland. The letters, which are generally of a standard wording and appear to form part of the Revenue’s wider review of tax compliance in the Financial Services sector, remind insurers of their obligations to pay stamp duty, 3% government levy and the 2% levy to the Insurance Contribution Fund. We understand the letters have been sent to all authorised insurers, whether or not they currently declare and pay these taxes.

After many months of discussion the government and the Association of British Insurers (ABI) has agreed on a solution to ensure that owners of properties in high flood risk areas have access to property insurance at reasonable cost. The solution involves the introduction of a new levy on insurers which will be used to build up a fund (‘Flood Re’) to cover the costs of flood damage in high risk areas.

Insurers who are actively writing non-life policies are being asked to review their tax accounting systems and controls and to submit voluntary disclosures if there are any unpaid taxes, whereas non-active insurers are requested to provide written confirmation that they have not written any non-life business in Ireland. This initiative is evidence that the Irish Revenue is taking a pro-active approach to tracking down any noncompliance, the like of which we have not seen in recent years.

The details are still to be worked out although we understand the new insurance scheme is scheduled to be implemented by summer 2015. We will publish further information on this levy as soon as details become available. Airmic Conference As Preferred Service Providers to Airmic (www.airmic.com), FiscalReps were delighted to celebrate the risk management associations’ 50th birthday at the annual conference, held in Brighton last month. With record attendance levels and topics such as contract law, contract certainty, cyber risk and global compliance up for debate, we were


pleased to have the opportunity to host a workshop with David Ketley, regional insurance manager for EMEA and Latin America at Cargill. Asher Harris, our US Principal joined us for a case study of the key compliance issues facing Cargill’s risk manager around the globe. It was good to catch up and meet with clients and prospects alike on our stand, and we were happy to host drinks and some traditional seaside fare in the form of fish and chips before the Airmic cocktail party on the Tuesday evening. We look forward to our next Airmic involvement, hosting an Airmic Academy session open to all Airmic members, GRIPT – Global Risk Insurance Premium Tax, in October 2013. Germany – Reminder on New Invoicing Rules from 1 January Next Year This may be a good occasion to remind all insurers writing into Germany that 1 January 2014 will see the introduction of new invoicing rules. From this date it is a mandatory requirement for the premium invoice to include the IPT amount, the IPT rate, and the insurer’s German Tax ID. If insurance premiums are exempt from the tax, the tax exemption must be stated. In the absence of an invoice, the tax amounts must be shown in another document which created the insurance relationship. France – New IPT on Motor Liability Insurance As advised in our April newsletter, 1 July 2013 saw the introduction of a new IPT on class 10 motor liability policies. From this date insurers writing such policies are obliged to charge and collect the new premium tax at the rate of 0.8% of annual premiums and remit it to the Fonds de Garantie des Assurances Obligatoires (FGAO).

San Marino – Introduction of IPT The Republic of San Marino is to introduce IPT. Although the legislation is understood to apply from 1 July 2013 it is subject to the publication of further regulation to be adopted by 30 November 2013. Based on information currently available the new tax will apply at the rate of 4% of premiums on all non-life insurance. Life policies will be exempt. We will provide further details as they become available. Ireland – little to report on new ‘pyrite’ levy Since our February newsletter little information has become available on the introduction of the proposed new insurance levy. According to a contact at the Department of Environment, Community and Local Government work is progressing on the drafting of legislation to underpin the imposition of levies on certain non-life insurance products and on quarried aggregate material. We will provide further details as they become available. IPT Training Courses 20% discount on all bookings made before 31 July 2013 IPT Basics - 7 October 2013 IPT Intermediate - 8 October 2013 IPT Advanced - 10 October 2013 For more information visit www.fiscalreps.com/training or contact Rebecca Taylor e: rebecca.taylor@fiscalreps.com t: +44 (0)20 7036 8070


What’s new – VAT UK – ECJ Judgment in Ocean Finance The European Court of Justice (ECJ) has ruled that an arrangement set up to save VAT by routing services offshore should be set aside. Interestingly, the ECJ stated in the case of Paul Newey t/a Ocean Finance Case C-653/11 that “Contractual terms, even though they constitute a factor to be taken into consideration, are not decisive for the purposes of identifying the supplier and the recipient of a ‘supply of services’”. The court went on to say that “They may in particular be disregarded if it becomes apparent that they do not reflect economic and commercial reality, but constitute a wholly artificial arrangement which does not reflect economic reality and was set up with the sole aim of obtaining a tax advantage, which it is for the national court to determine.” This reinforces the principle arising first from the ECJ judgment in Halifax Case C-255/02 that an artificial arrangement set up to avoid VAT may be recharacterised so as to negate the benefit. UK – Updated Guidance on Loss Adjusting Services HMRC has issued a Revenue and Customs Brief 13/13 (unlucky for some!) confirming the VAT treatment of loss adjusting services in connection with marine and aviation insurance claims. Where the place of supply is the UK (usually when the insurer is based in the UK) these services are standard-rated. HMRC have the impression that many loss adjustors, or UK insurers where a reverse charge VAT liability arises, have been treating these services as zero-rated. They say the zero rate is restricted to surveys necessary to establish the seaworthiness, airworthiness or classification of a qualifying ship or aircraft to enable it to be registered, and therefore meet the direct needs of the ship or aircraft requiring a physical inspection. They say loss adjusting meets the needs of

the insurer and not the ship or aircraft. HMRC accepts their past guidance was unclear and so they do not require businesses to account for VAT on past supplies if they have incorrectly applied the zero rate to loss adjusting services relating to qualifying ships or aircraft that involved a physical inspection. Businesses that have not already started to account for VAT on such supplies should start to do so from 1 September 2013. If there was no physical inspection, however, HMRC expects correction of the position to be carried out retrospectively in most cases. Where there is co-insurance, with insurers being based in multiple locations, HMRC wish to collect the relevant proportion of the VAT on loss adjusting services according to the proportion of the supply received in the UK. Montenegro – VAT Rate Increase Montenegro increased its VAT rate to 19% with effect from 1 July 2013. The increase is 2%, from the previous rate of 17%, and the government hopes this will be merely a temporary measure. The reduced rate of 7% remains unchanged. Italy – Increase Postponed

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The new administration in Italy has announced that the proposed 1% increase from 21% to 22% has been postponed from 1 July to October 2013. The government is trying to find alternative ways to raise the required revenue, and so the increase might even be cancelled completely. Further information on any of these issues may be obtained from Peter Hewitt or Nick Hammond t: +44 (0)20 7036 8070 e: peter.hewitt@fiscalreps.com / nick.hammond@fiscalreps.com


European Forums

FiscalReps’ Tour of European Forums - Insurance Premium Tax update In 2013, to celebrate ten years in business, FiscalReps is completing a European tour of Forums. The next Forum is being held in Madrid, followed by Forums in Milan and Paris. Our Forums will give you the opportunity to hear some of the world’s leading IPT experts talk about IPT across the EU and quiz them about your company’s IPT compliance. It will also enable attendees to bring their IPT knowledge up-to-date and equip them with the skills to manage their company’s IPT compliance. The Forums are free to attend. To register your free place at any of the forums please contact: Ruth Thompson | t: +44 (0)20 7036 8070 | e: ruth.thompson@fiscalreps.com

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16th April London, United Kingdom - VAT Forum 19th April Dublin, Ireland - IPT European Forum 22nd April Zagreb, Croatia - IPT European Forum

27th June Frankfurt, Germany - IPT European Forum

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12th September Madrid, Spain - IPT European Forum

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27th September Milan, Italy - IPT European Forum

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14th October Paris, France - IPT European Forum

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t: +44 (0)20 7036 8070 | www.fiscalreps.com @fiscalreps


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