FiscalPress Newsletter April 2014 19th Edition
What’s New – Premium Taxes
France - IPT Rate Increases From 9% to 14% on ‘Non solidaires’ Health & Sickness Insurance Contracts The Insurance Premium Tax (IPT) rate on ‘Non solidaires’ Health & Sickness insurance contracts increased from 9% to 14% with effect from 1 January 2014. ‘Non solidaires’ contracts arise when the insurer requires medical information from the policyholder in order to calculate the premium or sets the premium based on the health status of the person insured. We assume such contracts fall under EU Class 2 insurance business. Unfortunately, the French tax authorities did not communicate the rate change to fiscal agents in France nor is there any reference to the rate change on the tax authority guidelines. Further to FiscalReps’ research, Article 1001, (2) (ter) of the IPT legislation provides the legal reference for the IPT rate change.
By way of background, the IPT rate change was voted by the French Parliament at the end of 2013 as part of the Project of Law for the Financing of Social Security (PLFSS). As part of the Project, the PLFSS is looking to revise the definition of ‘solidaires’ Health & Sickness contracts, which currently constitutes 94% of Health & Sickness contracts. The French insurance market advises that the first draft of a forthcoming Governmental Decree proposes to revise the definition and introduces new guidelines for ‘solidaires’ contracts that could reduce their number, and correspondingly increase the number of ‘non solidaires’ contracts that fall within the new 14% IPT rate.
Perhaps as a consequence of the uncertainty, the tax authorities have not updated the tax authority guidelines. Furthermore, and from an IPT technical perspective, it is unclear, for example, whether any transitional IPT rules exist for the payment of instalments. FiscalReps is currently in dialogue with the French tax authorities to clarify any outstanding matters and ensure that we, and hence our Clients, are notified of any future changes in the French IPT legislation. If you would like to discuss any points regarding this alert; please do not hesitate to contact Christophe Bourdaire, Client Manager e: email@example.com t: +44 (0)20 7036 8070
San Marino – Update FiscalReps are currently in dialogue with the Central Bank and the Tax Authorities in San Marino to confirm the official process for IPT compliance and appointment of a fiscal representative. The company is currently undertaking due diligence on a short list of local accountants, auditors, lawyers and intermediaries with the intention of appointing the successful candidate as local fiscal representative for FiscalReps clients. It is a requirement under local IPT legislation to appoint a local professionally qualified person as fiscal representative, although the reporting and payment of IPT will still be made directly from our offices in the UK, following our usual standard operating procedures. The deadline for the first quarterly IPT payment is by 30 April 2014 for authorised insurers and by 31 May 2014 for unauthorised insurers. The deadline for the first annual IPT return is by 31 May 2015 for authorised insurers and 31 May 2014 for unauthorised. FiscalReps is visiting the Tax Authority in the week commencing 21 April 2014 to meet with the local officials and ensure payments have been made. More details will follow in our IPT Alerts. If you require any information in the meantime please contact Susie Crew, Client Director e: firstname.lastname@example.org t: +44 (0)7824 900 187
Greece – Abolition of TEO Charge & Introduction of New MGF Charge
Italy - Reminder Prepayment Deadline
The Greek parliament recently approved legislation to dissolve the TEO (National Road Construction Fund). The new law, which came into effect following publication in the Government Gazette on 26 March 2014, abolishes the 1% parafiscal charge on motor insurance premiums.
The deadline for making the 2015 Italian Prepayment is 16 May 2014.
As well as abolishing the TEO parafiscal charge the new law introduces a new parafiscal charge of 0.6% on motor premiums for the benefit of the Motor Guarantee Fund (MGF). Although details are not completely clear, the new charge is understood to supplement the existing MGF parafiscal charge that is calculated at 6% on motor liability premiums. However, unlike the 6% charge the new 0.6% charge is stated to be calculated on ‘motor premiums’, which FiscalReps interpret to mean premiums for motor liability as well as other motor perils. If this is the case, motor insurers will have to deal with two MGF parafiscal charges, one of which is applied to motor liability premiums and the other applied to all motor premiums. Detailed instructions on how the above changes (abolition of the TEO charge and introduction of the new MGF charge) will be implemented and transitioned are expected to be published by Ministerial Decree within the next month. FiscalReps will distribute particulars as soon as they become available to clients. If you would like to discuss any of these points further or if you have any queries then please contact Paul Chater, Client Director, or your Client Director e: email@example.com t: +44 (0)7877 459 988
It is calculated as a percentage of the total 2013 IPT and Solidarity Fund (CONSAP) liabilities (less any IPT declared in respect of 2013 Motor Third Party Liability business) declared. From January 2015 tax declaration (following the payment), the IPT that becomes due may be offset against the prepayment. It is our understanding that this year’s prepayment percentage is 40% as it was last year. However, it is possible that this could change and FiscalReps will inform you if this does occur. Penalty and interest charges are payable if the prepayment is not paid on time and these must be paid with the prepayment amount. Please also be aware that if there is any previous prepayment left, this can be used against the 2015 prepayment. If you have any questions on the above please contact Susie Crew, Client Director, or your Client Director e: firstname.lastname@example.org t: +44 (0)7824 900 187
The meeting was beneficial in developing a close relationship with the tax authority and ensuring that our clients are compliant in Germany.
UK – 2014 Budget: Exemption for Satellite Insurance Expected The only budget measure related to IPT is a proposal from HMRC for an exemption in relation to space satellite insurance. Based on our discussions with HMRC, FiscalReps understands that there will be a consultation period on draft legislation and the biggest issue will be where to draw the line between exemption and taxation. The current thinking is that the exemption will cover the launch and orbit of satellites (and other space ‘objects’ that may not technically be satellites) but the final detail is still being drafted. Currently this insurance is taxed if the location of the establishment of the policyholder to which the cover relates is in the UK, as it is not covered by the exemption for commercial aircraft. Implementation of the exemption is intended to take effect before the end of the year.
Germany – FiscalReps meet with Federal Central Tax Office Paul Chater and Ladislav Hanak met with the Bundeszentralamt fur Steuern (Federal Central Tax Office) in Bonn on 10 March 2014. Four IPT (Insurance Premium Tax) / FPT (Fire Protection Tax) officers attended the meeting including the Head of the Department and the officers who we deal with on a day to day basis. The meeting allowed FiscalReps to clarify and confirm its understanding of the German IPT/FPT regime, including the recent amendments to legislation, relevant case law and to address industry concerns.
Ireland – Possible New Flood Levy to Help Pay for Flood Repairs
Greece – FiscalReps meet with Greek Associates and TEA-EAPAE Authorities Paul Chater, Client Director – European Tax Practice of FiscalReps, and Maria Panteloglou, IPT Technician and Greek Specialist, met FiscalReps’ Greek associates and the TEA-EAPAE (Occupational Insurance Fund of Insurers and Personnel of Insurance Companies) authorities in Athens in February 2014. The meetings with our associates included a review of the Greek IPT and TEA-EAPAE legislation, relevant case law and the online filing of premium tax returns. The legal research related, in part, to a client query about a marine policy and the relevant IPT rate. Following on from this, a meeting was held with the TEA-EAPAE authorities. FiscalReps shared its Greek premium tax table with the authorities who shall confirm in writing that our understanding of the legislation (and its nuances) is correct. The three days proved to be very productive and provides FiscalReps with the comfort that our understanding of overseas tax regimes, such as Greece, is consistent with the relevant authorities. This, in turn, allows FiscalReps to provide our clients with the assurance that they are acting in a compliant manner across Europe, including some of the more challenging countries. If you have any questions or concerns regarding your tax position please do not hesitate to contact Paul Chater e: email@example.com t: +44 (0)7877 459 988 or Maria Panteloglou e: firstname.lastname@example.org
In the wake of the recent flooding in Ireland, the Environment Minister, Phil Hogan, in a recent press interview, indicated that the government may decide to introduce an insurance levy to create a distress fund for the compensation of affected householders when insurance coverage has been denied. A 1% levy on all non-life insurance premiums has been suggested which, if implemented, would bring total non-life insurance levies up to 6% of non-life premiums. It may be too early to say whether the suggested new levy is a serious proposal or a tactic to put greater pressure on the insurance industry to make flood insurance available to the communities most at risk of flooding (who may be currently denied insurance coverage).
What’s New – VAT
Video Conferencing FiscalReps has introduced HD Video Conferencing to enhance communication with clients. With click-to-connect simplicity, clients can participate from computers and mobile device, or from any H.323 conference room system. Voice only communication and desktop application sharing is also available through this facility. For more information, please do not hesitate to contact Felix Welch e: email@example.com | t: +44 (0)20 7036 8070
FiscalReps Forums Insurance Premium Tax (IPT) legislation has considerably changed in the current economic situation and these changes show no sign of slowing. Understanding and managing the complexity of IPT is an increasingly important task for insurance professionals when transacting business across the European Union.
FiscalReps’ Scandinavian Forum in Copenhagen
FiscalReps European Forum in Dublin
The Scandinavian Forum in Copenhagen will enable attendees to bring their knowledge up-todate and equip them with the knowledge and skills to manage IPT compliance more effectively within their organisations, presentations will include the ‘Introduction to IPT’ and ‘Eastern European’ Masterclass, as well as a presentation covering European issues and a guest speaker.
Following the success of the European Forum in Dublin in 2013, FiscalReps will be hosting a more comprehensive forum, which will enable attendees to bring their knowledge up-to-date and equip them with the knowledge and skills to manage IPT compliance more effectively within their organisations. The Agenda will be covering key topics such as US FET, VAT, Spanish IPT and Eastern European IPT.
The Forum is free to attend and will be hosted by: • Mike Stalley FCA Chief Executive of FiscalReps • Karen Jenner • Client Director – Captive Tax Practice of FiscalReps • Ing. Ladislav Hanak Senior Client Manager – European Tax Practice of FiscalReps • A guest speaker Date: 23 April 2014 Venue: Hilton Hotel Copenhagen Airport, Ellehammersvej 20, Copenhagen, 2770, Denmark Time: 09:30 - 14:00
The Forum is free to attend and will be hosted by: • Mike Stalley FCA • Chief Executive of FiscalReps • Peter Hewitt FTII, Head of European Tax Practice • Ing. Ladislav Hanak, Senior Client Manager – European Tax Practice • Joseph Finbow, Senior Client Manager – European Tax Practice. Date: Venue: Time:
25 April 2014 The Westin, Westmoreland Street, Dublin 2, Ireland 09:45 - 14:00
To avoid disappointment, please register early for your free place at these two events as capacity is limited. To register your free place at these events please contact: Ruth Thompson | t: +44 (0)20 7036 8070 | e: firstname.lastname@example.org
EU – Services to DC Pension Funds Exempt Late in 2013, FiscalReps reported that the Advocate General had given guidance to The Court of Justice of the European Union (CJEU) in the case of ATP Pension Service A/S (C-464/12). The CJEU has now confirmed that the management of a Defined Contribution (DC) pension fund is eligible for exemption. In PPG Holdings Case C-26/12 the CJEU had decided that management of a Defined Benefit (DB) scheme does not qualify for exemption. The difference is that the DC scheme can be classified as a “special investment fund” within the meaning of Article 135(1)(g) of the Principal VAT Directive, but the DB scheme cannot. A DC scheme is viewed as a collective investment arrangement as set out in the UCITS Directives 2001/107/ EC and 2001/108/EC, whilst the DB scheme is not. The most important distinguishing factor is that the beneficiary is taking the investment risk in a DC scheme, whereas in a DB scheme it is the employer who takes the risk. The CJEU has also given guidance as regards to the services which may fall into the definition of “management”. The meaning is broad, and in particular the CJEU considers that the principle of fiscal neutrality should apply to allow the overall service of operating a UCITS fund to be split into certain component parts, each of which should qualify for exemption when provided by a separate supplier. Each part must be specific to, and essential for, the management of such a fund. In terms of administration, the CJEU referred to Directive 85/611, Annex II, pointing out that the list is not exhaustive.
The CJEU also considered that the collection and processing of contributions qualifies for exemption as a financial service under Article135(1)(d) of the Principal VAT Directive. For UK insurers, the management of certain funds is exempt as a class of long term business. However, this judgment may extend the scope of exemption to elements of that service provided by other group companies and examination of the nature of such services should be considered as a matter of urgency.
Of interest to insurers, however, is the proposal to change the treatment of prompt payment discounts offered by suppliers. Currently the VAT is calculated on the discounted amount and this does not change if the discount is not taken – therefore the VAT is not 20% of the net. This is wrong in EU law and so the UK proposes to amend UK law from 1 April 2015 (with an earlier amendment from 1 May 2014 for those who do not need to issue a tax invoice). There will be a consultation, but the likelihood is that the VAT amount on the invoice will need to be increased if the prompt payment discount is not taken. Suppliers may need to reinvoice and customers may suffer increased costs in relation to additional VAT.
Ghana is struggling with the imposition of VAT at 15% on insurance and banking. It is intended that implementation will be from 1 April 2014, but the precise details have yet to be confirmed. The price of insurance should not increase by the full 15% (plus 2.5% National Health Insurance Levy) because VAT recovery on claims costs should become possible. Further information on any of these issues may be obtained from Peter Hewitt or Nick Hammond
UK – Pension Fund Investment Management Costs In addition to the effects of ATP Pension Service A/S set out above in the context of DC schemes, employers in the UK who pay for investment management of their defined benefit pension schemes may be entitled to recover the VAT on such costs. HMRC has announced that it will consider claims as a result of the PPG Holdings case. However, in some cases employers may instead lose the benefit of VAT recovery on pension fund administration services which they have enjoyed in the past, so care should be taken to structure the arrangements correctly.
Ghana – Imposition of VAT on Insurance and Banking
Belgium – VAT Rate Increase Expected
t: +44 (0)20 7036 8070 e: email@example.com / firstname.lastname@example.org
Belgium has announced that a reform of tax legislation generally will be undertaken after the May elections and reductions in some areas will be funded by an increase in the standard VAT rate of 21%. From 1 April 2014 the registration threshold will increase to €15,000 per annum.
UK – Budget Proposal for Changes to Prompt Payment Discount Treatment The Budget speech on 19 March 2014 held few items of interest for VAT advisors. The registration and deregistration thresholds increased by £2,000 each to £81,000 and £79,000 per annum respectively. t: +44 (0)20 7036 8070 | www.fiscalreps.com London office: 10 Fenchurch Avenue | London | EC3M 5BN | UK Head office: 200 Fowler Avenue | Farnborough Business Park | Farnborough | Hampshire | GU14 7JP | UK FiscalReps is a trading name of Fiscal Reps Limited | Registered in England and Wales (company number 04994134) FiscalReps®, taxbox® and taxDNA® are all registered trademarks owned by Fiscal Reps Limited