The UK premium tax position is fairly straightforward as long term insurance is exempt from UK IPT and outside the scope of the London Fire Brigade charge. However, a significant number of the client’s UK customers are relocating to other EU countries, such as Greece and Spain, where they are taking out additional long-term policies.
The insurer is concerned that this may trigger a new Location of Risk that, in turn, may attract overseas premium taxes in relation to long-term insurance. Furthermore, there is question mark over some tax authorities interpretation of the EU Directive’s Location of Risk rules, which is creating uncertainties for life insurers. In particular, the Belgian tax authorities and Dutch insurers are in discussions about the interpretation of these rules, which may lead to a forthcoming court case in the Court of European Justice.
Life insurers generally write life business on a domestic basis and do not need to consider overseas premium taxes. That said the increasing international mobility of individuals, employees and families require life insurers to address their overseas premium tax obligations in order to remain tax compliant.
Otherwise, any under declaration of premium taxes may adversely impact the insurer’s position in relation to reputational damage, corporate governance and provisions on the statutory accounts. Furthermore it was feared that any errors in premium tax calculations would adversely affect the product pricing of the premium and relationship with the tax authorities which could ultimately lead to penalties and interest payments for noncompliance.
The insurer engaged with FiscalReps who identified the relevant premium taxes and rates that apply to long term insurance in ten EU member states, provide worked examples of the tax calculation and the necessary registration and reporting requirements. FiscalReps provided an accurate and complete analysis of the findings based on the current legislation, national premium tax cases, tax authority guidance, discussions with international tax advisors and dialogue with contacts in the various tax offices.
In addition, FiscalReps provides an on-going regular update to the insurer on the Location of Rules and the tax authorities’ position so that the insurer can have access to up to date information, enabling informed decisions to be made about the premium taxes that need to paid.
Finally FiscalReps were able to provide an outsourced premium tax compliance solution ensuring that the insurer was promptly registered with the relevant tax authority in ten EU member states, fiscal representatives were appointed were legally required and that its on-going premium tax compliance requirements were met in full by FiscalReps team of international insurance premium tax specialists.