6 October 2015
As the world is aware, Greece is currently experiencing significant economic and social change and a snapshot of premium taxes today demonstrates this very clearly. Petros Pachis, Country Specialist, met the Greek tax authorities in Athens this month to obtain a clear understanding of recent and proposed changes.
By way of background, the IPT rate change on 17 July 2015 increased the default IPT rate to 15%. This was announced on 16 July 2015 and gave insurers very little time to amend IPT reporting and pricing processes. Further to the meeting, we can confirm all major exemptions were abolished (some minor exemptions such as State Export credit may remain), which will increase the IPT revenue significantly; especially in relation to Marine Insurance. However, no IPT should apply to Reinsurance, which should remove industry concern around double taxation (technically it is outside the scope of Greek IPT rather than exempt, which may have caused the initial confusion in the market). The Ministry of Finance, the IPT Authority, may apply penalty and interest charges to any non-compliance on or after 17 July 2015, subject to discussions with the Greek insurers’ trade body, the Hellenic Insurance Association. The early indications are that these will be applied. The Head of IPT verbally confirmed that our current IPT understanding and Rate Table is correct. A Circular/POL (secondary legislation) will be released by the Ministry of Finance in the next four weeks confirming the IPT position.
With regard to the Pension Fund, the local market is speculating that the Contribution will be reintroduced shortly but it may not apply to Freedom of Service insurers. It appears that the reinstated Contribution could be levied on Domestic Insurance Companies only as these Contributions will be used to pay the pensions of former employees of the same Insurance Companies. It would appear that the Pension Fund needs to ensure that it meets the relevant criteria in the Domestic Legislation and European Directives. As soon as we have official confirmation from the Pension Fund we will provide an update on the reintroduction of the Contribution.
The Director of the MGF confirmed in the meeting that a new Fund will be created as a Private Entity under supervision of the Bank of Greece. This will be responsible for indemnifying innocent third parties in respect of outstanding claims due to vehicles insured by an insurer, who has either become bankrupt or lost its licence. The other core function of the MGF, indemnifying outstanding claims in respect of uninsured vehicles, will remain under MGF management. It is understood that the Government will introduce the relevant legislation shortly but it is uncertain as to whether the 6.6% rate will change and/or the new/same rate could be apportioned between the two Funds. The Director confirmed verbally that FiscalReps’ understanding of the MGF Rate Table is correct.