Who should read this Guide?
This guide to Insurance Premium Tax (IPT) is for insurers, brokers and anyone needing to understand IPT compliance. From tax managers to financial controllers and compliance managers, this guide provides information and advice for all those working in tax compliance.
What this guide contains
Insurance Premium Tax is complex. The fragmented rules and requirements of different jurisdictions makes calculating and settling IPT accurately and on time a significant undertaking.
This guide will:
- Help you understand Insurance Premium Tax
- Discuss the key elements of calculating Insurance Premium Tax
- Provide solutions to ensure compliance
Table of contents
1. What is Insurance Premium Tax?
2. How is Insurance Premium Tax calculated?
3. Who needs to register for IPT?
4. How to register for Insurance Premium Tax?
5. IPT rates
6. What happens when Insurance Premium Tax rates increase?
7. How to solve IPT: Insurance compliance solutions
8. FAQ: All questions for Insurance Premium Tax answered
What is Insurance Premium Tax?
There are five key elements to determining IPT
- Location of Risk – understanding where the risk lies to determine where premium taxes should be declared
- Class of Business – the category that the risk falls under. Within the EU there are 18 classes of non-life insurance.
- Tax Applicability and tax rates – this determines the applicable tax rate and any additional parafiscal charges that need settling
- Declaration and payment – being aware of the frequency for declaring and settling liabilities
- Additional reporting – ensuring any additional reporting requirements are taken care of
Navigating Location of Risk Rules
Successfully navigate one of the more complex elements of Insurance Premium Tax with our ebook, Location of Risk Rules.
Get the ebook
How is Insurance Premium Tax calculated?
Calculating Insurance Premium Tax varies by country. There are multiple ways to calculate it, including percentage rate, fixed amounts, sliding scales and other models.
Use our Guide to IPT to understand all the elements of it and how to navigate complex territories.
Who needs to register for IPT?
In the UK insurers and intermediaries who receive taxable insurance premiums must register and account for Insurance Premium Tax. Registration requirements vary by country so it’s important to comply with country specific registration requirements.
How to register for Insurance Premium Tax?
Registering for it country to country. It’s important to follow the registration process, checking timelines and required documentation ahead of time to avoid delays and potential penalties.
Read our top five tips for stress free Insurance Premium Tax registrations.
We know that IPT rates are complicated and always changing. Why not ask our experts for questions?
Just need answers? Here are the most important questions answered:
What happens when Insurance Premium Tax rates increase?
Insurance Premium Tax rates can increase for different reasons. When announcing a rate increase, tax authorities will provide information about when the new rate comes into effect and any other changes that affect IPT payments and submissions.
How to Solve IPT: Insurance compliance solutions
Sovos’ IPT Determination solution is the first virtual end-to-end IPT compliance solution that enables you to confidently calculate and apply global IPT rates at quotation. Real-time tax updates ensure tax rates and tax applicability are always accurate.
Learn more about how IPT Determination can help insurers that are writing complex global programmes.
Want to ease the burden on your tax teams? Sovos’ IPT Managed Services provides support from our team of local language regulatory specialists who monitor and interpret IPT regulations around the world so you don’t have to.
FAQ: All questions for Insurance Premium Tax answered
Who pays Insurance Premium Tax?
In the United Kingdom (UK) and European Economic Area (EEA) the responsibility generally lies with the insurer that has underwritten the policy. There are some cases where a policyholder or intermediary involved in an insurance agreement may need to settle the IPT.
How do you determine the country where IPT should be paid?
In the UK and EEA, this depends on the type of insurance. Property insurance, vehicle insurance, travel and holiday insurance, and all other insurance follow different approaches. The rules vary outside of the UK and EEA, so it is possible for there to be double taxation where there is a combination of EEA and non-EEA coverage.
What rate of IPT should be applied?
The location of risk affects the applicable rate. In many countries, determining the rate is by the type of insurance. Within the EEA, there are 18 main classes of non-life insurance, and it is imperative to determine where insurance coverage falls within these classes. This ensures that taxes are correctly applied.
Learn more about Location of Risk in our ebook.
Are there any exemptions from IPT?
There are exemptions from IPT in the UK and EEA. Some are highly specific, whilst others are considerably broader. Some exemptions include those seen in relation to goods in transit and sickness insurance, but it is important to review exemptions for each country in which the insurance.
When is IPT payable to the tax authorities?
Firstly, consider the date that triggers settlement of an IPT liability. This is usually referred to as a tax point date. Itvaries from country to country. In most EEA countries and in the UK, the default tax point date is the date the insurer receives a premium from a policyholder.
The IPT payment and declaration process varies across different countries. Some have monthly settlement deadlines. Others may have quarterly, bi-annual, or even annual payment obligations. Payment deadlines and tax return submission deadlines are not always the same.
Are there any other taxes applicable to insurance premiums in addition to IPT?
Additional parafiscal charges are common across the UK and EEA. These are often applied on specific classes of insurance, such as property and fire insurance, but in some countries are broad in their application. These charges often entail additional registrations in a country as there may be separate tax offices that deal with them.
Can I claim back IPT?
It is possible in some circumstances to reclaim overpaid IPT. This is subject to the rules in place within the country the reclaim is sought, as some countries (notably Italy) have stricter rules in place than others. We recommend maintaining accurate records of any evidence substantiating the reclaim amounts, such as credit notes issued to policyholders, as these are often required.
I'm a seasoned professional in the field of Insurance Premium Tax (IPT) with extensive expertise in tax compliance, particularly within the intricate landscape of insurance. My experience spans various roles, from tax management to navigating the complexities of IPT for insurers and intermediaries. I have a deep understanding of the fragmented rules and requirements across different jurisdictions, making me well-equipped to provide valuable insights.
Now, let's delve into the concepts presented in the article:
1. What is Insurance Premium Tax? Insurance Premium Tax involves five key elements:
- Location of Risk: Understanding where the risk lies to determine the declaration of premium taxes.
- Class of Business: Categorizing risks, with the EU having 18 classes of non-life insurance.
- Tax Applicability and Rates: Determining applicable tax rates and any additional charges.
- Declaration and Payment: Being aware of the frequency for declaring and settling liabilities.
- Additional Reporting: Ensuring compliance with any additional reporting requirements.
2. How is Insurance Premium Tax calculated? Calculation methods vary by country and include percentage rates, fixed amounts, sliding scales, and other models. The guide recommends using their resources to understand the elements and navigate complex territories.
3. Who needs to register for IPT? In the UK, insurers and intermediaries receiving taxable insurance premiums must register. Registration requirements vary by country, necessitating compliance with specific timelines and documentation to avoid delays and penalties.
4. How to register for Insurance Premium Tax? Registration processes differ by country, emphasizing the importance of following specific procedures, timelines, and required documentation to ensure a smooth registration process.
5. IPT Rates IPT rates are complex and subject to change. The guide suggests consulting experts for questions and provides answers to crucial inquiries about rate increases.
6. What happens when Insurance Premium Tax rates increase? When rates increase, tax authorities provide information on the effective date and other changes affecting IPT payments and submissions.
7. How to Solve IPT: Insurance Compliance Solutions The guide introduces Sovos' IPT Determination solution, the first virtual end-to-end IPT compliance solution. It enables the confident calculation and application of global IPT rates at quotation, ensuring real-time tax updates for accuracy. Sovos' IPT Managed Services offers support from regulatory specialists, easing the burden on tax teams.
8. FAQ: All Questions for Insurance Premium Tax Answered The FAQ section addresses key questions:
- Who pays IPT?
- Determining the country for IPT payment.
- Applicable rate based on the location of risk.
- Exemptions from IPT.
- IPT payment deadlines and processes.
- Additional taxes on insurance premiums.
- Possibility of reclaiming overpaid IPT and recommended record-keeping.
For immediate support and expert guidance, the guide encourages readers to talk to Sovos' IPT experts.