Who is the party liable for insurance premium tax (IPT) towards the tax authorities? How should the IPT be allocated? Do exemptions apply? Our advice to insurers that insure Dutch risk is to look closely at these and other matters. I.e. Dutch IPT is in terms of the party liable for IPT far more complex than in other countries. Allocation and exemptions are also two frequently recurring issues in practice.
Party liable for IPT (taxpayer)
In the Netherlands it is not only the insurer or policyholder that could be liable for IPT, but also (designated) intermediaries / brokers, authorized agents and fiscal agents. It is essential to properly ascertain who the taxpayer is in each situation. If the incorrect party pays the IPT, the Dutch tax authorities may impose an IPT assessment.
If the designated intermediary or authorized agent is involved, then they, rather than the insurer, will often be the person liable for IPT in the Netherlands.
Place of risk and allocation
In order to determine in which countries IPT is due, you need to establish in which countries the risk for IPT is located and what part of the premium must be allocated to that risk. This can be the case for worldwide coverage and group coverage, but also for Construction All Risk (CAR) coverage and countless other types of insurance policies.
Establishing the place of risk and allocation is something that must be done with due care. For example, the insurance of goods that are located in multiple countries can be fully taxed in the Netherlands. Double (non-)taxation may thus arise in practice.
Exemptions and allocation
Exemptions apply in the Netherlands, inter alia for reinsurance, the insurance of seagoing vessels, transport insurance, and certain income and care-related insurance policies. There are similar exemptions in many countries. It is possible for an insurance policy to have both exempt and taxed insurance elements, such as transport and storage coverage. What needs to be established in that case is whether and to what extent IPT is due.
In practice, allocation issues can lead to disputes with the Dutch tax authorities; despite the fact that there is currently no allocation method prescribed by law or in the New Dutch Policy Statement on Insurance Premium Tax (published on May 12, 2022).
Insurers are also confronted with a multitude of other issues, including the definition of ‘insurance’ versus (extended) guarantee/surety, the impact of own risk/self-insured retention and (reverse charge) VAT on the handling of claims and loss adjustment.
Would you like to know more about insurance premium tax?
Our specialists would be pleased to help you. They have expertise at both the national and international level. Moreover, we are part of the worldwide KPMG network. We are therefore well-placed to help you analyze your IPT position. We look forward to meeting you.