To date, 2016 has brought many changes to taxes on insurance premiums around the world, especially in the Asia Pacific region and some EU member states. All of these changes have been reflected within our global insurance tax calculator, IPT Quote.
New tax introduced – The 2016 Burundi Budget announced that insurance companies are subject to a payment of 2% on net premiums with effect from 1 January 2016. Reinsurance, educational insurance and pension funds are exempt.
VAT exemption – The Tanzanian 2016 Finance Bill announced that aircraft, health and life insurance are exempt from VAT with effect from 1 July 2016.
IPT replacement of VAT – The Zambian 2016 budget abolished the 16% VAT rate on all non-life insurance premiums. As a replacement, a 3% levy on insurance premiums came into effect on 1 January 2016.
Stamp Duty abolition – The Australian Capital Territory (ACT) abolished stamp duty on all life and non-life insurance premiums effective 1 July 2016. As a result, stamp duty on premiums of general insurance was reduced from 2% to nil. Meanwhile, stamp duty on life insurance premiums fell from 1% to nil.
Supervisory Levy reduced – At the start of this year, China's Insurance Regulatory Commission published a notice announcing reductions in the rates of insurance supervisory levies. For levies charged on premiums, insurance companies that write liability insurance, credit insurance and short-term health insurance are subject to a rate of 0.06%. Insurance companies that write accident insurance and property damage insurance should pay a rate of 0.08%, while a rate of 0.04% is charged on companies that write life and long-term health insurance. The latest notice has retrospective effect from 1 January 2014. The date of payment is any day between the 15th and 31st of July each year.
VAT replacing Business Tax – On 23 March 2016, the Ministry of Finance and the National Taxation Bureau jointly announced that VAT of 6% applies to the insurance industry, replacing the current business tax of 5%, with effect from 1 May 2016.
Reinsurance VAT treatment – The Ministry of Finance and the State Administration of Taxation jointly issued a circular on 18 June 2016, providing guidance on VAT treatment reinsurance business in China. Taking effect from 1 May 2016, VAT is exempt when the reinsurance premium is paid from overseas to mainland China and the service is consumed completely outside of mainland China. In addition, VAT registered insurance companies which provide reinsurance services within mainland China shall follow the VAT rules that are imposed on the underlying insurance policies.
VAT reduced – The 2016 Fiji Budget announced that the VAT rate on goods and services has been reduced from 15% to 9% effective 1 January 2016. Workers compensation, life, medical and accident insurance policies are exempt.
Service Tax increased – The 2016 India union budget introduced a new charge, the Krishi Kalyan Cess. This is a 0.5% tax that is included within service tax (which has therefore increased from 14.5% to 15%). The new charge took effect on 1 June 2016.
Reinsurance Tax reduced – The Finance Act 2015 reduced income tax from 25% to 24% with effect from 1 January 2016. As a result, the reinsurance tax that is charged on the reinsured was reduced from 12.5% to 12%.
Premium Tax increased – The Official Gazette published an amendment of the Tax Code, announcing a tax rate increase from 6% to 7%. The change, which applies to all insurance policies, took effect on 1 July 2016.
Federal Excise Tax reduced – The Sindh Finance Act 2016, approved on 25 July 2016, is a reduction to the Federal Excise Tax, from 14% to 13% on insurance policies. It came into effect retrospectively on 1 July 2016.
VAT and Nation Building Tax reduced – The Sri Lankan Inland Revenue Department announced reductions in VAT (from 12.5% to 11%) and NBT (from 4% to 2%) effective 1 January 2016.
European Economic Area
INAMI 'Risk Accident' contribution reduced – From 1 January 2016, the percentage of the INAMI 'Risk Accident' contribution changed from 4.19% to 3.81%. The insurer contribution is still 0.06%, meaning that the insured contribution is now 3.75%.
Levy increased – The French contribution to the Guarantee fund for victims of acts of terrorism and other offences has increased from €3.30 to €4.30 per contract with effect from 1 January 2016.
IPT increased – With effect from 1 January 2016, the rate of insurance premium tax on legal expenses insurance contracts increased from 11.6% to 12.5%.
Levies increased – The Road Accident Victims Fund contribution increased from 2.39% to 2.41%. Meanwhile, the Hunting Accident Victims Fund contribution increased from 4.78% to 4.82% from 1 January 2016.
Para fiscal charge decreased – The Polish Chamber of Insurance reduced the levy from 0.026% to 0.024% with effect from 1 January 2016.
New levy introduced – The Financial Supervisory Authority introduced the Insurers' Resolution Fund which is a 0.4% charge on insurers with effect from 1 January 2016.
Para fiscal charges reduced – The Spanish insurance regulator introduced a reduction of the Consorcio National Guarantee Fund contribution to 1.5%. It also mandated a scale-down of the Consorcio Extraordinary Risks surcharge, which is calculated per vehicle ranging from €0.30 to €26.60. The changes took effect from 1 July 2016.
Rest of Europe
IPT increased – Tax on premiums increased from 3% to 10% excluding insurance contracts of life and health, with effect from 1 January 2016.
Retail Sales Tax reintroduced – The Canada Newfoundland and Labrador 2016 budget reintroduced the Retail Sales Tax on insurance premiums at a rate of 15% effective 1 July 2016.
United State of America
Stamping Fee increased – From 1 January 2016 the stamping fee in Texas for surplus line insurance increased from 0.06% to 0.15%.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.