1. Taxing Insurance Products: Motor Insurance Joseph Finbow Senior Client Manager – Captive Practice, FiscalReps Alessia Mecozzi Client Technician – European Tax Practice, FiscalReps

2. DRIVING TEST

3. Contents General Themes o Number of taxes, tax returns and rates o What is “motor” insurance o What affects the IPT application? o Location of Risk o Information Required Country Specifics o Italy o France o Spain o Austria o Denmark Questions

4. Context Largest sector by premium volume Generally written by domestic insurance company FoS premiums account for less than 1% of motor premiums FoE premiums account for less than 2% Source: Insurance Europe – European Insurance in Figures, February 2014

5. General Themes

6. General Themes: Number of Taxes

9. “ IPT” plus parafiscals o Numerous different taxes o Specific funding

10. General Themes: Number of Tax Returns

13. High compliance burden Writing MTPL in Belgium, France, Portugal and Spain results in 225 returns in one year

14. General Themes: Tax Rates

17. Motor nearly always the highest tax rates in a territory Higher tax rates result in higher compliance risks

18. General Themes: What is Motor Insurance? Motor Hull / Motor Own Damage / Class 3 MTPL / Class 10 Fully comprehensive product – issues of apportionment? Associated Products / Add-ons o GAP o Legal Expenses o Accident o Extended Warranty o Plus many others

19. General Themes: What affects the IPT application? Location of risk Where the vehicle is registered inside the country (IT, UK, ES) Type of vehicle (FR, ES, BE)

20. General Themes: Location of Risk ‘Member State where the risk is situated’ means: The Member State in which the property is situated, where the insurance relates either to buildings or to buildings and their contents, in so far as the contents are covered by the same insurance policy The Member State of registration, where the insurance relates to vehicles of any type The Member State where the policy-holder took out the policy in the case of policies of a duration of four months or less covering travel or holiday risks, whatever the class concerned The Member State where the policy-holder has their habitual residence or, if the policy-holder is a legal person, the Member State where the latter's establishment, to which the contract relates, is situated, in all cases not explicitly covered by the foregoing indents

21. General Themes: Information Required High level of policy detail required to ensure accurate tax application Location of vehicle within territory, e.g.: o Spain Vehicles registered in provinces of Álava, Guipúzcoa, Navarra or Vizcaya Separate IPT declarations required o UK Stored or garaged in inner London Boroughs? Additional charge due (LFBC) o Italy Location of registration within Italy Varying rates of IPT per province Separate reporting

22. General Themes: Information Required High level of policy detail required to ensure accurate tax application Details of insured vehicle(s), e.g.: o Spain Type of vehicle determines fixed fee charge, e.g. cars, trucks, caravans, mopeds, motorcycles o Belgium Different rates apply for private vs. commercial use Different rates apply based on weight of vehicle o France Different rates apply for private vs. commercial vs. agricultural Application of CatNat premium based on risks/perils covered

23. General Themes: Information Required This is all information that should be known / collected at premium pricing stage Does the information filter though to tax department? Are the product codings sufficiently sophisticated to be able to charge and then remit relevant taxes?

24. Country Specifics

25. Italy: MTPL IPT on MTPL: a Provincial Tax* Default rate: 12.50% Each province has got the authority to reduce or increase rate by up to 3.50% (110 provinces) {domicile is relevant to assess the risk and premium but where vehicle is registered is relevant for IPT} When rate changes enter into force Motor Reporting Fire Brigade Contribution (policy covering fire) IPT on MTPL must be deducted from the total IPT paid in the previous year when calculating the pre-payment for the following reporting period. * IPT on MTPL for mopeds is paid to the Central Government

26. Italy: The Road Accident Victim Fund (RAVF) Registration with Consap and UCI (Italian Central Office) – requirement for writing MTPL policy in Italy Insurer tax When to pay and declare How to calculate RAVF contribution

27. Italy: RAVF Application *Business started in 2011

28. MTPL in Italy: a worked example

29. France: The Taxes Applicable

30. France: CatNat The application of CatNat is not strictly a premium tax issue The premium applies on damage policies Complicates the tax calculations – more information required o A CatNat premium of 6% or 0.5% is applied to the base premium 6% applies to fire and theft cover. Where a policy covers fire and theft and other damage, the 6% only applies to the fire and theft element; or 0.5% applies to other damage cover only (i.e. when there is no fire and/or theft) IPT and MRPF due on the additional premium

31. France: Case Law Case law is prevalent in France in relation to IPT – especially motor due to high rate and volume of premiums Significant potential savings o The French General Tax Code states that the IPT rate is fixed as follows: Article 1001-5 bis: “At 18% for insurance against risks of any nature related to motor land vehicles”, Article 1001-6: “For any other insurance: 9%”. Individual ruling specific to the facts of the case – however, principles established often formalised into the French administrate guidance becoming legally binding

32. France: Case Law Driver and Passenger Insurance (Cour de Cassation dated 8 December 2009, Case Number 08 -21 - 736) Personal Belongings (Cour de Cassation dated 4 November 2008, Case Number 07 -20 - 214) Legal Expenses (Cour de Cassation dated 31 January 2006, Case Number 150 FS-PB)

33. Spain: Insurance Premium Tax Straight forward application and calculation – 6% Provincial compliance - Where is the vehicle registered?

34. Spain: Consorcio de Compensación de Seguros Surcharge on Mandatory Vehicle Third-Party Liability Insurance (Modelo 20) - 2% Extraordinary Risks Surcharge – Direct Damages (Modelo 10)

35. Austria IPT FBT 8% on 0.25% of premium Vehicle Insurance Tax: depending on vehicle engine size (class 10) o Engine power in KW minus 24 KW x €0.55 o Minimum & maximum contribution o Rate increase if paid in instalments o Example: (75-24) x €0.55 = €28.05

36. Denmark Class 3 1.1% premium tax Class 10 42.9% premium tax Minimum contribution – 47.2% of claims paid – adjustment in following April Environmental Contribution DKK 101 per vehicle

37. Questions