Europe

Deep Dive: Insurance Premium Tax in Belgium

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By Rahul Lawlor, SOVOS. Rahul is a Senior Compliance Representative, responsible for delivery of indirect tax compliance services for a portfolio of global insurers. He joined Sovos in 2016 after completing a Financial Maths degree from the University of Surrey.

The Belgian taxation landscape can be challenging for insurers if they are not well versed in the rules and requirements for ongoing compliance. Belgium ranks as one of the somewhat trickier countries to deal with in the Insurance Premium Tax (IPT) sphere with a plethora of different taxes due dependant on the class of business as well as IPT prepayment requirements.

There are two different tax bodies Belgium insurers should be aware of: the Service Public Fédéral Finances which covers IPT and the National Institute for Health & Disability (INAMI) which covers a vast range of parafiscal charges.

IPT in Belgium

The standard rate of IPT in Belgium is 9.25% which is due on the total amount paid by the policyholder to obtain cover, inclusive of any third-party fees. Goods in Transit risks as well as specific motor risks are subject to a different rate, whilst certain life cover can also have varying rates.

The tax point is the date which triggers the tax, and in Belgium for all taxes it is triggered on the maturity date. This is formally defined as the contractual date when the policyholder pays the premium to the insurer.

Something which sometimes causes issues for insurers is the existence and application of the Belgian prepayment. The prepayment is based on the IPT figures for the October declaration and is due by 15 December.

Similarly to the Italian prepayment the rate stands at 100% but that is where the similarities end. Initially prepayment was only allowed to be offset against the IPT liabilities in the December declaration. However, we did experience some issues in receiving monies from the tax authority where the December liability exceeded the prepayment, thus resulting in a reclaim due.

In 2021 an exercise was undertaken whereby insurers were able to offset any excess prepayment not received in the previous four years against current IPT liabilities. In 2022 insurers have been able to utilise the prepayment up until the March declaration i.e four periods in total (December-March), thereafter if there is any prepayment remaining, in theory a reclaim should be received.

In certain circumstances an exemption was granted to not pay the prepayment. This was often with Captive insurers where they were paying liabilities solely in October on a yearly basis and didn’t expect any further liabilities until the following October. Such exemptions were negotiated directly with the tax office.

To ease the burden for insurers covering solely life insurance, such coverage is exempt from IPT prepayment.

INAMI in Belgium

There are seven different taxes covered by INAMI, five of which are due monthly, these are:

  • Fire
  • Civil Motor Liability
  • Red Cross
  • Motor Hull
  • Ownership Motor Liability

Taxes are due on certain motor and motor liability risks dependant on what the contract is covering, with the exception of fire. Some insurance policies are taxed with an element charged to the insured and an element charged to the insurer.

Fire risk is the most common parafiscal we see from the above and care should be taken in its application. Unlike other countries where the fire element percentage is largely determined by the insurer and the scope of the contract, fire risks in Belgium must be apportioned according to a predetermined set rate.

The hospitalisation INAMI charge is due on a biannual basis for ‘Sickness – Pre & Post Hospitalisation Costs’ on an individual and group level. For the charge to apply the insured must receive the benefits of Belgian healthcare insurance (not applicable to doctors, dentists, optician’s fees etc). The applicable rate is 10% on the taxable premium unless the insured’s benefit is less than EUR 12.39 per day, in which case a de minimis limit exemption applies.

Finally, we have the Security Fund for Fire & Explosion due annually, which is currently 3% on the taxable premium. This applies on compulsory liability insurance for fire and explosion in premises open to the public.

Navigating the rules and requirements in Belgium can be demanding for even the most experienced insurer. Sovos has a dedicated team of compliance experts to walk you through even the most challenging problems and ensure you are on the right compliance path.

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