A proposal for a law containing miscellaneous tax measures submitted to parliament on 19 October 2023 includes an important change to the annual tax on insurance operations (insurance premium tax or IPT). The amendment would redefine the taxable base of IPT with the result that insurance-related services that are exempt from VAT would be subject to IPT if not already included in the insurance premium. This would place additional IPT responsibilities on insurance brokers and intermediaries. A second IPT change included in another draft law containing miscellaneous tax measures would result in an increased IPT liability for Belgium-based entities that are party to an insurance contract where the policyholder is based abroad. If approved, both changes would enter into force 10 days after publication of the final legislation in Belgium’s official gazette.
The legislative proposal currently under discussion in parliament introduces a change in the definition of the taxable base for IPT. Under article 1761 of the Code for Diverse Rights and Taxes, IPT is levied on the total amount of premiums, both personal and employer contributions, increased by the charges. Under the proposal, “charges” would be redefined as “remuneration for insurance related services where those are exempt from VAT according to article 44, §3, 4 of the Belgian VAT Code.”
This new definition aims to include in the taxable base for IPT all situations where insurance intermediaries would be remunerated for insurance-related services directly by the policyholder, rather than via a commission arrangement with the insurer. Where a broker invoices a fee or charge to the policyholder or a third party for the management of the insurance policy or portfolio and this qualifies as a VAT exempt service, the remuneration paid would be subject to IPT. In principle, services would be exempt from VAT if they were rendered by an insurance intermediary who was involved as an intermediary in the conclusion of the related insurance contract.
IPT generally would be due at the rate of 9.25%, although other rates could apply depending on the nature of the risk covered in the insurance policy to which the service is related. Where the VAT exemption does not apply, VAT at a rate of 21% would be due, although this VAT may be deductible for the recipient of the services.
The liability for payment of the IPT on these services would fall on the intermediary providing the service, meaning that insurance brokers and intermediaries would have to declare and pay the IPT. They may however pay the IPT due on the services to the insurer, who would then become liable for the IPT in respect of both the premiums and the services.
A second draft law that has not yet been submitted to parliament extends the article defining the persons liable to pay IPT where this is due in Belgium.
Currently, the liability for IPT is defined based on a “cascade” approach, according to which responsibility for payment of the IPT falls initially on Belgian-based insurers, then Belgian-based intermediaries, and thirdly the policyholder. The updated measure provides that a Belgian establishment that is party to an insurance contract (as the insured) would be liable for IPT where the policyholder is a legal person established abroad.
The aim of this measure is to enhance IPT collection by transferring the obligation to a Belgian counterpart. It is intended to cover specifically cases where a foreign company would enter as the policyholder into an insurance contract with a foreign insurer, for risks located in Belgium, for the benefit of its Belgian subsidiary or branch. Under the proposed new rules, the Belgian establishment would be liable for the reporting and payment of the Belgian IPT in lieu of the foreign company that is the actual policyholder.
The date from which each of the proposed measures would enter into force depends on the date of publication of the relevant approved legislation, which is expected before the end of 2023. If enacted, different stakeholders in the insurance value chain would need to reassess their procedures and business model.
Deloitte Belgium’s insurance sector specialists are available to assist businesses in preparing for these changes.
Joaquim is a lawyer at Deloitte Legal, specialising in all VAT matters. He has over 10 years of experience in advisory services including guiding companies through administrative and court procedures. The majority of his clients are privately held companies and include real estate developers, law firms, health care suppliers and governmental institutions. Since 2009 he is a member of the Brussels bar. He published regularly on VAT matters and lectures at the KULeuven (University Leuven) on VAT aspects of real estate and is research assistant at the UGent (University of Ghent).