Volume 71, Number 3 July 15, 2013Insurance Premium Tax to Apply toForeign Multinationalsby Pia DorfmuellerReprinted from Tax Notes Int’l, July 15, 2013, p. 218(C) Tax Analysts 2013. All rights reserved. Tax Analysts does not claim copyright in any public domain or third party content.
Reprinted from Tax Notes Int’l, July 15, 2013, p. 218Insurance Premium Tax to Apply toForeign MultinationalsAmendments to Germany’s Insurance Premium TaxAct (IPTA) that entered into force on January 1 willapply to foreign multinationals with German operationsin the country’s Exclusive Economic Zone (EEZ)as of January 1, 2014.The EEZ stretches seaward out to 200 nauticalmiles. Thus, insurance premiums relating to offshoreoperations within the EEZ will be subject to the 19percent insurance premium tax (IPT). The new legislationdoes not provide for allocation rules.Under the amended IPTA, foreign multinationalswith German operations may be subject to IPT if theyhave a (worldwide) insurance policy issued by an insurancecompany outside the European Union or EuropeanEconomic Area that relates to their German operations.Previously, German IPT applied to policieswith insurance companies resident outside the EU orEEA only if the policyholder was resident in Germanyor the insured risk related to German assets.The new rules address, in particular, professionalliability insurance and premises operations insurance.The IPT is borne by the foreign parent, as the policyholder.In principle, an EU or EEA insurer (or its representativecharged with the collection of insurancepremiums) is required to pay the IPT, which must berecorded separately, along with the IPT identificationnumber, on the invoice.COUNTRYDIGESTWhen the insurer is not resident in the EU or EEA,the foreign parent must pay the IPT to Germany’s FederalCentral Tax Office. The German business insuredby the foreign parent under the worldwide insurancepolicy is also liable for IPT under the new rules. Thus,the policyholder, the insurer, and the German businessare jointly liable for the IPT.The new legislation introduces an option to file IPTreturns electronically. The returns generally are to befiled monthly until the 15th day following the monththat the insurance premium is paid. Moreover, all personsjointly liable for IPT must keep records requiredfor the determination of the IPT and the basis of theircalculations. The requirements for invoicing and documentationwill apply as of January 1, 2014.A foreign parent usually charges portions of its insurancepremiums (in the amount allocable to its Germanoperations) to the respective German business.Provided that the amounts charged are at arm’s length,those portions of the insurance premiums, includingthe IPT, are deductible for German corporate tax andtrade tax purposes.Foreign multinationals with operations in Germanyare advised to carefully review their worldwide insurancepolicies covering those operations, as the extendedscope of the IPTA may result in double taxation. Thenew requirements for invoicing and documentationshould also be followed diligently.◆♦ Pia Dorfmueller, partner, international tax, P+P Pöllath +Partners, Frankfurt, Germany(C) Tax Analysts 2013. All rights reserved. Tax Analysts does not claim copyright in any public domain or third party content.TAX NOTES INTERNATIONAL JULY 15, 2013 • 1