Value Added Tax (VAT) or Goods and Services Tax (GST) is “harmonised” within the European Union (EU), and many other countries around the world follow the EU model. Unfortunately there is a lot of variation in the detail and for insurers this is particularly so because insurance is exempt in the EU but tends to be taxable elsewhere. The US is the only country in the developed world which is not operating or at least actively pursuing the introduction of a VAT system, though sales and use taxes can sometimes apply to insurers.
FiscalReps can help you with the answers to specific queries, in any country of the world. Below are a few of the common consultancy projects FiscalReps regularly complete for insurers to help them ensure that they are VAT compliant yet recovering all of the VAT they are entitled to:
Place of Supply Rules
Determining the place of supply is critical to deciding whether VAT may be applicable to a service. For example, if a broker is adding VAT to commission payable to another country it should be determined whether that is correct. Further, the question arises whether such VAT may be recoverable from the country concerned. Using a combination of hand selected local advisors, local tax authority relationships, previous legal rulings and an unrivalled knowledge of local legislation FiscalReps can determine where you should or should not be paying VAT.
Reverse Charge Accounting
When a service is bought in from outside the country, VAT is usually self-assessed. Almost all countries with a VAT system also have a reverse charge provision. However, some services in the insurance sector qualify for exemption so a reverse charge cost can be avoided.
Some countries have introduced a provision which seeks to charge VAT or GST on insurance supplied to private individuals as well as to businesses. However, this cannot realistically be collected from the policyholder and so there is or will be a new requirement for such insurers to register and account for the tax locally.
Review of Claims Costs
In countries which exempt insurance, claims costs should usually be attributed to specific insurance policies. This affects the deduction of VAT on those costs. The tax authorities have recently tightened up in this area, as it appears insurers have not been attributing the claims costs to the greatest possible extent. The same applies to other costs, but claims costs tend to be larger and therefore attract more attention.
A FiscalReps review of claims costs will ensure that any VAT recovery is maximised and VAT is not being improperly charged, as well as giving comfort that the tax authorities are unlikely to find an overclaim.
In order to discuss your requirements further please contact:
Elliot Shulver, Indirect Tax Specialist
+44 (0)02 7039 8070