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KPMG’s Eleventh EuropeanInsurance Premium Tax Conference
FINNISH IPT23 June 2016
AGENDAFinnish IPT
FINNISH INSURANCE MARKETHeaven for taxation
Total non-life insurance premium,
Finnish companies MEUR 4 529
• Four major insurance companies /
groups covers 87% of the market
• Pension system
• Mandatory Worker’s Compensation
and motor insurance 50% of the
premiums
• Broker net pricing: Broker
commission cannot be collected,
distributed or paid by an insurance
company
DIRECT INSURANCE IN FINLAND
Source: Federation of Finnish Financial Services and Statistics Finland
50 YEARS
All pictures in this presentation are either privately owned, from IF’s picture database or licensed as Creative Commons BY 2.0
IF HAS A LONG HISTORY
Gross written premiums
• MEUR 4,559 (2015)
Ratings
• S&P rating A+
• Moody’s rating A2
Employees
• 6,800 (full time equivalents)
Customers
• Private ~3 million
• Corporate ~350,000
• Baltic Region ~350,000
IF IS PART OF SAMPO PLCSampo, a leading Nordic financial services group
LISTED ON THE NASDAQ OMX HELSINKI
CommercialPrivate BalticIndustrialClient segment, companies:
> 500 employees
> € 50 million turnover
100 % 100 % 21.2 %> 30 %
NORDIC P&C MARKET SHARES 2014
1.9%
3.1%
3.2%
5.2%
5.8%
6.1%
6.6%
10.4%
11.3%
12.0%
12.1%
22.1%
Fennia
Sparebank1
AlmBrand
LähiTapiola
Topdanmark
Folksam
Pohjola
RSA Scandinavia
LF
Tryg
Gjensidige
If
TOTAL MARKET EUR 25 BN
THE LEADING P&C INSURANCE COMPANY IN THE NORDIC REGIONwith a full service offering and a strong European presence
© OpenStreetMap contributors
5826
133
BUSINESS SEGMENTS AND SHARE OF GWP (%)
Private
Commercial
Industrial
Baltic
• 90 % of BA Industrial clients operate in more than one country
• 3,500 local policies in 140 countries
• 25,000 claims outside the Nordic Region annually
• Tailor-made international insurance and claims handling programs
IF’S INTERNATIONAL OPERATION
If officePartnerNo representation
at your service in 140 countries
• If is established in 11 EEA countries and FPS notifications cover other EEA countries
• Tax agent / representative network
• Advisors
• IPT – domestic and cross border - is integrated in Industrial and Commercial insurance systems
• Over 1000 tax returns filed annually
• All other countries covered through partner network and local taxes handled by local service providers
IF’S SOLUTION TO INTERNATIONAL IPT
• Total amount of the insurance premium tax revenues were MEUR 712 in 2015.
• That represents 0.8 % of the total tax revenues in Finland
• Two officers employed, part time only
• Up to 700 tax returns monthly
Tax administrationBASICS OF FINNISH INSURANCE PREMIUM TAXATION
• Act on the Tax on the Insurance Premiums + VAT regulations when applicable + separate taxation procedure regulations.
• Taxpayer is either an insurer covering risks located in Finland (as defined in the Solvency II directive) or a policyholder in the event the policy is issued by an insurer located in a third country (outside EEA).
• Taxpayers are required to register as tax liable and foreign insurers must also appoint a tax representative. A tax representative is not liable for the tax. A broker cannot act as a tax representative.
IPT REGULATIONS
Fact sheetBASICS OF FINNISH INSURANCE PREMIUM TAXATION
IPT RATE AND SCOPE
Fact sheetBASICS OF FINNISH INSURANCE PREMIUM TAXATION
• IPT applies to insurance policies covering risks located in Finland, except for insurance premiums that are exclusively based on the following insurance contracts
• Personal insurance
• Reinsurance
• Credit insurance
• International transportation
• Vehicles primarily used for international traffic
• Patient Injuries
• Tax rate 24%, calculated on the net premium
• Apportionment of the premium required: IPT applies to the relevant part of a packaged policy e.g. travel (personal, luggage, liability, legal expenses) and cyber.
PROCESS
Fact sheet
• IPT declared and paid not later than 12th day of the calendar month following the collection of the premium
• Penalties for late declarations and payments apply
• Adjustments can be made during the tax year
• IPT refund possible for the current plus three years based on an application
BASICS OF FINNISH INSURANCE PREMIUM TAXATION
BASICS OF FINNISH INSURANCE PREMIUM TAXATION
• Fire Brigade Charge 3%
• Calculated on the property insurance premium and the fire element in all risks solutions
• A part of the IPT tax base
• Paid annually, reported in September
• Taxpayer can be insurer, broker or insured
• Foreign taxpayers are required to appoint a representative
• Other charges related to workers’ comp and motor
PARAFISCAL CHARGES
Fact sheet
FINNISH IPT
• Approx. 30 published Supreme Administrative Court judgments
• Both published and confidential advance rulings
• Focus on
• Liability insurance –international risks related to operations conducted from Finland
• International transportation
• “Kvaerner case” in Finland
RULINGS
The devil is in the details
FINNISH IPT
• Risks previously covered by the state
• Elk damage
• Flood damage
• Crop damage
• Environmental damage
• VAT / IPT rates
• Salary tax
TRENDS
New developments
TAX PROCEDURES
• Digital reporting
• Tax account – better netting of refunds and payments
• Monthly reporting, also zero reports
• Delayed reporting for max 45 days, cost € 3 per day
• Delayed payment up to 45 days, 2 %
• Severe delays, tax will be increased from 15 to 50 %
• Advance ruling procedure
COMMON PROCEDURE FOR ALL SELF-IMPOSED TAXES STARTING 2017
New developments
HOW MUCH TAXES IS ENOUGH TAXES?
EXAMPLE: PRIVATE MOTOR HULL
Heaven for taxation
Fisker Karma, Made in Finland
• IPT 24% on premium
• VAT 24 % on claims cost
• VAT on overhead costs
Indirect taxes can total almost 35 % of the premium
• Not including car tax (12.2 – 48.8%) in the cash value
SELLER AND REPAIR SHOP /LEASING
Policyholder / Service provider
INSURER
Premiums (IPT)
Premiumtax
Payments
Outgoing tax
Incoming tax
TOTAL COSTS (FI)CR = 100
INDIRECT TAX COST IN AN INSURANCE SOLUTIONHeaven for taxation
Repair cost(Incl VAT)
EXTERNAL SERVICE PROVIDER
E.g. risk management
VAT Fee (Incl VAT)
EXTERNAL INSURANCE SERVICE PROVIDERExemption VAT act para. 44.2
Fee (Excluding VAT)
≠ Aspiro case
Fee (Excluding VAT)
FCE bankSkandia case
Delivery(ies)(VAT or no VAT)BGZ leasing case
Mapfre case
VAT24
30
VAT (Claims cost)
IPT (Rate 24%)
100
VAT (Overhead cost)
Wishing you a pleasant Midsummer
THANK YOU!