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Focus On French IPT: Health And Motor Insurance Changes
Changes to the reporting of insurance-based taxes in France are due to take effect from 1 January 2016. Our expert has a detailed look at the implications.
The French Insurance Premium Tax (IPT) regime is known as one of the most complicated to negotiate in Europe. Non-life insurers have to contend with different rates dependent on the type of insurance business written, compulsory reinsurance on certain contracts (with further IPT considerations), per-contract fund contributions, taxes on both insurer and insured, annual reporting and multiple tax returns, all provided for in nuanced and complex legislation. On top of this, they have just 15 days following the end of the reporting month in which to prepare and submit the main IPT return and pay their tax liability, which can be quite a challenge for a large insurer with multi-jurisdictional tax liabilities.
Perhaps with the current complexity in mind, the way Motor and Health insurance is reported is being changed in France. They are reported in distinctly different ways; accordingly we should address them separately.
The majority of motor contracts in France are currently subject to IPT, plus CATNAT IPT and the associated insurer contribution on the CATNAT premium. Different rates, contributions and rules can apply for agricultural and commercial land vehicles. Contracts with damage cover also attract the €3.30 per contract ‘Victims of Terrorism’ contribution. Motor liability contracts, or the liability element of comprehensive motor contracts, are also subject to a Social Security Contribution of 15% (minus administrative discount of 0.8%), as well as additional contributions to the Fonds de Garantie of 1.2% and 0.8%.
Under new measures to be introduced on 1 January 2016, there will no longer be a social security contribution due on motor liability business. There will instead be two new rates of motor IPT, as follows:
- 15% for compulsory motor liability insurance of agricultural land vehicles and commercial land vehicles exceeding 3.5 tonnes in weight
- 33% for compulsory motor liability insurance.
The existing IPT rates for non-compulsory motor insurance and motor legal protection will be unaffected by these changes. The rates of the additional contributions for agricultural vehicles and the contributions to the Fonds de Garantie are not currently due to change at this time, though there could still be further changes announced ahead of next year.
Health insurance is currently subject to both IPT and a social security contribution. The Health IPT rate (or potential exemption) varies dependent on the type of contract written; determining factors include whether the policy was agreed with or without medical examination or disclosure, whether the insured is employed in agriculture and other factors. The social security contribution of 6.27% is due on contracts supplementary to the French healthcare system.
From 1 January 2016 Health business will be exempt from IPT, and the social security contribution will be restructured to incorporate the current IPT regime. This simplifies the system somewhat, as all premium-based charges on Health insurance will be settled in one place, however it may cause insurers who only wrote health business that attracted IPT (not supplementary to the French healthcare system) to have an additional administrative burden in terms of filing the social security contribution. The new social security contribution rates will vary based on the following factors:
- Is the cover supplementary to the French healthcare system?
- Has the contract been agreed with or without medical examination or disclosure?
- Are agricultural staff covered?
There are also specific rates for certain types of contract such as ‘ First Euro’ Contracts covering those not in the care of French compulsory health insurance, and ‘Per Diem’ contracts covering daily allowances. TMF Group’s IPT Quote tax calculation already has the new rates in the system, so that clients can ensure the correct tax iscalculated on any policies where the new rates are due. Any insurers with concerns over the changes to French IPT or French IPT in general, should contact our expert team who are well equipped to address any concerns.
Our IPT Compliance team will be supporting clients who write Motor and/or Health business with the changeover to ensure they remain compliant through the changes. Though the planned changes are a step towards simplification, it’s fair to say that the French IPT regime remains rather complex.