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In line with our previous tax alert, the Ministry of Finance has issued a circular on 19 June 2024, addressing the Belgian insurance premium taxes ("IPT") on service contracts concluded between insurance brokers and insurance takers.
This circular aims to provide further clarity on a number of matters that were not explicitly covered by the new legislation or parliamentary documents.
1. Service fees targeted by the tax
As a reminder, the taxable base for the purpose of Belgian insurance premium taxes (“IPT”) has been redefined to include “all insurance-related remunerations that are exempt from VAT under article 44, §3, 4° of the VAT Code”.
Art. 44, §3, 4°, of the VAT Code provides that 'the acts of insurance and reinsurance, including related services performed by brokers and agents, with the exception, however, of services as loss adjusters', are exempt from VAT. In this respect, we refer to circular 2017/C/36 on acts of insurance and reinsurance, which further clarifies the scope of this provision.
In line with our expectations, the new circular explicitly confirms that the following instances are not subject to IPT:
- fees for acts of management by an intermediary who did not intervene in the conclusion or amendment of the contract (certain exceptions may apply);
- fees for services provided as a loss adjuster;
- fees for services for which VAT is not due for reasons other than the exemption of Article 44, § 3, 4°, of the VAT Code.
2. Tax rate and exemptions
The circular clarifies that the tax rate to be applied to service fees mirrors the rate of the related insurance transaction. Therefore, the tax applies to service fees associated with taxable insurance transactions for which the risk is located in Belgium.
Transactions involving foreign risks are therefore excluded from the tax. Additionally, exceptions listed in the Code of Miscellaneous Taxes and Duties are also exempt.
3. Service fee for multiline insurance contracts
For service contracts covering multiple insurance transactions with varying characteristics, (e.g. different risk locations, IPT exemptions or different IPT rates), the IPT to be applied should take into account the IPT due on the related premiums.
The Ministry of Finance explicitly permits a proportional allocation of the IPT due on the fee, based on respective premiums or contributions. Any alternative method can however be permitted as well, but must be objective, verifiable, uniformly applied across customers, and consistent over time.
The circular includes a numerical example in annex II.
4. Taxable event that makes the fee payable
The insurance premium tax must be settled, and returns filed by the 20th of the month following the due date for non-life insurance premiums or the payment date for life insurance premiums. The legislator has not provided a separate, specific provision regarding the taxable event that makes the service fee payable. Consequently, the taxable event to settle the IPT on the service contract is determined in function of the premium’s due or payment date, regardless of when the fee is due or paid.
The fact that the law does not foresee a separate taxable event for the service fee can lead to practical issues when the service fee is not invoiced at the same time and at the same interval as the related insurance premium(s).
5. Tax payer of the tax on the fee
In principle, the IPT on the service contracts is payable by brokers and all other intermediaries established in Belgium .
The law provides the option to transfer this obligation to the related Belgian insurance company, but does not provide any further practical considerations.
According to the circular, the broker must formally notify the insurance company of this shift in obligation, but the insurer’s consent is in principle not required.
Documentation proving the broker’s choice must be kept available to the tax administration. In addition, the insurer must be provided with all necessary information to file the tax declaration and make the payment on time, including the amount of tax due.
The circular also clarifies that brokers do not have to apply this option uniformly across all insurers or contracts. Brokers can choose to apply it to some or all of the contracts they manage.
6. Entry into force
The legislation enacted on 28 December 2023 came into effect on 8 January 2024, ten days after its publication in the Belgian Official Gazette. Consequently, fees for insurance-related services are generally taxable as from:
- 8 January 2024, for non-life insurance risks where a premium has lapsed.
- 8 January 2024, for life insurance risks where a premium was paid.
7. New tax declaration published
The Ministry of Finance has published a dedicated tax declaration form for the period, with an extended deadline until 20 October 2024, available on its website. Each taxable period (monthly) from January 2024 to August 2024 requires a separate return. For September 2024 (with the standard deadline of 20 October 2024), brokers should use the regular IPT declaration template. A distinct payment reference format has been provided:
In Dutch: "JBVC UITSTEL – Broker's Company Number – Broker's Name – (MM/YYYY)”
or in French: “JBVC REPORT – Broker's Company Number – Broker's Name – (MM/YYYY)”
Unlike the regular IPT return, the guidelines of this dedicated form do not permit submission via email. The return must therefore be sent by post.