Tax Alert – Germany – Additional Guidance on Insurance Tax Law Modernization Act – VersStRModG
Further to the German alert released in November 2020, there is updated guidance on how the Insurance Tax Law Modernization Act – VersStRModG, which came into force on January 1st 2021, is applied. Please see below a timeline of the original legislation and additional guidance released by the Federal Ministry of Finance (Germany).
On December 20th 2020, the Insurance Tax Law Modernization Act – VersStR-ModG was released which informed that from January 1st 2021, policies covering objects, certain vehicles, travel and permanent establishments outside the EU/EEA with policyholders who are resident within Germany are liable to pay German IPT – this could lead to the occurrence of double taxation.
On March 4th 2021, guidance was released to clarify the approach to EEA insurers and non-EEA insurers. This guidance confirms that for non-EEA insurers, the location of risk does not impact the taxability and German IPT is due on all of the premium when the policyholder is established in Germany. For EEA insurers, the location of risk does impact the taxability and German IPT is due on premiums derived from Germany and Non-EEA countries when the policyholder is established in Germany.
On September 7th 2021, further guidance was released which clarifies the understanding of permanent establishments located in third countries and foreign companies based in the third countries. German IPT is applicable only on premiums attributable to non-EEA risks (non-‘special risks’) and that subsidiaries do not fall under the definition of permanent establishments.
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