Insurance companies, or their tax representatives, must file an Insurance Premium Tax (IPT) return for each taxable period – i.e. every quarter.
Who is concerned
The insurance companies subject to IPT are:
- Luxembourg-based non-life insurance companies;
- non-life insurance companies operating on a freedom-of-services basis;
- branch offices of foreign non-life insurance companies.
All types/categories of insurance are concerned, except for life insurance and insurance covering maritime vessels.
If the insurer's head office is not in an EU Member State and they do not have a permanent establishment in Luxembourg, the IPT is payable by the insurer's designated tax representative.
If the task of filing the returns and paying the tax is incumbent on the insurer's tax representative, the latter must be:
- established in Luxembourg; or
- domiciled, for tax purposes, in Luxembourg.
Luxembourg IPT does not apply to reinsurance companies.
Within 15 days of commencing trading, insurance companies must notify the competent office of the Registration Duties, Estates and VAT Authority (Administration de l’enregistrement, des domaines et de la TVA – AED) using the form provided for that purpose (initial declaration).
IPT returns must be filed before the end of the month following the taxable period.
Should an insurer cease trading in the course of the year, they must file their return for the current taxable period before the 15th of the month following that in which they ceased trading.
How to proceed
Filing the return
The person liable for the tax must submit their tax return on MyGuichet.lu with the Registration Duties, Estates and VAT Authority.
The IPT return must include all of the details required to establish the amount of tax to be paid or refunded for the taxable period – namely:
- the net amount received in premiums;
- the applicable tax rate;
- the amount of tax for each type/category of insurance for which policies were sold.
Payment and adjustment of taxes
The tax is payable when the return is filed, if it is filed before the legal deadline (last day of the month following the taxable period). If not, the tax must be paid on the day the deadline expires.
If the insurer had wholly or partially refunded the premium received from the policy holder –because the policy was terminated, or because the cost of the policy fell – the insurer is entitled to a tax adjustment.
The adjustment must be specified on the tax return.
Amount of tax
The tax base comprises the amount paid for the insurance policy – i.e. the amount received by the insurance company in return for the insurance. The tax is then calculated on the basis of the amount received in respect of the policies sold during the taxable period. At the company's request, the AED may base the calculation on the amount in respect of the policies issued during the taxable period.
The tax rate varies between 3 % and 6 % depending on the nature of the insurance policies concerned.
The person liable for the tax – the insurer or their tax representative – must keep detailed accounts for the purpose of applying the tax and for tax audits conducted by the AED. The accounts must contain separate records of all data to be included in the return.
The documents and records required for audits to be conducted must be kept for 10 years from their closing or effective date.
The AED may conduct audits of the insurance policies sold by the insurers.
At the company's request, the AED may accept the use of the insurer's business records. Such records must be different for each type/category of insurance.
Furthermore, the insurer or their tax representative must submit all documents in connection with the insurance policies, and provide all necessary information, to the AED inspectors conducting the audit, should they be asked to do so.
The AED will immediately correct any errors observed in the insurer's returns or during the audit.
The company may recover the non-payable portion of the tax if, for example, a policy is terminated prematurely and the company is unable to adjust the tax. In this case, the company's accounts must contain a note referencing the original policy.
Should the insurer or their tax representative fail to file a return and pay the tax in the month following the taxable period, the AED may require the payment of provisional instalments, to be set off against the tax liability.
Any insurer, or their tax representative, who fails to file a return and pay the tax risks a fine of between EUR 50 and EUR 5,000. Furthermore, if the tax is not paid in full or in part by the set deadline, the person liable for the tax may be fined a tax penalty of up to 10% of the unpaid tax.
Anyone who commits acts for the purpose of evading the payment of the tax or fraudulently obtaining a tax refund risks a fine of 10% of the evaded tax and at least EUR 125.
Moreover, if the AED has serious, precise and concordant reasons to doubt the accuracy of the filed returns, it may impose an ex officio tax assessment on the insurer or their tax representative, if the doubts cannot be dispelled by the person liable for the tax.
The tax penalties are set by the director of the AED or their deputy.
They must be paid in the month in which written notification of the penalty is received.
The AED's decisions may be appealed. Appeals must be justified and addressed in writing to the director of the AED within 3 months of the date of notification of the decision.
The director may:
- uphold the decision;
- reduce or cancel the tax penalty.
That decision may itself be appealed by means of a writ filed by a lawyer with the Luxembourg district court for civil matters within the same timeframe of 3 months from the date of notification.
If the insurer has been not notified of a decision within 6 months, they may consider that their claim has been rejected and may then engage the services of a lawyer to lodge an appeal with the Luxembourg district court for civil matters.