The Other Tax Measures Bill, which was introduced on Budget Day 2010, proposes amendments to the insurance premium tax that are envisioned to take effect on January 1, 2011. The first concerns the requirement to appoint a tax representative and the second concerns the interpretation of the term "establishment", as used for insurance premium tax purposes. Furthermore, an increase in the insurance premium tax rate has been proposed in the new government’s recently presented draft coalition agreement.
The measures presented in the Other Tax Measures Bill 2011 are still part of the legislative process. After the inauguration of the envisaged government, the proposed increase in the insurance premium tax rate will have to be included in a bill and go through the legislative process before it can take effect.
Abolition of requirement to appoint a tax representative
The requirement for non-resident insurers to, in certain situations, appoint a tax representative in the Netherlands for the payment of the insurance premium tax, will be abolished. This amendment has been prompted by the European Union law (“EU”). As of January 1, 2011, a foreign insurer may choose whether to file and remit the insurance premium tax himself, or to appoint a tax representative to do this.
The interpretation of “establishment” for insurance premium tax purposes
As a consequence of a European Court of Justice judgment (the Kvaerner judgment), the interpretation of “establishment” for insured legal entities will be amended for insurance premium tax purposes. This will bring it into line with EU law.
It is no longer relevant whether the policy holder is located in the Netherlands, but rather whether the company covered by the insurance policy, i.e. the insured company, is located in the Netherlands. Insurance premium tax is only payable in the latter case.
Insurance premium tax rate increase
It is proposed to increase the insurance premium tax rate to 9.5% (now: 7.5 %). As mentioned above, after the inauguration of the envisaged government, the proposed increase will have to be included in a bill and go through the legislative process before it can take effect.