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Insurance and VAT and insurance premium tax

For years Ive paid my Aircraft Insurance and this year 2018-2019 I had a large premium increase. So I went to Friedrichshafen and inquired as to why the increase. I was told by my agent that the insurance company is now requiring VAT payment. Depending on which country you list your residence determines the amount of VAT payment. Well that explains the increase. Next I went to a different booth and there that agent from France said they did not charge for VAT. It seems this is a whole new policy from my Insurance company which they started in 2018.
Has anyone had an experience with this?

KHTO, LHTL

Yes. You are correct in that the EU demands what is effectively an IPT for aircraft insurance and applicable at the rate ruling in the country of registration. I was caught in the very same scenario.

UK, United Kingdom
As a US citizen it is registered in the US as a US registered aircraft. Temporary address is in the EU.

What about what the French broker told me?

Does that mean that if a Ship is registered in Malta or the Cayman islands and works the Mediterranean they will have to pay a VAT in the first port of call or the second?
Not trying to be smart but having jumped through hoops with the VAT import issue now Im trying to understand this. Or is it just a grab by the authorities for more money?

I understand that Romania has no VAT on Aircraft insurance.

Thanks for the reply.

Last Edited by C210_Flyer at 16 Jun 15:20
KHTO, LHTL

Vat depends on the country.

In the UK there no insurance premium tax on an N reg. I don’t think there is VAT either.

Maybe France adds VAT to insurance for everyone?

Administrator
Shoreham EGKA, United Kingdom

EU-wide, there is no VAT on insurance premiums. That is paragraph 1.(a) of article 135 of the European VAT directive (the link is to version valid from 2019-01-16 until new European legislation comes into force and modifies it). However, if the insurance is an “incidental expense” of a VAT-taxable service, the insurance premium is VAT-taxable, too. That’s article 78.(b). My understanding is that this applies to stuff like the insurance that is included in car/plane/… rentals, in freight transport, … But definitely not applicable to what is being discussed here, namely the purchase of insurance on your own plane.

As a matter of national tax law, member countries may have, or not have, a tax on insurance premiums. That is allowed by article 401 of the VAT directive. That’s a separate tax, and not VAT. My understanding is that for vehicles, this follows the country of registration of the vehicle. I don’t think any EU law forbids member countries to impose a tax on insurance premiums on foreign registered vehicles that are based in their country, or owned by a resident or stuff like that, but I’m not aware of any member state that does.

Another point is that e.g. the Netherlands has the same insurance tax rate as the VAT rate. I heard that is linked to the Netherlands wanting there to be VAT on insurance premiums.

ELLX

Lionel thanks for the synopsis but that was as clear as mud.

lionel wrote:

But definitely not applicable to what is being discussed here, namely the purchase of insurance on your own plane.

That is good news

lionel wrote:

As a matter of national tax law, member countries may have, or not have, a tax on insurance premiums.
That is Bad news. So Germany decided to tax insurance premiums? My bill clearly stated VAT.

lionel wrote:

. I don’t think any EU law forbids member countries to impose a tax on insurance premiums on foreign registered vehicles that are based in their country, or owned by a resident or stuff like that, but I’m not aware of any member state that does.

That is Bad News because it appears at least one country does, Germany.

So what does this mean?

Anyone not pay tax or VAT? You can PM if your uncomfortable giving out that info to the public.

KHTO, LHTL

I think most countries have an Insurance tax. The rate varies greatly. According to https://www.abi.org.uk/globalassets/sitecore/files/documents/publications/public/2016/keyfacts/euipt.pdf among the “big fully independent” countries only Estonia, Latvia, Lithuania, Czech Republic and Norway don’t have any. Iceland’s is very, very low. I know that Jersey doesn’t have any, and I’d guess Guernsey and the Isle of Man neither.

C210_Flyer wrote:

So Germany decided to tax insurance premiums?

Yes. According to the link above, the rate is 19% or 22% depending on the type of insurance.

C210_Flyer wrote:

My bill clearly stated VAT.

That’s bullshit and/or mislabelling.

C210_Flyer wrote:

That is Bad News because it appears at least one country does, Germany.

If your airplane is not D-reg, I don’t have the expertise on Germany to say definitely, but my guess is that it is just incompetence on the side of the insurer or broker.

ELLX

Well you are 100% correct the Broker told me it was VAT but pulling out the records it clearly says Insurance Tax.

Its expensive enough for me to pursue this further. I was told by the Broker that Romania does not have this insurance tax. Do you know anything about this?

Im also going to ask the broker to bill my US billing address and see what they have to say.

KHTO, LHTL

According to the link I gave above, Romania has insurance taz, but at the low rate 1% or 2%, depending on the type of insurance. But, as far as I understand, that would apply of your plane is registered in Romania.

ELLX

Sorry I skipped right over the link.

That is the crux of the problem, where is it registered? According to the Broker, it depends on where my residence address is located. Well that is the US. But since Im using my friends address here temporarily in Germany then they are saying Im a resident German.

If I remember correctly, the insurance companies have an agreement that if the airplane spends most of its time in Europe then it has to be insured by a European Insurance company. But tomorrow I will double check that also.

KHTO, LHTL
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