TAX ON INSURANCE PREMIUMS INCREASES FROM 6% TO 8% IN 2021

FROM UNITECO, AND FROM THE ENTIRE SECTOR, THEY EMPHASIZE THAT THIS TAX CAN LEAD TO A FALL IN HIRING

The  new General State Budgets for 2021  include an increase in the  tax rate on insurance premiums, from the current 6% to 8% . Although, some types of insurance are exempt from the Insurance Premium Tax (IPS).

The IPS is the  indirect tax , which is levied on insurance premiums. The insurance companies are the taxpayers who pass on said tax to the policyholders, they are the ones who finally bear the burden of the tax.

However,  not all insurance is taxed with the IPS . Compulsory and collective social insurance that implements alternative systems to pension plans and funds; life insurance, although, it would apply to complementary guarantees if they existed; credit and surety insurance, and combined agricultural insurance. Likewise, insurance operations related to pension plans, reinsurance operations and international freight and passenger transport insurance operations are also exempt from this rate.

With the entry into force of the new Law,  the policyholder will pay 33% more  due to the rise from 6% to 8%. In other words, a policy with a net premium of  100 euros, which would currently pay an IPS of 6 euros, will pay, as of 2021, 8 euros.

The Government justifies this increase with two arguments: this tax rate has not changed since 1998 and  the tax continues to be a lower rate than in other European countries . In Germany this rate stands at 19%, in the United Kingdom at 12.5% ​​or in Italy it is between 12.5% ​​and 21.5%.

On the other hand, the Spanish Union of Insurance and Reinsurance Entities (Unespa), qualifies the measure as  “disproportionate and lacking justification” . In the same way, it ensures that the measure will “significantly” affect families and companies, as it is an external surcharge to the premium.

“It must also be taken into account that IPS is regressive from a social point of view. It hurts people and companies that, through insurance and with a criterion of responsibility, insure their daily life, their assets and their business  and professional activities against possible damages that they may cause to third parties, ”they warn from the association.

The Government estimates the impact that this measure will have in 2021 at about  455 million euros  (52 million in 2022). It represents, according to Unespa, an increase of almost 25% in the collection of this tribute.

“The increase in insurance taxation  may lead to a reduction in the protections that families and companies hire  and, consequently, in a greater exposure to risk on the part of society and the country’s economy as a whole,” the sector remarks.

From  Uniteco Professional , we are at the disposal of our policyholders to expand the information regarding the tax change and how it will affect them in their insurance contracts.