KPMG’s Eleventh EuropeanInsurance Premium Tax Conference

FINNISH IPT23 June 2016

AGENDAFinnish IPT

FINNISH INSURANCE MARKETHeaven for taxation

Total non-life insurance premium,

Finnish companies MEUR 4 529

• Four major insurance companies /

groups covers 87% of the market

• Pension system

• Mandatory Worker’s Compensation

and motor insurance 50% of the

premiums

• Broker net pricing: Broker

commission cannot be collected,

distributed or paid by an insurance

company

DIRECT INSURANCE IN FINLAND

Source: Federation of Finnish Financial Services and Statistics Finland

50 YEARS

All pictures in this presentation are either privately owned, from IF’s picture database or licensed as Creative Commons BY 2.0

IF HAS A LONG HISTORY

Gross written premiums

• MEUR 4,559 (2015)

Ratings

• S&P rating A+

• Moody’s rating A2

Employees

• 6,800 (full time equivalents)

Customers

• Private ~3 million

• Corporate ~350,000

• Baltic Region ~350,000

IF IS PART OF SAMPO PLCSampo, a leading Nordic financial services group

LISTED ON THE NASDAQ OMX HELSINKI

CommercialPrivate BalticIndustrialClient segment, companies:

> 500 employees

> € 50 million turnover

100 % 100 % 21.2 %> 30 %

NORDIC P&C MARKET SHARES 2014

1.9%

3.1%

3.2%

5.2%

5.8%

6.1%

6.6%

10.4%

11.3%

12.0%

12.1%

22.1%

Fennia

Sparebank1

AlmBrand

LähiTapiola

Topdanmark

Folksam

Pohjola

RSA Scandinavia

LF

Tryg

Gjensidige

If

TOTAL MARKET EUR 25 BN

THE LEADING P&C INSURANCE COMPANY IN THE NORDIC REGIONwith a full service offering and a strong European presence

© OpenStreetMap contributors

5826

133

BUSINESS SEGMENTS AND SHARE OF GWP (%)

Private

Commercial

Industrial

Baltic

• 90 % of BA Industrial clients operate in more than one country

• 3,500 local policies in 140 countries

• 25,000 claims outside the Nordic Region annually

• Tailor-made international insurance and claims handling programs

IF’S INTERNATIONAL OPERATION

If officePartnerNo representation

at your service in 140 countries

• If is established in 11 EEA countries and FPS notifications cover other EEA countries

• Tax agent / representative network

• Advisors

• IPT – domestic and cross border - is integrated in Industrial and Commercial insurance systems

• Over 1000 tax returns filed annually

• All other countries covered through partner network and local taxes handled by local service providers

IF’S SOLUTION TO INTERNATIONAL IPT

• Total amount of the insurance premium tax revenues were MEUR 712 in 2015.

• That represents 0.8 % of the total tax revenues in Finland

• Two officers employed, part time only

• Up to 700 tax returns monthly

Tax administrationBASICS OF FINNISH INSURANCE PREMIUM TAXATION

• Act on the Tax on the Insurance Premiums + VAT regulations when applicable + separate taxation procedure regulations.

• Taxpayer is either an insurer covering risks located in Finland (as defined in the Solvency II directive) or a policyholder in the event the policy is issued by an insurer located in a third country (outside EEA).

• Taxpayers are required to register as tax liable and foreign insurers must also appoint a tax representative. A tax representative is not liable for the tax. A broker cannot act as a tax representative.

IPT REGULATIONS

Fact sheetBASICS OF FINNISH INSURANCE PREMIUM TAXATION

IPT RATE AND SCOPE

Fact sheetBASICS OF FINNISH INSURANCE PREMIUM TAXATION

• IPT applies to insurance policies covering risks located in Finland, except for insurance premiums that are exclusively based on the following insurance contracts

• Personal insurance

• Reinsurance

• Credit insurance

• International transportation

• Vehicles primarily used for international traffic

• Patient Injuries

• Tax rate 24%, calculated on the net premium

• Apportionment of the premium required: IPT applies to the relevant part of a packaged policy e.g. travel (personal, luggage, liability, legal expenses) and cyber.

PROCESS

Fact sheet

• IPT declared and paid not later than 12th day of the calendar month following the collection of the premium

• Penalties for late declarations and payments apply

• Adjustments can be made during the tax year

• IPT refund possible for the current plus three years based on an application

BASICS OF FINNISH INSURANCE PREMIUM TAXATION

BASICS OF FINNISH INSURANCE PREMIUM TAXATION

• Fire Brigade Charge 3%

• Calculated on the property insurance premium and the fire element in all risks solutions

• A part of the IPT tax base

• Paid annually, reported in September

• Taxpayer can be insurer, broker or insured

• Foreign taxpayers are required to appoint a representative

• Other charges related to workers’ comp and motor

PARAFISCAL CHARGES

Fact sheet

FINNISH IPT

• Approx. 30 published Supreme Administrative Court judgments

• Both published and confidential advance rulings

• Focus on

• Liability insurance –international risks related to operations conducted from Finland

• International transportation

• “Kvaerner case” in Finland

RULINGS

The devil is in the details

FINNISH IPT

• Risks previously covered by the state

• Elk damage

• Flood damage

• Crop damage

• Environmental damage

• VAT / IPT rates

• Salary tax

TRENDS

New developments

TAX PROCEDURES

• Digital reporting

• Tax account – better netting of refunds and payments

• Monthly reporting, also zero reports

• Delayed reporting for max 45 days, cost € 3 per day

• Delayed payment up to 45 days, 2 %

• Severe delays, tax will be increased from 15 to 50 %

• Advance ruling procedure

COMMON PROCEDURE FOR ALL SELF-IMPOSED TAXES STARTING 2017

New developments

HOW MUCH TAXES IS ENOUGH TAXES?

EXAMPLE: PRIVATE MOTOR HULL

Heaven for taxation

Fisker Karma, Made in Finland

• IPT 24% on premium

• VAT 24 % on claims cost

• VAT on overhead costs

Indirect taxes can total almost 35 % of the premium

• Not including car tax (12.2 – 48.8%) in the cash value

SELLER AND REPAIR SHOP /LEASING

Policyholder / Service provider

INSURER

Premiums (IPT)

Premiumtax

Payments

Outgoing tax

Incoming tax

TOTAL COSTS (FI)CR = 100

INDIRECT TAX COST IN AN INSURANCE SOLUTIONHeaven for taxation

Repair cost(Incl VAT)

EXTERNAL SERVICE PROVIDER

E.g. risk management

VAT Fee (Incl VAT)

EXTERNAL INSURANCE SERVICE PROVIDERExemption VAT act para. 44.2

Fee (Excluding VAT)

≠ Aspiro case

Fee (Excluding VAT)

FCE bankSkandia case

Delivery(ies)(VAT or no VAT)BGZ leasing case

Mapfre case

VAT24

30

VAT (Claims cost)

IPT (Rate 24%)

100

VAT (Overhead cost)

Wishing you a pleasant Midsummer

THANK YOU!