New budgetary agreement raises taxes on insurance products

At the start of this week, the new federal government announced that it had reached a budget agreement that includes measures such as wage indexation, taxation and creating new sources of revenue. Among others, this entails an increase in the insurance premium tax (IPT) which, however, only affects (most categories of) non-life insurance.
 
The standard rate of IPT in Belgium is 9.25%; this will now be raised to 9.6 % for fire, car and family insurance, among others. The measure will not affect the profit sharing of branch 21 products, and nothing will change for 2nd pillar pensions. However, it should be noted that the tax on securities accounts will also be raised, doubling from 0.15 % to 0.30 %, affecting many savers who invest through branch 23 (life) insurance funds. The professional insurance federation Assuralia already expressed its disappointment at these measures; according to sector representatives, the announced increases will have a direct impact on the end customer. As all non-life insurance policies (with the exception of occupational accident insurance) are affected, this amounts to an additional tax increase for citizens who wish to protect themselves against social risks such as fire, liability and accidents.
 
Assuralia also regrets the decision to double the securities tax. This tax is due when the average taxable value of a securities account exceeds EUR 1 million, regardless of the number of account holders or the legal nature of the account. Because the securities tax is payable by both natural persons and legal entities, the insurer is taxed on the entirety of the assets within the fund, even if this represents a collective of many small investors. This is due to branch 23 funds being held in a securities account of the insurer, who manages the fund. As such, the tax also affects small savers who invest through branch 23, even though their individual investment is well below EUR 1 million. Assuralia has long proposed taxing branch 23 funds at the level of the investor, and only for investments in excess of EUR 1 million: this would constitute a fairer and more targeted system. Moreover, Assuralia warned that there is an increasingly uneven playing field with Luxembourg-based branch 23 products, which are exempted from the tax.
 
The measures still remain to be worked out in detail and are subject to approval by Parliament. It is not yet clear when exactly they will enter into force, but the first few are expected to take effect in the early months of the coming year.

Questions? Contact our Insurance expert Sandra Lodewijckx.