Based on the Plan of legislative tasks of the Slovak Government for 2018, the Ministry of Finance submitted for comments a draft bill relating to insurance tax.
The aim of the proposal is to introduce insurance tax for insurance within non-life insurance as well as life insurance. The proposed amendment will alter the existing contribution of 8% of received insurance premiums from non-life insurance according to the Insurance Act.
Insurance tax represents a standard model used in most EU member states mainly for the reason that, according to Council Directive 2006/112/EC on the common system of value added tax, insurance services are exempted from value added tax in whole European Union. Insurance tax is charged and paid by insurance companies to the state budget.
The object of the tax is insurance in which the insurance risk is located inside the country and it will normally be applied to payments f insurance premiums for the insurance. In special cases, the insurance tax will also be applied to insurance costs the legal person paid to the policy holder that concluded the insurance policy with a third-country insurance company.
The insurance tax will be paid to the state budget mainly by legal persons operating in the insurance sector according to the Insurance Act, i.e. insurance companies based in Slovakia, insurance companies based in other member states of the EU and European Economic Area as well as subsidiaries of third-country insurance companies.
The proposed insurance tax is to replace the existing payment of part of insurance within non-life insurance amounting to 8%. For this reason, the 8% rate is proposed for most branches of non-life insurance. A lower tax rate, for example 4%, is proposed for some branches for injury and illness insurance. Within life insurance branches, the rate of 2% and 3% is proposed. In order not to levy pension insurance, it is proposed that life insurance products within the second and third pillar of the pension system be exempted from tax.
The proposed effective date of the act is 1 October 2018, which means that the tax will apply to insurance premiums, in which two conditions will be fulfilled. It means receipt or payment of the premium after 30 September 2018 and insurance period starting after 30 September 2018.