Doubt on outsourced insurance services VAT exemption

Mon 11th Jan 2016

The EU’s Advocate General (AG) has challenged the view that outsourced insurance claims services can enjoy the wider financial services VAT exemption.

The view came from a Polish case around outsourced claims handling for accident insurance claims. The taxpayer claimed this benefited from the EU VAT Directives insurance and reinsurance exemption, and therefore it did not have to charge Polish VAT to its insurance company clients. This was important since such insurers cannot reclaim any input VAT, and so would have to treat and VAT charged as an expense to the business.

The Polish tax authorities contended that the taxpayer provided a wide range of services beyond simple claims management, and therefore not consistent with insurance services.

The AG ruled that the taxpayer’s services did not provide insurance cover and associated risks, a basic requirement of an insurance service. Furthermore, the services were not associated with assisting an exempt insurer finding and contracting insurance services.