Skip to main content

Important German Insurance Premium Tax Update

This article is to advise the Lloyd’s market of the insurance premium tax law reform enacted by the German Parliament and the impact this will have on Lloyd’s business.

*Updated on 8 September 2021.

5 January 2021

This article is to advise the Lloyd’s market of the insurance premium tax law reform enacted by the German Parliament and the impact this will have on Lloyd’s business. This announcement is made following the publication of the law in the German Federal Law Gazette on 9 December 2020.

In addition, this article sets out the existing law for non-EEA insurers which will impact Lloyd’s Syndicates from 1 January 2021.

New Guidance (September 2021):

Following the release of an FAQ document between the German Insurance Association (GDV) and the German Ministry of Finance in June 2021, Lloyd’s guidance is updated below in accordance with the clarification provided.  The FAQ document intends to clarify some of the uncertainty around the recent changes to the application of German IPT to certain business written by insurers located within the EEA.   

Please note that only our guidance at section 1.1 of our original article published 5 January 2021 has been updated. All other guidance in relation to the existing law for non-EEA insurers, i.e. Lloyd’s Syndicates, remains unchanged.


1 .  German IPT law reform

1.1  Changes to IPT location of risk impacting EEA insurers

Effective 10 December 2020, where a policyholder established in Germany (i.e. a German enterprise, permanent establishment, or other institution) or an individual habitually resident in Germany takes out insurance with an EEA insurer and the policy covers non-EEA risk(s), the premium attributable to the non-EEA risk will be subject to German IPT in addition to the German element. This is the case irrespective of the class of business and the physical location of any insured risk.

These new law changes will only impact the business written by Lloyd’s Europe (i.e. an EEA insurer), where elements of non-EEA risk are covered (e.g. UK, Monaco) and the principal policyholder is German. Please refer to Appendix 1 for examples of some of the types of risks which may now be subject to German IPT and potential instances of double taxation which may arise.

Updated guidance:  Where a policyholder established in Germany (i.e. a German enterprise, permanent establishment, or other institution) takes out insurance with an EEA insurer and the policy covers certain risks that are not classified in Germany as ‘special risks’ (‘special risks’ includes fixed property, vehicles and travel) , any premium attributable to a non-EEA subsidiary will not be subject to German IPT.

This is on the understanding that German IPT is applicable only on premium attributable to non-EEA risks (non-‘special risks’) where this risk relates to a permanent establishment or branch of the German policyholder. According to the German General Tax Code, subsidiaries do not fall within the definition of a permanent establishment, however a branch does.

Xchanging will no longer query policies written by Lloyd’s Europe where German IPT has not been charged on premium in respect of these non-‘special risks’ relating to non-EEA subsidiaries of German policyholders.

Please note we have also updated Example 1 in Appendix 1 to reflect this updated guidance.

The Xchanging guidance will be updated with immediate effect. Not charging tax correctly could lead to delays in processing this business with Xchanging.

1.2  Limitation of the IPT exemption for certain personal insurances

Currently, an exemption applies to policies covering an individual for temporary or permanent occupational disability, e.g. airline pilots’ loss of licence (but only as a result of injury or ill health) or sports persons for loss of income incurred as a result of injury or ill health. This exemption also currently applies to corporate entities taking out similar cover to protect their own exposure, in most circumstances.

For all policies of this nature incepting on or after 1 January 2022, the existing exemption will no longer apply for corporate entities taking out the cover to protect their own financial exposure. Instead the exemption will be limited to cases where the insurance is taken out for personal purposes.

1.3 IPT liability for Lloyd’s General Representative in Germany

Prior to the IPT law reform, the primary liability for German IPT should have generally been assumed by the “insurer”. In the context of Lloyd’s business, this has always been difficult to apply in practice. Therefore, Lloyd’s has had an understanding with the German tax authority that the Lloyd’s General Representative in Germany reports and pays the IPT on behalf of the Lloyd’s Syndicate/Members.

A regulation is included in the new law (§10c VersStG-E) regarding a formal obligation on the part of the Lloyd’s General Representative in Germany (Hauptbevollmaechtigter) to assume IPT liability on behalf of the underwriters associated at Lloyd’s. In practice, the change to the legislation essentially creates a legal basis for what Lloyd’s has always done.

2.   Existing law impacting non-EEA insurers

2.1  The party liable for IPT for non-EEA insurers

From 1 January 2021, business written by Lloyd’s Syndicates will be seen as written by a third-country/non-EEA “insurer” by the German tax authority. Existing German IPT law states that it would generally be the responsibility of the German principal policyholder to pay any German IPT to the German tax authority.

However, in light of the law changes impacting the IPT liability for Lloyd’s General Representative in Germany covered in 1.3 above, this will not be the case for Lloyd's. The Lloyd’s General Representative in Germany will remain liable for any IPT due, irrespective of whether Lloyd’s syndicates are seen as third-country “insurers”. Therefore, this new law amendment supersedes any existing law concerning the default position, i.e. the default position being that the policyholder is responsible for paying the German IPT in the case of a non-EEA insurer.  


2.2 IPT location of risk definition for non-EEA insurers

Existing German IPT law specifies that the scope of what constitutes a “German risk” for IPT purposes is different depending on whether the policy is taken out with an EEA insurer or a non-EEA insurer. For policies taken out with an EEA insurer, the law changes described in section 1.1 above detail the new application of the location of risk rules.

For non-EEA insurers, where a policyholder established in Germany (i.e. a German enterprise, permanent establishment, or other institution) or an individual habitually resident in Germany takes out insurance with a non-EEA insurer, 100% of the premium will be subject to German IPT. This is the case irrespective of the class of business and the physical location of any insured risk.

This law will only impact the business written by Lloyd’s Syndicates where the principal policyholder is German. Any EEA elements of a risk must be written by Lloyd’s Europe (i.e. an EEA insurer), therefore the impact of the above will be limited to the non-EEA risk which can be written by the Lloyd’s Syndicates. In practice, this means the impact of the IPT location of risk definition for non-EEA insurers will have the same effect as the new IPT location of risk definition for EEA insurers in the context of Lloyd’s business.  

Not charging tax correctly could lead to delays in processing this business and Xchanging will be querying the absence of German IPT in these instances from 1 March 2021.

Appendix 1 – Examples of impact of German law reform

Example 1
German head office with subsidiaries in France, the UK and the US:
-Principal policyholder: Germany
-Additional insured: France
-Additional insured: UK
-Additional insured: US
-Coverage type: D&O

In this example, we would expect German IPT to be applied to the premium apportioned to the German head office and the US subsidiary (non-EEA risk written by Lloyd’s Syndicates). US taxes may also be applicable to the premium apportioned to the US subsidiary and therefore potential instances of double-taxation may arise. As the risk relating to the French subsidiary is located in the EEA, no German IPT will be applicable.

If the risk relating to the UK (non-EEA) subsidiary is written by Lloyd’s Europe, no German IPT will be applicable on the basis this risk relates to a non-EEA subsidiary and not a non-EEA branch or permanent establishment of a German policyholder. This is in accordance with our updated guidance in section 1.1. above.

If the risk relating to the UK (non-EEA) subsidiary is written by Lloyd’s Syndicates, we would expect German IPT to be applied to the premium apportioned to the non-EEA subsidiary on the basis this risk is covered by a non-EEA insurer and the policyholder is established in Germany. This is in accordance with our guidance in section 2.2 above which remains unchanged.

Example 2
US head office with subsidiaries in France and Germany:
-Principal policyholder: US -Additional insured: France -Additional insured: Germany -Coverage type: D&O

In this example, we would expect German IPT to be applied to the premium apportioned to the German subsidiary only, however because the principal policyholder is not German the non-EEA elements of the risk (i.e. US) are not subject to German IPT.

As the risk relating to the French subsidiary is located in the EEA, no German IPT will be applicable.

Example 3
German policyholder with a property in Australia:
-Principal policyholder: Germany
-Coverage type: Property
-Asset location: Australia
In this example, we would expect German IPT to be applied to the premium for the Australian property (i.e. 100% of the premium) because this is a non-EEA risk. Australian taxes will also be applicable to this premium as is currently outlined on Crystal. This could result in double taxation.

Example 4
German policyholder with a marine vessel flagged in Panama:
-Principal policyholder: Germany
-Coverage type: Marine Hull & Machinery
-Vessel flag: Panama

In this example, we would expect German IPT to be applied to the premium for the Panama vessel (i.e. 100% of the premium) because this is a non-EEA risk. This has been the position since 1 January 2019 as previously set out on Crystal.

Further information

For more information on how to determine risk location, please refer to: https://www.lloyds.com/tools-and-systems/risk-locator/how-to-establish-the-risk-location

For more information regarding the German location of risk rules, please refer to  Crystal

For any queries on the application of this German law reform please contact: taxdept@lloyds.com

If any further guidance becomes available we will update the contents of this article with this information.