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Germany: Treatment of ships / aircraft registered outside of the EEA with a German insured

Fri 16 Nov 2018

This article is to advise the Lloyd’s market of new information received by Lloyd’s Tax Department concerning the premium tax treatment of ship’s hull and aircraft hull and associated liability business in Germany.

Update (November 2018):

Effective from 1 January 2019, all business covering ships/aircraft registered outside of the EEA with a German insured will be treated as being subject to German premium tax.

Xchanging will only process this business incepting on or after 1 January 2019 if German premium tax has been applied.

This update comes following discussions Lloyd’s tax department have had in Germany, including with its German tax advisers, during which the position was clarified.

Previous guidance (1 July 2018):

The German courts have recently issued a number of decisions which concluded that where a German resident insured takes out insurance relating to an aircraft or vessel registered/flagged outside of the European Economic Area (EEA), the premium will fall within the German premium tax regime.

Lloyd’s Tax Department understands that these decisions are likely to be appealed. However, until such matters have been resolved, it is recommended that Lloyd’s underwriters charge German premium tax on these risks. If it is later found that tax should not have been charged, Lloyd’s will arrange for refund claims to be made to the German tax authorities.

Despite Lloyd’s Tax Department’s recommendation above, and given the uncertainty, this business may continue to be signed without tax. However, if tax is not collected and it is subsequently found that it is due, underwriters will be required to fund it, including any interest and penalties. Lloyd’s Tax Department strongly recommends that underwriters ensure that the commercial terms of the policy allow them to collect tax at a later date if it is deemed to be due. Following underwriters should ensure that they are comfortable with the tax treatment the lead has adopted, as they will also be liable if taxes are found to be due.

If you have further questions, please contact Lloyd’s Tax Department

Charlie Dyer

Manager, Indirect Tax

+44 (0) 207 327 6836