Spain IPT rate increase

New Guidance (2 February 2021):

Lloyd’s Tax Department has been made aware of additional information regarding how the recent Spanish IPT rate increase should be treated, which requires additional guidance to be provided.

We have now received further advice that the new rate of IPT will need to be applied to all new business, renewals and additional premiums incepting from or effective after 1 January 2021.  This means that all premiums with an inception date prior to 1 January 2021 can continue to be processed with the old 6% rate of Spanish IPT applied.  The previous guidance below for the treatment of instalments and return premiums remains unchanged. 

Any premiums incepting after 1 January 2021 with the old 6% rate of Spanish IPT applied will be queried by Xchanging, leading to potential delays in premium being processed and paid.

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Previous Guidance (6 January 2021)

The standard rate of Spain (incl Navarra, Alava, Guipuzcoa and Vizcaya) IPT has increased from 6% to 8% with effect from 1 January 2021.  This announcement comes following the publishing of Article 73 Law 11/2020 in the Spanish Official State Gazette on 30 December 2020.  

Increase in Spain IPT rate

We are aware that the Spanish insurance association (UNESPA) tried to agree a transition period for the rate change with the Spanish tax authority while the draft law was being negotiated, however no transition period has been provided by the tax authority.

In the absence of any transitional arrangements being agreed with the tax authority, the new rate of IPT will need to be applied to all new business, renewals and additional premiums processed/signed on or after 1 January 2021, irrespective of when the policy incepted, or the premium adjustment was effective from. For premium processed via instalments, the new rate of IPT will apply to all instalments of the premium processed on or after 1 January 2021. Return premiums should be processed using the tax rate applied to the original premium being adjusted.

Lloyd’s administrative arrangements for IPT rate increase

Due to the short notice of this rate increase, and assuming no transition arrangements are agreed, for policies incepting prior to 1 January 2021 Lloyd’s will continue to allow this business to be processed at the old rate of IPT (6%) until 1 March 2021. This is to accommodate in-flight risks/bordereaux with IPT previously agreed at the old rate. During this period, underwriters will fund any shortfall in IPT so that the correct tax is paid to the Spanish tax authority.

Any premiums submitted for processing after 1 March 2021, or policies incepting after 1 January 2021, with the old rate of Spanish IPT applied will be queried by Xchanging, leading to potential delays in premium being paid.

This communication will be updated if we are made aware of any transition arrangements being agreed or if the Spanish tax authority issue any further guidance. If you have any questions or require any further information, please consult the Spain tax pages of Lloyd’s Crystal or contact Lloyd’s Tax Department at taxdept@lloyds.com.