News That Matters

INSURANCE PREMIUM TAX INCREASES FROM 6% TO 8%

The  new General State Budgets for 2022  include an increase in the  tax rate on insurance premiums, from the current 6%, to 8% . Although, some types of deductible  insurance are exempt from the Insurance Premium Tax (IPS).

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The IPS is the tax of  an indirect nature , which is levied on insurance premiums. The insurance entities are the taxpayers who pass on said tax to the policyholders, they are the ones who finally bear the burden of the tax.

However,  not all insurance is taxed with the IPS . Compulsory and collective social insurance that implement alternative systems to pension plans and funds; life insurance, although it would apply to complementary guarantees if they existed; credit and surety insurance, and combined agricultural insurance. Likewise, insurance operations related to pension plans, reinsurance operations and international freight and passenger transport insurance operations are exempt from this rate.

With the entry into force of the new Law  , the policyholder will pay 33% more  due to the rise from 6% to 8%. In other words, a policy with a net premium of  100 euros, which would currently pay an IPS of 6 euros, will start paying 8 euros from 2022.

The Government justifies this increase with two arguments: this tax rate has not changed since 1998 and  the tax is still a rate lower than that existing in other European countries . In Germany this rate stands at 19%, in the United Kingdom at 12.5% ​​or in Italy it is between 12.5% ​​and 21.5%.

On the other hand, the Spanish Union of Insurance and Reinsurance Entities (Unespa), describes the measure as  “disproportionate and lacking in justification” . In the same way, it ensures that the measure will affect “significantly” families and companies, as it is an external surcharge on the goodexpressday.

“We must also take into account that IPS is regressive from a social point of view. It harms people and companies that, through insurance and with a criterion of responsibility, insure their daily life, their assets and their business  and professional activities against possible damage they may cause to third parties”, they warn from the association.

The Government estimates  the impact that this measure will have in 2022 at around 455 million euros  (52 million in 2022). It represents, according to Unespa, an increase of almost 25% in the collection of this tax.

“The increase in insurance taxation  can lead to a decrease in the protections that families and companies contract  and, consequently, in a greater exposure to risk by society as a whole and the country’s economy,” the sector remarks.

At  Uniteco Profesional , we are at the disposal of our policyholders for more information regarding the tax change and how it will affect their insurance contracts.

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