The CJEU rules on insurance premium taxation: a guide for group insurance taxation?
(Article by Viktoria Chatzara – Senior Associate and Paraskevi Res – Associate of Rokas Law Firm, published on Lexology Navigator – Insurance & Reinsurance for Greece, 27 March 2019)
European Union
On 17 January 2019 the Court of Justice of the European Union (CJEU) issued its decision on case C-74/18,
following a reference for a preliminary ruling from the Finnish Supreme Administrative Court. The ruling
concerns the definition of the “Member State in which the risk is situated” under Article 13(13) of the Solvency
II Directive, and aims at determining in which member state insurance premium taxation shall been.
The facts of the case
The CJEU’s preliminary ruling was issued in the context of a case referring to insurance cover provided via the
freedom of services (FoS) regime in Finland by an insurer based in the UK. The insurance products in question
provided cover in the context of acquisitions for the loss sustained by the buyer, as a result of the breach of the
representations given by the seller (“warranty and indemnity insurance”), or in the event that the target
company became liable to tax in respect of the period it was owned by the seller (“tax liability insurance”). The
issue that came up concerned the cases where the policyholder (either the buyer or the seller) was a Finnish
entity, while the target company was established abroad; and, in reverse, where the policyholder was a foreign
entity and the target company was established in Finland. In such cases the need arose, to determine in which
state the relevant premiums would be taxed.
The insurer applied for a tax ruling to the Finnish Central Tax Board (Board), which stated that if the insurance
is provided to a Finnish company and the target company is established in another Member State, the insurance
premiums are not subject to tax in Finland. By contrast, if the insurance is provided to a foreign company and
the target company is established in Finland, the insurance premiums will be subject to tax in Finland. The
insurer brought an action against said tax ruling before the Finnish Supreme Administrative Court (Court),
which in turn decided to refer the issue to the CJEU for a preliminary ruling on the interpretation of the first
subparagraph of Article 157(1) of Solvency II Directive, read in conjunction with Article 13(13) thereof.
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