The French tax authorities updated their official guidelines on 27 April 2022 concerning the VAT exemption of insurance and reinsurance transactions and the supply of services relating to these transactions by insurance brokers and insurance agents.
Concepts of insurance transaction and insurance or reinsurance service supplier
The French tax authorities have adopted in their guidelines the definition of an insurance transaction as set out in community case law (ECJ, Card Protection Plan, Försäkringsaktiebolaget Skandia, Aspiro): “an insurance transaction is, as generally understood, that the insurer undertakes, in return for prior payment of a premium, to provide the insured, in the event of materialisation of the risk covered, with the service agreed when the contract was concluded. By its nature, the existence of an insurance transaction implies the existence of a contractual relationship between the provider of the insurance service and the person whose risks are covered by the insurance, that is to say, the insured party”.
It specifies, in accordance with this case law, that the benefit of the VAT exemption of an insurance or reinsurance transaction depends on the nature of the service, and not on the regulatory status of the taxable person carrying out the transaction. As a reminder, the former administrative guidelines referred to the regulatory status of the operators and indicated that the exemption applied to “all transactions which are carried out by insurance companies acting as such in the context of their regulated activity”.
The tax authorities indicate that insurance companies, health insurance companies and any other insurer benefit from the VAT exemption for insurance and reinsurance services that they carry out on their own account (or in their name and on behalf of a third party). The fact that they are governed by the Insurance code or the Mutual Societies code (“code de la mutualité”) is irrelevant.
Certain clarifications included in the previous version of the tax authorities’ guidelines are maintained in this new version : in particular, the benefit of the VAT exemption provided for by Article 257 bis of the French tax code (TOGC) for transfers of insurance and reinsurance contract portfolios ; also, the fact that optional insurance offered by a service supplier constitutes an exempt insurance transaction, distinct from the main transaction (Administrative Court of Appeal of Lyon, case related to skis hire).
Notion of services relating to insurance and reinsurance transactions carried out by insurance brokers and insurance agents
The tax authorities clarify that the notion of insurance or reinsurance broker or insurance agent depends on the content of the transactions carried out, and not on the regulatory classification.
Therefore, the tax authorities reaffirm the notion of broker or insurance agent by reference to the definitions of European case law (in particular, Aspiro case law, 17 March 2016): for this status to be recognised, taxable persons must, on the one hand, have a relationship with both the insurer and the insured party; on the other hand, their activities must cover the essential aspects of the work of an insurance broker or agent, such as the finding of prospective clients and their introduction to the insurer.
The tax authorities define the notion of “finding of prospective clients” in a broad manner: it covers all actions that consist in identifying and contacting potential new clients with a view to the conclusion of insurance contracts, without the actual conclusion of a contract at the end of their intervention being decisive. It also covers actions that consist of presenting new guarantees to an insured party or renewing an insurance contract already in place.
It should be noted that the supply of services relating to insurance and reinsurance transactions is exempt only if it is provided by a taxable person acting as an insurance broker or as an insurance agent.
The notion of services relating to insurance transactions is defined broadly by the authorities: it concerns all services linked to an insurance or reinsurance transaction (in particular; issuing contracts, premium collection, managing policies and claims, assessing damage, etc.). However, such services can only be exempt if they are provided by an insurance broker or insurance agent acting as such.
Thus, for example, a services supplier who provides mediation services to an insurer by marketing its insurance products, as well as contract and claim management services, benefits from the exemption both for the mediation services and for the contract and claim management services.
On the other hand, the tax authorities specify that if the service supplier performs contract and claims management services without mediating in the conclusion of the contracts for the managed portfolio, these services, although they relate to insurance transactions, are not performed by a person whose activities cover the essential aspects of the work of an insurance agent. They are therefore automatically subject to VAT.
Note that the French Tax Authorities indicate that traders may until 31 December 2022 continue to rely on the previous version of the guidelines. This possibility is justified by the need to consider the time needed to adapt information systems to the new guidelines.