Insurance tax

On 20 June 2018, the National Council of the Slovak Republic adopted the Act No 213/2018 [new Window; only Slovak language] on insurance tax and on amendments to certain laws (hereinafter "Insurance Tax Act” or “Act”). The Act is to come into effect on 01 October 2018, except Article I, paragraph 5 of Article IV, Article V and Article VI which are to come into effect on 1 January 2019. Articles II to V refer to other laws and, therefore, they will not be included in this overview which aims to inform about the new legal provisions concerning insurance tax, as referred to in Article I of the Act. Articles II to VI lay down changes in other laws as follows:

• Article II amends the Civil Code Act No 40/1964 [new Window; only Slovak language], Občiansky zákonník v znení neskorších predpisov,
• Article III amends the Accounting Act No 431/2002 [new Window; only Slovak language], as amended;
• Article IV amends the Income Tax Act No 595/2003 [new Window; only Slovak language], as amended;
• Article V amends the Act No 563/2009 [new Window; only Slovak language] on the tax administration and on amendments to certain laws (Code of Tax Administration), as amended;
• Article VI amends the Act No 39/2015 [new Window; only Slovak language] on insurance and on amendments to certain laws, as amended.

The provisions in Article I of the Insurance Tax Act will became effective as of 1 January 2019.

The objective of the new legislation is to introduce insurance tax to apply to non-life insurance business lines. Insurance tax will have the character of an indirect tax. As stated in the Explanatory Report to this Act, insurance tax is a standard implemented in a majority of the Member States of the European Union, which is largely due to the reason that based on Council Directive 2006/112/EC [new Window] on the common system of value added tax, insurance services in the European Union are exempt from value added tax. The introduction of insurance tax is fully in line with Article 401 of Council Directive 2006/112/EC [new Window]. Based on that Article, without prejudice to other provisions of Community law, the Directive must not prevent a Member State from maintaining or introducing taxes on insurance contracts, provided that the collecting of those taxes does not give rise, in trade between Member States, to formalities connected with the crossing of frontiers. This gives a Members State the possibility to introduce the tax.

Insurance tax related matters are also governed by EU law, namely the Directive of the European Parliament and of the Council 2009/138/EC [new Window] of 25 November 2009 on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II) (recast).

The insurance tax introduced by the Insurance Tax Act will replace the current 8% levy on premium receipts from non-life insurance business imposed under the Act No 39/2015 [new Window; only Slovak language] on insurance and on amendments to certain laws, as amended (hereinafter “Insurance Act”), governing the pursuit of insurance business in the Slovak Republic. Based on Section 68a of the Insurance Tax Act, insurance undertakings are obligated to pay the levy on premium receipts from non-life insurance business introduced as of 1 January 2017 by the end of 2018. One of the reasons for the introduction of insurance tax is the current learning indicating that the levy on premium receipts from non-life insurance business effective as of 1 January 2017 is a non-systemic and ineffective measure which causes application problems to insurance undertakings and differences in the treatment, for the purposes of the levy, of premium receipts from policies made before 1 January 2017 and those from policies made after that date. The new legislation, namely Article VI paragraph 1, terminates the imposition of the levy on non-life insurance premium receipts with effect from 1 January 2019. The introduction of insurance tax is intended to ensure a more transparent and unambiguous application as compared to the former 8% levy. The new tax will affect all non-life insurance products, except mandatory third-party motor liability (TPML) insurance for which the 8% levy will be maintained in accordance with Section 68 of the Insurance Act.

Information on insurance tax is broken down according to sections of the Act No. 2013/2018 Coll [new Window; only Slovak language]:

• Section 1 Subject matter of regulation
• Section 2 Basic provisions
• Section 3 Object of taxation
  • Insurance covering immovable properties and their parts, improvements and things situated inside them
  • Insurance of a means of transport
  • Travel insurance
  • Other insurance cases
• Section 4 Persons liable for the payment of tax to the tax administrator
  • Competent local tax authority
• Section 5 Incurrence of the tax obligation
• Section 6 Taxable amount
• Section 7 Correction of the taxable amount and tax
• Section 8 Tax rate
• Section 9 Foreign currency conversions and rounding of the tax amount
• Section 10 Tax period, tax return and due date of the tax payment
• Section 11 Record-keeping and record retention
• Section 12
• Sections 13 and 14 Transitional and final provisions

Section 1 Subject matter of regulation

Effective from 1 January 2019, the Insurance Tax Act implements and governs insurance tax (hereinafter “Tax”).

Section 2 Basic provisions

The provisions of Section 2 lay down certain definitions for the purposes of the Act.

For the purposes of the Insurance Tax Act, insurer means:

• An insurance undertaking referred to in Section 4 (1) and (2) of the Insurance Act. An insurance undertaking may have the legal form of a joint stock company or of a Societas Europea. Based on the provision of Section 4 (1) of the Insurance Act, an insurance undertaking is a legal entity established in the territory of the Slovak Republic which pursues insurance business on the basis of an insurance business authorisation granted by the National Bank of Slovakia [new Window] through a procedure under a special law. Based on Section 4 (2) of the Insurance Act, a captive insurance undertaking, which is an insurance undertaking owned by a financial institution other than an insurance undertaking, a re-insurance undertaking, or a group of insurance undertakings or reinsurance undertakings, or owned by an institution other than a financial institution whose purpose is to insure solely the risks of the institution(s) by which it is controlled or whose part it forms, is also considered an insurance undertaking. The purpose for which such insurance undertaking is established is insuring the owner’s own risks.
• An insurance undertaking of another Member State of the European Union or of a Member State of the European Free Trade Association (i.e. Norway, Lichtenstein and Iceland) which has signed the Agreement on the European Economic Area (hereinafter “Member State”). ‘Insurance undertaking of another Member State’ is to be understood as reference including both the head office and any branch of such insurance undertaking. The Act directly refers to Section 4 (3) and (4) of the Insurance Act: based on Section 4 (3) of the Insurance Act, an insurance undertaking of another Member State is a legal entity established in the territory of a Member State holding an insurance business authorisation granted in the home Member State; and based on Section 4 (4) of the Insurance Act, a branch of an insurance undertaking of another Member State is an organisational unit of the insurance undertaking of another Member State based in the territory of the Slovak Republic; a branch is understood as an office managed by an employee of the insurance undertaking of another Member State or another person holding an authorisation, unlimited in time, to pursue insurance business on behalf of the insurance undertaking of another Member State. An insurance business authorisation, also referred to as the “uniform European passport”, granted by the competent supervisory authority of the home Member State is valid throughout the European Union. Such authorisation, granted in whichever Member State, authorises the insurance undertaking to pursue insurance business throughout the territory of the Community either through a branch or on the basis of a right to free provision of services.
• Branch of a foreign insurance undertaking: based on the provision of Section 4 (6) of the Insurance Act, a branch of a foreign insurance undertaking is an organisational unit of a foreign insurance undertaking established in the territory of the Slovak Republic which pursues insurance business on the basis of an insurance business authorisation granted by the National Bank of Slovakia [new Window] through a procedure under a special law. The foregoing implies that a foreign insurance undertaking may pursue insurance business in the territory of the Slovak Republic only through its branch to which the National Bank of Slovakia has granted an insurance business authorisation.
• Foreign insurance undertaking: based on the provision of Section 4 (5) of the Insurance Act, a foreign insurance undertaking is a legal entity based in the territory of a country other than a Member State which holds an insurance business authorisation granted in the country in which it is based.
  As regards foreign insurance undertakings, the Act adopts a distinct treatment of a foreign insurance undertaking and of a branch of a foreign insurance undertaking even though they both are the same legal entity; this distinction is necessary for the determination of the person liable for the payment of insurance tax for the purposes of Section 4 (1) and (2) of the Insurance Tax Act.
• Slovak Insurers Bureau: [new Window] it is a legal entity whose scope of operation is specified in the Act No 381/2001 [new Window; only Slovak language] on mandatory third-party motor liability insurance and on amendments to certain laws, as amended.
• Export-import Bank of the Slovak Republic: [new Window] based on Section 1 (1) of the Act No 80/1997 [new Window; only Slovak language] on the Export-import Bank of the Slovak Republic, it is a specialised financial institution supporting exporters’ and importers’ foreign trade operations with the aim of improving the competitiveness of domestic goods and services and promoting the mutual economic exchange of the Slovak Republic with foreign countries. The Export-import Bank offers the insurance of exporters’ export credits and receivables against commercial risks. Such insurance operations are subject to insurance tax.

Policyholder means for the purposes of the Act the person that entered into the insurance contract with the insurer.

A relevant provision of the Act lays down the definition of “habitual residence” for the purposes of determining the location of the insured risk and, accordingly, the object of taxation. Habitual residence is the place where a natural person has been living for an extended time and maintaining personal and professional relationships.

Recharged insurance costs mean for the purposes of the Act a premium, or a portion of premiums, paid to a foreign insurance undertaking not having any branch in the territory of the Slovak Republic, which is claimed from, or attributed to, a legal entity by either the policyholder or a person other than the policyholder.

Section 3 Object of taxation

The object of taxation is the non-life insurance business lines listed in Annex 1 [new Window; only Slovak language] to the Act to the extent the insured risk is situated in the national territory. They include established non-life lines covering all types of risks typically insured in non-life insurance business.

Basically, the tax will be applied to the insurance premium paid under an insurance contract made with a domestic insurance undertaking, or an insurance undertaking of another Member State, or a branch of a foreign insurance undertaking.

Where a business similar to the business of an insurance undertaking is pursued by an entity other than an insurer within the meaning Section 2 (a) of the Act, such insurance will not be subject to insurance tax under the Act. The taxation extends only to insurances provided by insurance undertakings. This means that even if a particular legal relationship has the characteristics of insurance but the service provider is not an insurance undertaking, insurance tax will not be charged; as an example, insurance tax will not be charged on assistance services for motor vehicles provided by an entity other than an insurance undertaking.

Section 3 (2) sub-paragraphs (a) to (d) of the Act provides an exhaustive list of rules for the determination of the location of an insured risk. An insured risk will be deemed located in the national territory if:

1. The immovable properties and their parts, improvements and things situated inside them, except goods in commercial transit, which constitute the insured risk are located in the national territory;
2. The insurance covers any means of transport which is or should be registered in a relevant register maintained in the national territory;
3. The policyholder has entered into an insurance contract in the national territory with an insurance period of not more than four months and the insurance contract covers risks associated with travelling or a holiday, irrespective of the insurance business lines listed in Annex 1 [new Window; only Slovak language], and
4. In cases not referred to in the sub-paragraphs (a) to (c) above:
   • If the policyholder is a natural person, the principal consideration will be whether or not the policyholder has his/her habitual residence in the national territory;
   • If the policyholder is a legal entity, the principal consideration will be whether or not the registered office or establishment covered by the insurance contract is located in the national territory. The same location determination principle will be applied to the registered office or establishment of a legal entity to which insurance costs are recharged.

a) Insurance covering immovable properties and their parts, improvements and things situated inside them

The Act does not specifically define immovable properties and their parts, improvements and things situated inside them. Insurances covering such risk falls under items 8 and 9 of Annex 1 [new Window; only Slovak language] and the determination of whether or not the rule in Section 3 (2) (a) of the Act has been complied with will be based on consideration of the insurance contract as such and of the object covered by the insurance contract. Where the insured risks are immovable properties and their parts, improvements and things situated inside them and the same are located in the territory of the Slovak Republic, based on Section 3 (2) (a), the insured risk will be deemed located in the national territory whether or not the immovable property and its parts, improvements and things situated inside it are covered by the same insurance contract.

b) Insurance of a means of transport

The determination of whether or not the means of transport is subject to insurance tax will depend on whether the means of transport is, or should be, registered in a relevant register maintained in the national territory. For motor vehicles, the fact that a vehicle is, or should be, registered in the central motor vehicle register of the Slovak Republic means that the vehicle falls under Section 3 (2) (b) of the Act and, accordingly, any premiums received from insurance of that motor vehicle are subject to insurance tax.

The term “should be registered” is to be understood as meaning that the applicable legislation requires the vehicle to be registered in the Slovak Republic but, for some reason, the registration has not be made, which is due to either a breach of the statutory obligation to register the vehicle with the competent body of the Police Force, or to a different cause (e.g. due to the rule that the registration of a new vehicle can only be made if a document proving the existence of mandatory TPML insurance is produced, which means that the TPML insurance needs to be taken out before the registration itself).

Based on Section 114 (1) of the Act No 8/2009 [new Window; only Slovak language] on road traffic and on amendments to certain laws, as amended, where the approving authority has decided that the vehicle needs to be registered in the register of vehicles, such vehicle must be registered with the competent body of the Police Force [new Window] having jurisdiction over the vehicle holder’s place of residence or registered office, as applicable, or the address of its establishment; a vehicle to be operated by an organisational unit of an undertaking which is subject to registration with the Register of Companies has to be registered in a register kept by the competent body of the Police Force [new Window] having jurisdiction over the location of that organisational unit. Based on Section 114 (7) of the said Act No 8/2009 [new Window; only Slovak language], as amended, the competent body of the Police Force [new Window] will register any vehicle that is subject to mandatory TPML insurance in the register of vehicles, or make any changes in such registration, only upon production of a certificate or other proof of the existence of mandatory TPML insurance for that vehicle.

Based on Section 2 (b) of the Act No 381/2001 [new Window; only Slovak language] on mandatory third-party motor liability insurance and on amendments to certain laws, as amended, ‘domestic motor vehicle’ means a motor vehicle subject to registration in the register of vehicles of the Slovak Republic; the definition will also extend to any motor vehicle not subject to such registration whose owner, holder or operator has the permanent residence or place of business in the territory of the Slovak Republic, or a motor vehicle sent to the Slovak Republic from a different Member State for which the Slovak Republic is the country of destination, for a period of 30 days from the date the buyer has took over the motor vehicle, whether or not the motor vehicle has been registered in the Slovak Republic.

Where the object of insurance is a means of transport not subject to registration in the Slovak Republic, the determination of the location of the insured risk will be based on the rule laid down in Section 3 (2) (d) of the Insurance Tax Act.

c) Travel insurance

For insurances covering risks connected with travels or holidays, irrespective of the insurance business lines listed in Annex 1 [new Window; only Slovak language] to the Act, where the policyholder makes an insurance contract in the national territory to cover those risks and the insurance period of such contract is no longer than four months, the insured risk will be deemed located in the national territory based on Section 3 (2) (c) of the Act. The aim of adopting a different treatment of travel insurances with insured periods of four months or less is to encourage persons to take out insurance directly in the Member State from which the person travels and to facilitate the free movement of persons throughout the Community.

d) Other insurance cases

Where the insurance does not fall under the rules for the determination of the insured risk location laid down in Section 3 (2) sub-paragraphs (a) to (c) of the Act, the rules in Section 3 (2) (d) will apply and the determination will depend on whether or not the natural person or the legal person, as applicable, being the policyholder has his/her habitual residence, or its registered office or establishment to which the insurance contract relates, respectively, in the territory of the Slovak Republic. The same location determination principle will be applied to the registered office or establishment of the legal entity to which insurance costs are recharged.

The Act provides for a specific treatment of cases where the object of tax is goods in commercial transit which are excluded from the application of the insured risk location rule laid down in Section 3 (2) (a) of the Act; instead, the insured risk location rule laid down in Section 3 (2) (d) of the Act applies to such goods, i.e. the location is determined according to the policyholder’s habitual residence (for a natural person) or registered office/establishment (for a legal entity).

As stipulated in Section 3 (1) of the Act, an insurance is liable to tax if the insured risk is located in the national territory. The rules for the determination of the insured risk location are based on the rules laid down in Article 13 (13) sub-paragraphs (a) to (d) and Article 157 (1) and (3) of Directive of the EP and of the Council 2009/138/EC [new Window]. It can reasonably be supposed that the other Member States of the European Union and the European Economic Area which have implemented insurance tax also have their insured risk location rules based on the same principle since it follows from the harmonised legislation governing insurance.

Based on Section 3 (3) of the Act, re-insurance is not liable to tax.

Section 4 Persons liable for the payment of tax to the tax administrator

The provision of Section 4 (1) of the Act defines the insurance tax payer, i.e. the person liable for the payment of insurance tax to the tax administrator. The persons required to pay insurance tax to the state budged are insurers pursuing insurance business, i.e. insurance undertakings having their registered office in the national territory, insurance undertakings of other Member States and branches of foreign insurance undertakings.

Insurance provided by a foreign insurance undertaking that has not established a branch in the national territory but holds an insurance business authorisation granted in the country where it has its registered office will also be liable to taxation to the extent it provides insurance for an insured risk located in the national territory. In such cases, the person liable for the payment of tax to the tax administrator will be:

• The policyholder that has paid the premiums to the foreign insurance undertaking; if the policyholder recharges the premiums to another legal entity, the policyholder will be liable to tax to the extent of any portion of premiums not recharged (Section 4 (2) (a) of the Act); or
• If the policyholder recharges premiums to another legal entity, such legal entity will be liable to tax to the extent of the amount of the costs of insurance so recharged which relates to an insured risk located in the national territory (Section 4 (2) (b) of the Act).

The cases referred to in Section 4 (2) (a) and (b) involve the transfer of the tax obligation to the recipient of the service. The person liable for the payment of tax is thus the policyholder (i.e. a natural person or a legal entity) that has made the insurance contract with a foreign insurance undertaking having no branch in the national territory, or the legal entity to which the policyholder has recharged the costs of insurance relating to the insured risk located in the national territory.

Where the insurance contract is made between a policyholder and more than one insurance undertaking/insurance undertaking of another Member State/branch of a foreign insurance undertaking (hereinafter “co-insurer”), the person liable for the payment of tax under Section 4 (3) will be only the co-insurer which has incurred the payment obligation under the arrangement between the co-insurers liable for the payment of the whole tax. Where such arrangement does not assign the liability for the payment of tax to a particular single co-insurer, the tax payers will be all the co-insurers, each of them up to its share of premiums, as specified in the insurance contract. If any of the co-insurers is a foreign insurance undertaking having no branch in the national territory, paragraph 3 will not apply and the taxpayers will be the persons referred to in paragraph 1.

Competent local tax authority

Based on the provision of Section 12 of the Insurance Tax Act which foresees the application of the provisions of the Act No 563/2009 [new Window; only Slovak language] on the tax administration and on amendments to certain laws (Code of Tax Procedure), as amended, in the determination of the local tax authority competent (i.e. having the territorial jurisdiction) to act on and decide a tax related matter of a taxpayer, such determination will be made on the basis of the territorial jurisdiction principle laid down in Section 7 of the Code of Tax Procedure. Based on Section 7 (1) of the Code of Tax Procedure, the jurisdiction of a tax administrator will depend primarily on the taxpayer’s permanent residence, if a natural person, or registered office, if a legal entity, unless the Act or other special laws require otherwise. Where the territorial jurisdiction cannot be determined through the application of paragraph 1, the determination will be based on the location of the taxpayer’s organisational unit pursuant to the Commercial Codea [new Window; only Slovak language] (Section 7 (2) of the Code of Tax Procedure); and where the determination cannot be made according to paragraph 1 and 2, the competent tax administrator will be the Tax Office of Bratislava (Section 7(3) of the Code of Tax Procedure).

Special law requiring otherwise’ is to be understood in this case as the Act No 479/2009 [new Window; only Slovak language] on general government bodies in the area of taxes and charges and on amendments to certain laws, as amended. Based on Section 6 (3) (b) of that Act, an insurance undertaking, an insurance undertaking of another Member State, a branch of an insurance undertaking of another Member State and a branch of a foreign insurance undertaking fall within the jurisdiction of the Tax Office for Selected Taxpayers. The special law ‘requires otherwise’ for those taxpayers and, accordingly, the competent tax administrator of those entities is not determined on the basis of the legal entity’s registered office.

This means that if, based on Section 4 (1) of the Act, the person liable for the payment of tax is an insurer (i.e. an insurance undertaking, an insurance undertaking of another Member State, a branch of an insurance undertaking of another Member State and a branch of a foreign insurance undertaking), the competent local tax authority will be the Tax Office for Selected Taxpayers. If, based on Section 4 (2) of the Insurance Tax Act, the persons liable for the payment of tax are the policyholder and the legal entity to which the costs of insurance are recharged, the competent local tax administrator will be determined on the basis of the taxpayer’s permanent residence, if a natural person, or registered office, if a legal entity. For taxpayers whose competent local tax authority cannot be determined using primarily this rule, the competent authority will be the Tax Office of Bratislava.

Section 5 Incurrence of the tax obligation

The Act lays down provisions on the determination of the incurrence of the tax obligation separately for cases where the person liable for the payment of tax is the insurer (Section 4 (1) of the Act) and for cases where the person liable for the payment is the policyholder (Section 4 (2) (a) of the Act) or the legal entity to which the costs of insurance are recharged (Section 4 (2) (b) of the Act).

The determination of the incurrence of the tax obligation by the taxpayer, as referred to in Section 4 (1) (an insurance undertaking having its registered office in the national territory, an insurance undertaking of another Member State and a branch of a foreign insurance undertaking), will be made in accordance with Section 5 (1) sub-paragraphs (a) to (c) and the tax obligation may be determined to be incurred:

• As of the date when the premium payment was received and in the amount of such payment (Section 5 (1) (a)); based on Section 5 (7) of the Act, the receipt date of a premium payment is the date when the receipt of the premium receivable was recorded in the accounting; or
• As of the due date of the premium (Section 5 (1) (c)).

A taxpayer must elect one of the above approaches to the determination of when its tax obligations have been incurred. The election does not need to be notified to the tax administrator in advance, but the determination approach chosen must be indicated on the second page of the insurance tax return form. This obligation applies only to a taxpayer having the status of insurer. A policyholder and a legal entity to which costs of insurance are recharged will leave the cell empty. The approach to the determination of the incurrence of tax obligation chosen by the taxpayer must consistently be applied in at least eight consecutive calendar quarters.

Where the insurer is a foreign insurance undertaking and based on Section 4 (2) (a) of the Act, the person liable for the payment of insurance tax is the policyholder which paid the premium to the foreign insurance undertaking, the date of incurrence of the tax obligation will be the payment date of the premium or any part of it (Section 5 (3) of the Act). Based on Section 5 (7) of the Act, the payment date of the premium or any part of it will be the date when the payment was debited from the payer’s account, or the date when the payer’s obligation ceased to exist for a different reason. Such other reason may be, as an example, mutual set-off of debts.

Where the person liable for the tax payment under Section 4 (2) (b) of the Act is a legal entity to which the costs of insurance relating to an insured risk located in the national territory are recharged, the tax obligation will be incurred on the 30th day after the end of the calendar month in which the insurance cost recharging took place (Section 5 (4) of the Act). No specific definition of the cost recharging date is provided in the Insurance Tax Act. Consistently with the established meaning of the term, the cost recharging date is deemed to be the date when the legal entity recoded in the accounting its debt to the policyholder by which the costs were recharged.

If a taxpayer being an insurer referred to in Section 4 (1) of the Act decides to change the approach to the determination of the tax incurrence after it has been used for at least eight consecutive calendar quarters, the change procedure will be governed by Section 5 (5) and (6) of the Act.

Based on Section 5 (5) of the Act, if the taxpayer determines the incurrence of tax obligation on the basis of the receipt date of the premium payment, as referred to in sub-paragraph (1) (a), and such taxpayer decides to change the basis of its determination of the incurrence of tax obligation to the date when the premium receivable has been recorded in the accounting, as referred to in sub-paragraph (1) (b), or to the due date of the premium, as referred to in sub-paragraph (1) (c), a premium payment received after the effective date of such change will still be subject to determination of the incurrence of tax obligation according to sub-paragraph (1) (a) if

• The premium was written or payable before the effective date of the change of the determination approach;
• The premium payment was not received before the effective date of the change of the determination approach.

Based on Section 5 (6) of the Act, if the taxpayer determines the incurrence of tax obligation on the basis of the date the premium receivable has been recorded in the accounting, as referred to in sub-paragraph (1) (b), or on the basis of the due date of the premium, as referred to in sub-paragraph (1) (c), and such taxpayer decides to change the basis of its determination of the incurrence of tax obligation to the receipt date of the premium payment, as referred to in sub-paragraph (1) (a), the recording date of the premium receivable or the due date of the premium falling to a date after the effective date of such change will still be subject to the determination of the incurrence of tax obligation laid down in sub-paragraph (1) (b) or (1) (c), respectively, if the payment of the premium, or any part of it, was received before the effective date of the change of the determination approach.

Section 6 Taxable amount

Based on Section 6 of the Act, the determination of the taxable amount depends on who is the person liable for the tax payment (Section 4 of the Act): if the person liable for the tax payment is the insurer, the determination of the taxable amount will depend on what approach to the determination of the incurrence of tax obligation the insurer has elected to apply, as referred to in Section 5 (1) of the Act.

The insurer’s taxable amount will be determined as follows:

• If the tax obligation is incurred as provided for in Section 5 (1) (a), the taxable amount will be the amount of premiums received less tax; where the premium agreed for a particular insurance period is paid in instalments, the taxable amount will be the received premium instalment less tax, which means that the tax will be assessed on each premium instalment and each instalment will include tax;
• If the tax obligation is incurred as provided for in Section 5 (1) (b), the taxable amount will be the amount of the premium receivable less tax;
• If the tax obligation is incurred as provided for in Section 5 (1) (c), the taxable amount will be the premium due for payment less tax.

The calculation of tax on the premium received or on the premium receivable or on the premium due for payment, which is inclusive of tax, will follow the standard indirect tax assessment mechanism. Each individual premium payment, instalment, receivable or amount due for payment will be considered the price inclusive of tax on which the tax is to be assessed. The insurance tax amount will be calculated using an expression where the numerator is the product of the premium payment, receivable or amount due for payment and the applicable tax rate, and the denominator is the sum of 100 and the applicable tax rate.

The insurer’s taxable amount will be determined as follows:

• If the tax obligation is incurred as provided for in Section 5 (3), i.e. the tax obligation is incurred by the policyholder which paid the premium to a foreign insurance undertaking, the taxable amount will be the amount of the premium received;
• If the tax obligation is incurred as provided for in Section 5 (4), i.e. the tax obligation is incurred by the legal entity to which the costs of insurance attributable to an insured risk located in the national territory are recharged, the taxable amount will be the amount of the premium so recharged.

In the above cases the premium amount and the recharged costs of insurance will both be net of insurance tax.

The insurance tax will be calculated using an expression where the numerator is the product of the premium payment or the recharged costs and the applicable tax rate, and the denominator is 100.

Section 7 Correction of the taxable amount and tax

Where an increase or a reduction in, or cancellation of, the premium occurs after the end of the tax period in which the tax obligation was incurred, the taxpayer being an entity referred to in Section 4 (1), i.e. an insurance undertaking having its registered office in the national territory, an insurance undertaking of other Member State or a branch of a foreign insurance undertaking, or an entity referred to in Section 4 (2) (a), i.e. a policyholder which paid the premium to a foreign insurance undertaking, will make a correction of the taxable amount and the tax amount. The foregoing follows from Section 7 (1) of the Act.

Based on Section 7 (2) of the Act, a taxpayer being an entity referred to in Section 4 (2) (b), i.e. a legal entity to which the costs of insurance are recharged, will make a correction of the taxable amount and the tax amount insofar as the amount of the costs of insurance so recharged has increased or decreased after the end of the tax period in which the tax obligation was incurred.

The correction of the taxable amount and the tax amount will be made in the tax return for the tax period in which the matter necessitating the correction referred to in paragraph 1 or 2, as applicable, arose. This means that the correction of the taxable amount and the tax amount made under Section 7 (1) and (2) of the Act [new Window; only Slovak language] is not to be reported through an additional insurance tax return.

The determination of whether or not a correction of the taxable amount and the tax amount is to be made will be based on the reasons for the correction under consideration. Where the premium has increased or decreased on the basis of terms agreed in the contract, e.g. in a situation when the premium is adjusted additionally to reflect facts that were not known at the time the insurance contract was signed and that substantially affect the premium amount, and such adjustment has necessitated amendment of the insurance contract and the amendment has been accepted by the policyholder, such circumstances will substantiate correction of the taxable amount and the tax amount. Insurance contracts are made for periods ranging from several days to several years and where an insurance contract made for a particular insurance period is extended to another insurance period but, based on the Parties’ agreement, the contractual relationship continues on different terms including a different premium amount (e.g. due to the policyholder’s loss record for the current insurance period), such circumstances will not substantiate correction of the taxable amount and the tax amount for the preceding period.

If the taxpayer has assessed and paid the tax amount incorrectly, e.g. because of using a wrong insurance amount basis, or has paid insurance tax on amounts which are not subject to tax based on Section 3 of the Insurance Tax Act, etc., the correction of the taxable amount and the tax amount cannot be made in the tax return for the tax period in which such fact has been established. This means that in cases where the correction of the taxable amount and the tax amount is to be made on a basis other than referred to in Section 7 (1) and (2) of the Act and the correction affects the tax amount, the taxpayer must file an additional insurance tax return.

Section 8 Tax rate

The tax introduced by the new legislation replaces the existing 8% levy on non-life insurance premiums imposed under Section 68a of the Insurance Act [new Window; only Slovak language]. The insurances listed in Annex 1 [new Window; only Slovak language] to the Act will be subject to an 8% tax rate. The tax rate applicable to third-party motor liability insurance listed in Annex 1 [new Window; only Slovak language] in item 10 sub-paragraph (a) is 0% for the reason that this business line will continue to be subject to the 8% levy on premium receipts imposed under Section 68 of the Insurance Act.

Section 9 Foreign currency conversions and rounding of the tax amount

The provision of Section 9 of the Act lays down rules for cases where the premium is paid in a foreign currency and rules for rounding the tax amount.

Where the premium is paid an a currency other than the euro, the taxpayer must translate the premium amount for the taxation purposes to euros using a reference conversion rate determined and published by the European Central Bank [new Window] or the National Bank of Slovakia [new Window] which is effective:

• On the last day of the tax period, or the next day if no such rate was determined or published on the last day; or
• On the date specified in the special law, namely Section 24 (2) (a) of the Accounting Act No 431/2002 [new Window; only Slovak language] as amended.

The taxpayer may elect any of the above premium conversion methods provided that the election will be binding during the whole calendar year.

Where a correction of the taxable amount or the tax amount is made, the conversion rate used at the time of incurrence of the tax obligation will be applied. This means that the conversion rate used in the correction of the taxable amount or the tax amounts must be identical to the rate which was used by the taxpayer for the conversion of its premium receipts or payments or recharged costs of insurance denominated in a different currency at the time of incurrence of the tax obligation.

The calculated tax amount is to be rounded to the nearest whole cent, namely down for sums below EUR 0.005 and up for sums of EUR 0.005 or above.

Section 10 Tax period, tax return and due date of the tax payment

The tax period is a calendar quarter. The taxpayer must file its tax return, and make the tax payment, by the end of the calendar month following the end of the tax period. A taxpayer will not be required to file a tax return if no tax (payment) obligation, or taxable amount/tax amount correction obligation under Section 7 (1) or (2) of the Act, has been incurred in the tax period. This means that even if the taxpayer has incurred the tax obligation in respect of its mandatory TPML business, the applicable tax rate is zero and no tax payment obligation is incurred and, accordingly, no tax return will be filed.

A taxpayer is required to file its tax returna solely by electronic means (Section 10 (3) of the Act) and in the manner provided for in Section 13 (5) of the Code of Tax Procedure [new Window; only Slovak language] and solely through the electronic registry of the Financial Administration’s portal. The insurance tax return template is set out in the Measure of the Ministry of Finance of the Slovak Republic No MF/010937/2018-731 [.pdf; 201 kB; new Window] of 30 July 2018 laying down the tax return form, as published in Item 15 of the Financial Journal 2018 [new Window]. The notification of the issuance of the said Measure was published in the Collection of Laws of the Slovak Republic under No 236/2018 [new Window; only Slovak language]. A specimen instruction for the completion of the tax return form is set out in the Communication of the Ministry of Finance of the Slovak Republic MF/010937/2018-731 [.pdf; 153 kB; new Window] on the issuance of an instruction for the completion of the tax return form, as published in Item 16 of the Financial Journal 2018 [new Window].

Values in the tax return are to be rounded to the nearest whole cent, namely down for sums below EUR 0.005 and up for sums of EUR 0.005 or above.

Where the insurance undertaking or insurance undertaking of another Member State has one, or more than one, branch in the national territory or in another Member State, the insurance undertaking must also indicate in its tax return information on the tax obligations incurred in the national territory in respect of those branches.

Based on Section 10 (4) of the Act, a taxpayer which is subject to the obligation to file a tax return and does not have any tax identification number assigned for insurance tax must file a tax registration application and such filing must be made no later than five days after the end of the tax period in which its obligation to file a tax return was incurred. The filing of such registration application will not be subject to the obligation to make all filings by electronic means, unless such obligation arises for such taxpayer under Section 14 (1) of the Code of Tax Procedure [new Window; only Slovak language]. The Tax Office will issue a tax registration certificate and assign a tax identification number and communicate that number and the tax administrator’s account number to the taxpayer within ten days from the filing date of the registration application. No tax registration obligation arises from the provision of Section 10 (4) of the Act for a taxpayer which has already been assigned a tax identification number. The above provision is, however, without prejudice to the taxpayer’s obligation arising from Section 67 (9) of the Code of Tax Procedure [new Window; only Slovak language], to notify the tax administrator, in the manner provided for in Section 13 (5) of the of the Code of Tax Procedure [new Window; only Slovak language], of any change in the facts declared at the time of registration and to extend the registration to insurance tax.

Also, no tax registration obligation will arise for taxpayers which are currently liable to the non-life insurance premium levy (under Section 68a of the Insurance Act [new Window; only Slovak language], effective until 31 December 2018) since they become registered taxpayers by virtue of law (Section 13 (3) of the Act) as of the effective date of the Insurance Tax Act.

Section 11 Record-keeping and record retention

To be able to properly assess the tax, taxpayers are required to keep specific records for each tax period. The provision of Section 11 defines the content of such records and their retention time, which is at least by the end of the time limit for the lapse of the right to assess tax under Section 69 of the Code of Tax Procedure [new Window; only Slovak language].

Records required for the proper tax assessment are to contain, without limitation, the policyholder’s name, surname and habitual residence, if a natural person, or the policyholder’s registered name and the address of its registered office or establishment, if a legal entity, and the insurer’s registered name and the address of its registered office or branch, and the insurance contract number, premium amount, taxable amount, tax amount, tax rate and indication as to the location of the insured risk in the national territory.

If so requested by the tax administrator, the taxpayer must submit any records not having the prescribed structured form by electronic means in the manner provided for in Section 13 (5) of the Code of Tax Procedure [new Window; only Slovak language].

§ 12

The administration of insurance tax is governed by the provisions of the Code of Tax Procedure [new Window; only Slovak language]. The Insurance Tax Act specifically regulates certain specific taxpayers’ obligations, for example: to file an insurance tax return (Section 10 (3)); to submit at the tax administrator’s request records supporting the proper assessment of tax (Section 11 (3)); to file a registration application (Section 10 (4)); to obtain the statutory registration (Section 10 (4) and Section 13 (3)). This means that the administration of insurance tax is governed by the provisions of the Code of Tax Procedure [new Window; only Slovak language], unless the Act governs the administration of the tax through specific provisions. Any matters concerning, for example, the execution of tax audits, termination of registration, or filing of additional tax returns are governed directly by the Code of Tax Procedure [new Window; only Slovak language].

Sections 13 and 14 Transitional and final provisions

The application of insurance tax is provided for in the transitional provision. The transitional provision addresses the payment of tax separately in cases where the person liable for the payment of tax is the insurer (Section 4 (1) of the Act) and in cases where the person liable for the payment is the policyholder (Section 4 (2) (a) of the Act), or the legal entity to which the costs of insurance are recharged (Section 4 (2) (b) of the Act).

Where the tax obligation attaches to the insurer (an insurance undertaking having its registered office in the national territory, an insurance undertaking of another Member State or a branch of a foreign insurance undertaking) as the taxpayer, the tax will be applied if the conditions laid down in the Act have been fulfilled at the same time appropriately to the respective option chosen by the taxpayer to determine the incurrence of tax obligation, as provided for in Section 5 (1) sub-paragraphs (a) to (c) of the Act.

Based on Section 13 (1), tax will be applied if the insurance period commences after 31 December 2018 and

1. the payment of the premium or its part is received after 31 December 2018, if the taxpayer’s tax obligations is incurred as referred to in Section 5 (1) (a); or
2. the premium is written after 31 December 2018 and the payment of the premium or its part is received after 31 December 2018, if the taxpayer’s tax obligations is incurred as referred to in Section 5 (1) (b); or
3. the payment is due after 31 December 2018 and the payment of the premium or its part is received after 31 December 2018, if the taxpayer’s tax obligations is incurred as referred to in Section 5 (1) (c).

This means that, based on the transitional provisions, the tax will be applied if the insurance period commenced after 31 December 2018 and the payment is received or the premium is written or due (depending on the elected method of determining the incurrence of the tax obligation) after 31 December 2018.

Where the tax obligation is incurred by a taxpayer being the policyholder or the legal entity to which the costs of insurance are recharged, the tax will be applied under Section 13 (1) if the insurance period commences after 31 December 2018 and

4. the payment of the premium of its part is made by a taxpayer referred to in Section 4 (2) (a) after 31 December 2018, or
5. the costs of insurance are recharged to a taxpayer referred to in Section 4 (2) (b) after 31 December 2018.

Based on Section 13 (2) of the Act, the insurance period is the period of time to which the payment of the premium or its part relates.

Based on Section 13 (3) of the Act, an insurer which has incurred an obligation to pay the levy on premium receipts from non-life business (under Section 68a of the Insurance Act [new Window; only Slovak language], as effective until 31 December 2018) will become a tax entity registered for insurance tax with effect from the effective date of the Act. If a taxpayer does not have a tax identification number, the Tax Office must issue a tax registration certificate and assign and communicate a tax identification number to such taxpayer no later than 28 February 2019.

The Insurance Tax Act [new Window; only Slovak language] transposes into national law Directive of the European Parliament and of the Council 2009/138/EC [new Window] of 25 November 2009 on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II) (recast), as amended.

Since the Insurance Tax Act [new Window; only Slovak language] replaces the current 8% levy on premiums received from non-life business imposed under Section 68a of the Insurance Act [new Window; only Slovak language], by insurance tax, specific deadlines and process for the last levy payment have been provided for in order to avoid double taxation. The obligations of payers of the levy are governed by a transitional provision made in Article VI Section 205a of the Insurance Tax Act [new Window; only Slovak language] effective from 1 January 2019, which amends the Insurance Act [new Window; only Slovak language].

The special levy will continue to be imposed on premiums from insurance contracts according to the terms laid down in Section 205a (1) and (2) of the Insurance Act [new Window; only Slovak language]. Based on Section 205a (1) of the Insurance Act [new Window; only Slovak language], an insurance undertaking, an insurance undertaking of another Member State or a branch of a foreign insurance undertaking is required to pay the levy imposed under Section 68a (1) of the Insurance Act [new Window; only Slovak language], as in force until 31 December 2018, on premiums received from non-life business for December 2018 by 31 January 2019; and based on Section 205a (2) of the Insurance Act [new Window; only Slovak language], an insurance undertaking, an insurance undertaking of another Member State or a branch of a foreign insurance undertaking is required to pay the levy on premiums received from non-life business imposed under Section 68a of the Insurance Act [new Window; only Slovak language], as in force until 31 December 2018, in respect of insurance contracts with an insurance period commenced before 1 January 2019 which are subject to the levy on premiums received from non-life business imposed under Section 68a of the Insurance Act [new Window; only Slovak language], as in force until 31 December 2018, until the beginning of the next insurance period.

The provisions in Article I of the Insurance Tax Act [new Window; only Slovak language] concerning insurance tax will became effective as of 1 January 2019.