In 1657, the Danish King Frederik III introduced a tax on stamped documents (stamp duty) in order to finance the war against Sweden. Even though there has not been war between Denmark and Sweden since 1814, the stamp duty has survived until today, although since 2000 it has only applied on non-life insurance. With effect from 1 January 2013, the stamp duty will be abolished. Instead, a new tax on non-life insurance will be introduced.
First and foremost, the new tax is a modernization of the stamp duty. Stamp duty is charged when an insurance policy is created. It was originally paid when the insurance policy received its official stamp. Today, however, stamp duty is almost exclusively paid via monthly returns. The new tax will be a ‘regular’ tax and will be similar to other Danish excise duties, such as the Danish tax on motor liability insurance and pleasure boat insurance.
In general, insurances that are currently subject to stamp duty will be subject to the new tax. However, there are some changes:
- Third party liability insurance for motor vehicles will be exempt from the new tax. The current exemption for insurances where the sum insured does not exceed DKK12,000 will be abolished. This change means that extended warranty insurances, e.g. for televisions, computers and refrigerators will be taxable from 1 January 2013.
- The method for calculating the tax on combined insurances will change. For example, household insurance that includes fire and water damage. The stamp duty on this type of insurances is currently calculated on the insurance with the highest premium. From 1 January 2013, the tax will be calculated on the total premium.
Changes to the tax rate, period and foreign companies
The other changes relate to the tax rate, period, and foreign insurance companies The changes are:
- The tax rate is 1.1 percent of the charged premium.
- The tax must be reported and paid no later than the 15th of the month following the tax period (month).
- Insurance companies established in the EU, Norway, Iceland, Liechtenstein, Greenland and the Faroe Islands can register without appointing a Danish representative. Insurance companies established in other countries must appoint a Danish representative.
- A Danish representative will be jointly and severally liable for payment of the tax. According to the transition rule, as of 1 January 2013, all charged premiums are liable to the new tax, even if stamp duty has previously been paid for the same insurance policy.
If there is irregular charging of premiums before the new regime comes into effect, the law holds a precautionary measure which implies that these premiums will be liable to the tax.