• Service: Tax, Global Indirect Tax
  • Type: Business and industry issue
  • Date: 6/24/2013

Belgium – Belgian Insurance Premium Tax: CJEU rules in favor of “dynamic” interpretation of the habitual place of residence 

GITB June 2013 - Belgium

On 21 February 2013, the CJEU ruled that article 50 of Directive 2002/83/EC concerning life assurance is to be interpreted as meaning that a member state may apply the insurance tax on life insurance premiums paid by the individual policyholder, resident in this member state irrespective of the country where the contract was concluded.1

With this judgment, the CJEU decided in favor of a “dynamic” interpretation of article 50 of the directive on life insurance, and did not follow the opinion of the advocate general who considered that a “static” interpretation of this provision should prevail.2 The “static” interpretation meant that the place of residence was to be taken into account to determine which member state has the taxing power would be the place of residence of the policyholder at the moment the contract was concluded.

The case

The case concerned an insurance company established in the Netherlands that concluded life insurance contracts with a number of individuals who were resident in the Netherlands at the time the contract was concluded, but moved to Belgium afterwards.

The Belgian tax authorities considered that as the policyholders were resident of Belgium in the years concerned, the insurance company was liable for Belgian annual tax on life insurance, while the insurance company considered that indirect taxes on assurance premiums could only be perceived by the member state where the policyholder had his/her habitual residence at the time the contract was concluded.

Article 50 § 1 of the directive on life insurance: “static” or “dynamic” interpretation?

The issue at stake was the interpretation of article 50 of Directive 2002/83/EC which provides that every assurance contract shall be subject exclusively to the indirect taxes on insurance premiums in the member state of the commitment. It also provides that the law applicable to the contract shall not affect the fiscal arrangements applicable.

The “member state of commitment” is defined by the directive as the member state in which the policyholder has his/her habitual residence.

However, the directive does not mention if the habitual place of residence of the policyholder to be taken into account is the place of residence at the moment the contract was concluded or at the moment the premiums are paid. The directive remains unclear about how the provision should be interpreted.

Objectives of the directive are decisive to interpret its provisions

Consequently the CJEU analyzed the objectives of article 50, and of the life insurance directive to determine how this article should be interpreted. The Court concludes that those objectives are better achieved if article 50 is interpreted in a “dynamic” way. The decision is based on the following considerations:

  • The objective of article 50 is the allocation of taxing powers on insurance premiums between member states. As the tax is due when premiums are paid, and not at the moment the insurance contract is concluded, the CJEU considers that the criterion of habitual residence should be assessed at the moment these payments occur.
  • As regards the objective of preventing distortions of competition, the CJEU notes that the directive tends to ensure that all life insurance policies offered to an individual are subject to the same fiscal rules, irrespective of the member state where the insurance company is established so that the choice of service provider is not influenced by tax considerations. This objective can only be achieved through the “dynamic” interpretation.
  • Completing the internal market in direct life assurance, from the point of view both of the right of establishment and of the freedom to provide services in the member states, is one of the essential objectives of the directive. The CJEU notes that insurance companies must verify the tax rules currently applicable at the place of residence of their policyholders, even if they did not choose to provide services in other member states. However, the Court considers that this administrative burden is also present when the member state with the taxing power remains the same. That member state indeed always has the possibility to modify its tax regime. As a consequence, the administrative burden would also exist if the “static” interpretation would prevail.

Insurance companies must verify tax rules currently applicable in each member state where policyholders reside

The decision relates to life insurance contracts taken out by an individual and not by a legal entity.

However, this decision may have a broader application and could also be applied to non life insurance contracts unless another place of risk prevails (e.g. location of the building).

On the other hand, the determination of the place of risk for contracts concluded by a legal entity could be a more complex exercise. We refer, for example, to the Kvaerner case3 in this respect.

As a consequence of the CJEU’s decision, insurance companies should monitor the place of residence of their policyholders and monitor indirect taxes rules on insurance premiums across all member states to be able to fulfill their obligations, even if they have decided not to provide their services in any other member states.


1 Case C-243/11, RVS Levensverzekeringen.

2 Advocate General Opinion of 6 September 2012.

3 Case C-191/99, Kvaerner, 14 June 2001.

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Kris Lievens

+32 (2) 708 4761

Adrian Smith
KPMG in the UK

+44 20 7311 2427

Global Indirect Tax Brief: June 2013

GITB: June 2013
Articles in this edition highlight the increasing importance of indirect tax as one of the most important sources of revenue for governments.