Insurance tax – a new tax in the Slovak Republic

Since 1 January 2019, the Slovak Republic is going to introduce a new kind of insurance tax. This tax will burden only non-life insurance, such as accident insurance, sickness insurance, transport or credit insurance, liability insurance (with the exception of compulsory contractual insurance subject to another levy). The exact scope defines appendix no. 1 to the approved act. Life insurance will not be subject to this tax.

In most cases, the 8% insurance tax will be levied and paid to the state budget by insurance companies based in the Slovak Republic or insurance companies from other EU member states or the European Economic Area (Norway, Liechtenstein, Iceland). This tax will be part of the premium paid by the policyholder, that is, the person who has entered into an insurance policy with the insurance company.

However, there may be cases, where another person than the insurance company will pay a tax on insurance to the state budget. There will be two cases:

• A policyholder who signs the insurance contract directly with a foreign insurance company. A foreign insurance company is understood to be an insurance company from outside the EU or from outside the European Economic Area, which does not have a branch in the Slovak Republic
• Group insurance – if the parent company in the Group concludes a group-wide insurance, subsequently transfers the costs of this insurance to individual companies in the Group and this insurance was concluded with a foreign insurance company without a branch in the Slovak Republic, the legal person, to whom such insurance has been charged, is required to pay the insurance tax.

In such cases, the policyholder or legal entity, to whom the Group's insurance premiums have been charged, is obliged to pay 8% of the insurance tax to the state budget. The basis of the tax is in these cases the amount of the premium or the cost of the insurance.

The taxing period is a calendar quarter. The Act further regulates when exactly the tax liability arises when the insurance risk, which is subject to the tax on insurance, is located in the Slovak Republic, the content of the recording obligation, when the tax is due, etc.

Finally, we would like to add that the introduction of the insurance tax is also supported by European legislation, through the VAT Directive, which stipulates that insurance services are exempt from VAT, but that Member States may impose taxes on insurance contracts.