Study highlights negative impact of VAT on insurers

Aviva has welcomed the release of “The study to increase the understanding of the economic effects of the VAT exemption for financial and insurance services”, by the European Commission.

Produced by PwC, the study acknowledges the negative effect the current VAT regime has on insurers and recommends three key changes to support the EU insurance industry.

Firstly, the study proposes an extension of the scope of the VAT exemption for insurance-related services. It also suggests the introduction of VAT grouping in all Member States and the possibility to set up VAT Groups on a pan-European basis. Furthermore, the study calls for improved pan-European VAT guidance on the scope of exemptions to be available to Member States and taxpayers

Andrew Moss, group finance director, Aviva, said: “Aviva believes the Study makes a valuable contribution to the current review of VAT legislation for financial services. Without a future-proof amendment of the current rules, European insurers' costs will increase by many hundreds, or even thousands of millions of Euros. Some EU-based insurers have already relocated to more favourable tax regimes. Failure to act now is likely to mean more and more insurers looking to move out of the EU.”