Global life and pensions provider Aviva has revealed its support for the publication of the PricewaterhouseCoopers produced 'The Study to Increase the Understanding of the Economic Effects of the VAT Exemption for Financial and Insurance Services', by the European Commission.
Following an analysis of the current VAT regime, the study proposed key changes to remedy the negative effect the regime has on insurers, and to support the EU insurance industry.
These include the exploration of an extension of the scope of the VAT exemption for insurance-related services, the introduction of all member states and the possibility to set up VAT groups across Europe as well as improving the pan-European VAT guidance on the scope of exemptions to be available to member states and taxpayers.
Andrew Moss, group finance director of 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 favorable tax regimes. Failure to act now is likely to mean more and more insurers looking to move out of the EU.
The review of the VAT legislation was a response to a 2005 ruling by the European Court of Justice, which discovered that the current legislation could lead to many of the services insurers currently outsource, such as policy records maintenance and claims handling, would start to bear VAT.
Currently, national VAT grouping is permitted in only a few member states.