Parliament approves the insurance tax act

Comparing to the first draft of the act, which was originally subject to inter-governmental review process and details of which we covered in our January’s issue, the approved wording of the act contains several changes.

The approved wording introduces insurance tax in the amount of 8% from the insurance premium payment received (receivable booked, payable) from non-life insurance lines of business, except for the third party motor liability insurance, in case that the insured risk is located in the territory of Slovakia. As opposed to the original wording the new insurance tax will not apply to life insurance lines of business.

In general the insurance tax act defines the following moments when the tax liability arises:

1. The day when the insurance premium is received.

2. The day when the insurance premium receivable is booked.

3. The day when the insurance premium receivable is payable while it is up to the tax payer to choose one of the above methods and then apply it for the period of at least 8 calendar quarters.

Tax period is a calendar quarter and the deadline for filing of the tax return is set as the end of month following the end of the respective tax period.

The effective date was, based on the Parliament Committee proposal, changed to 1 January 2019 instead of originally planned 1 October 2018. The insurance companies would also be obliged to inform their clients about the new amount of insurance premium at least 10 weeks before the end of the insurance period.

Under the transitional provisions the insurance tax will apply if the insurance period begins after 31 December 2018 and the insurance premium payment is received, receivable is booked or payable (given the chosen method of tax liability determination) after 31 December 2018. For the purpose of the insurance tax act the insurance period should be period to which the insurance premium payment (or its part) relates.

The signature of the President is the next step of the legislative process. We will keep you informed about the next steps of the legislative process.