Decoding The Complexity Of Fire And Property Damage Insurance In Germany

Author:Ms Ying Chen
Profession:TMF Group

In Germany, there is a complicated tax regime concerning Fire and Property Damage insurance. What is the total tax amount due when 60% of the premium subject to a rate of 22% Insurance Premium Tax (IPT), and 40% of the premium subject to a rate of 22% Fire Brigade Charge (FBC)? This is the tax calculation on a fire only policy. In addition, there is fire premium split rules behind the scene. Tedious? Let's take a closer look at taxes on Property & Fire insurance in Germany.

In general, an insurance contract in Germany is subject to a 19% insurance premium tax on 100% of the premium, and the insured is liable for the tax. When fire peril is covered in a policy, under some circumstances the Federal Central Tax Office divides the amount of tax paid into IPT and FBC, and the insurer is regulated as the tax debtor for FBC.

Many of our clients are aware of the split of tax amount to attend both taxes when a policy covers residential building or home contents. However, they get confused with how to run the calculation when it comes to a fire only policy or a policy covering multiple perils including fire.

Is it a fire only policy?

If this is a policy covering properties damaged by fire only - regardless of the type of the property covered (fire insurance and insurance against business interruption by fire only) - a 22% rate of tax should be applied on the net premium; 60% of the tax amount is considered as IPT, and 40% goes to FBC.

Does the cover concern residential buildings or buildings mainly for commercial purposes?

If the building in question is a residential building and / or that building's contents, regardless of whether fire is covered, a 19% tax rate is applicable; 85% of the tax amount is IPT, and the rest belongs to FBC. For the contents, tax splits into 84% and 16% with the rate remaining at 19%. If the policy covers only fire peril, it is then considered a fire only policy and the 60/40 split applies instead.

If the...

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