The Swiss Federal Tax Administration (hereafter: “SFTA”) has recently decided to focus on a little-known issue: the stamp duty on insurance premiums.
This tax is levied on insurance premiums that are:
- part of a Swiss portfolio of an insurer subject to Swiss insurance supervision or of a Swiss insurer enjoying public-law status, or
- if a Swiss entity (as policyholder) takes out a policy from a non-Swiss insurer not subject to the Swiss insurance supervision.
Tax audits more focused on insurance stamp tax
As of late, the Swiss Federal Tax Administration has become more prone to auditing group companies, in particular those located in western Switzerland and in the canton of Zug. The SFTA’s particular focus seems to be on companies in the trading, shipping and pharmaceutical sectors. Due to the nature of their business, they seem to be more willing to contract insurance policies with non-Swiss insurer.
The nature of the damage covered determines whether the contract is subject to insurance stamp tax
The stamp tax on insurance premiums is defined in the Swiss stamp law/circular which is well known for being extremely formal and specific, incorporating many exceptions. For example, as soon as a Swiss company concludes an insurance contract, which is often the case when a trading company wants to insure its civil liability for damages that could occur during transportation (e.g. oil spill) or to cover contractual fines and penalties, the contract is likely to be subject to stamp duty on insurance premiums.
The potential tax risks could be significant
The tax is calculated on the net cash premium and amounts to 5% (and 2.5% for life insurance). Moreover, in case of outstanding payment, which is the case when the lack of payment is determined during an audit for instance, the late payment interest is set at 5% per annum.