Insurance Premium Tax

On February 21, 2013, the Court of Justice of the European Union ("CJEU") ruled that article 50 of Directive 2002/83/EC concerning life assurance is to be interpreted as meaning that a Member State's right to subject to an indirect insurance tax on life insurance premiums paid by the individual policyholder residing in this Member State overrides the Member State's taxing rights where the contract was concluded.

The right to levy indirect taxes on life insurance products rests with the Member State where the policy holder resides at the time of the levy

The facts and questions at issue

The issue at stake was the interpretation of article 50 of Directive 2002/83/EC (the "Directive") which provides that insurance contracts shall be subject exclusively to the indirect taxes on insurance premiums in the Member State of the commitment. The "Member State of commitment" is defined by the Directive as the Member State in which the policyholder has his/her habitual residence.

In the case at hand a Dutch insurance company with no presence in Belgium had contracted a life insurance contract with several persons residing in the Netherlands at the time of the entering into the agreement. Those persons however subsequently moved their residence to Belgium. The question therefore became as to whether the Netherlands retained their taxing right on the insurance premium since the policy holders lived there initially ("static interpretation of article 50"), or whether that right vested with Belgium as of the day of the change of residency ("dynamic interpretation of article 50").

The ruling by the CJEU in favour of the dynamic interpretation

The CJEU rules...