October 29, 2020 – The governing coalition wants to bring the law change through the Bundestag on Thursday. This means that, among other things, contributions for personal insurance policies in which the policyholder and the insured person are not related are taxable. The objections of the insurance industry were hardly taken into account. The FDP sees a bureaucracy monster approaching the insurers. Alliance 90 / The Greens spoke of a poorly crafted reform project.
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The law on insurance tax law, which has been in force since 1996, is to be modernized according to the will of the federal government and also adapted to the latest case law.
Among other things, there are plans to limit the tax exemption for personal insurance to policies in which the policyholder and the insured person are related. As a result, for example, contributions to occupational disability insurance that companies take out for their employees are taxable.
The insurance industry is getting a reprieve
This is what the “Act on the Modernization of Insurance Tax Law and Changes to Employment Law Regulations” (Bundestag printed paper 19/21089, PDF – 687 KB). It will be decided on Thursday evening in the second and third reading by the coalition factions of the CDU / CSU and SPD.
The insurance industry had harshly criticized the project in a hearing on October 5th. However, according to the coalition’s amendments to the VersicherungsJournal, there is only one point of concession.
The deadline for the legislative changes will be postponed from July 1, 2021 to January 1, 2022 in order to give insurers more time to adapt to the new regulations. In addition, there will be a twelve-page accompanying letter from Federal Ministry of Finance (BMF) to be published in the Federal Tax Gazette.
It lists numerous use cases for the tax exemption of personal insurance and clarifies when a tax exemption exists and when it is not. The tax authorities should orientate themselves on this letter.
GDV sees additional costs in the millions due to new bureaucracy
Of the General Association of the German Insurance Industry eV (GDV) explained to the VersicherungsJournal after the final deliberations in the finance committee: “In our view, the legislature has missed the opportunity to make insurance tax law in Germany more modern.”
Instead of using the law to reduce bureaucracy in the insurance sector, the legislature is creating new bureaucratic hurdles. “According to our estimates, this will lead to conversion costs of over 100 million euros for the industry.”
Private health insurance association: marginal additional income does not justify the effort
Of the Association of Private Health Insurance eV (PKV-Verband) had also expressed strong criticism in the hearing at the beginning of October and also fully endorsed the positions of the GDV.
The GDV argued that even the intended first-time basic inclusion of life and health insurance in the insurance tax would lead to massive additional bureaucratic expenses in the tens of millions. On the other hand, the tax authorities promise only marginal additional tax income.
Of the Association of the Insured (BdV) had called for the reform plans to be abandoned. The objective of closing individual tax loopholes does not justify the expansion of fiscal and bureaucratic burdens for consumers (VersicherungsJournal Medienspiegel October 5, 2020).
The coalition factions create a bureaucracy monster.
Frank Schäffler, Member of the Bundestag
FDP: Expected tax revenues do not justify the effort
The FDP finance politician and industry expert Frank Schäffler told the VersicherungsJournal about the outcome of the deliberations: “The coalition factions are creating a bureaucracy monster.” Just because certain sports disability insurances or film cancellation insurances are subject to insurance tax, the industry as a whole is burdened with additional bureaucracy.
The expected additional tax income would only amount to six million euros. “That bears no relation to the effort.”
For Bündnis 90 / Die Grünen, Stefan Schmidt explained: “We think the content of the law is largely correct, but poorly implemented in terms of craftsmanship.” It is only fair to restrict the tax exemption for personal insurance and link it to social reasons.
However, it cannot be that many regulations outside of the law are regulated in implementing ordinances and accompanying ministry letters. According to Schmidt, the Greens abstained from voting in the committee meeting.
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