Claims Settlement Services Are Not VAT Exempt

Analysis

Claims Settlement Services Are Not VAT Exempt

Judgement of the Court of Justice of the European Union

Tax Alert 7/2016 | 21 March 2016

The judgement of the Court of Justice of the European Union on a Polish case concerning VAT exemption for claims settlement services has been pronounced.

VAT exemption for claims settlement services

On 17 March 2016 the EU Court of Justice (the "Court") issued its judgement regarding a case No. C-40/15. The disputed case presented to the EU Court of Justice by the Supreme Administrative Court concerned the possibility to exempt claims settlement services provided by and on behalf of an insurer from VAT. The services discussed include receiving insurance claims, registering claims, establishing the reasons for and circumstances of the claims, conducting correspondence with the client and settling substantive claims.

In its judgement the EU Court of Justice decided that under the EU VAT Directive the services in question cannot be VAT exempt. According to the UE Court of Justice the analyzed activities carried out to render claims settlement services do not fall within the exemption laid down by Article 135 (1)(a) of the EU VAT Directive.

Significant impact on the insurance market

The judgement of the EU Court of Justice does not refer to the exemption laid down by Article 43.13 of the VAT Act. The application of the exemption in question should be analyzed by the Supreme Administrative Court. The judgement may prove significant for the insurance market, as in practice selected claims settlement services, including direct claims settlement services, were VAT exempt under the regulation in question.

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