The Court of Justice has recently given judgment in a case concerning the VAT liability of claims settlement services. The case concerned a company established in Poland that supplied comprehensive services for the settlement of insurance claims.
The Court considered first of all whether the services provided consisted of insurance transactions covered by the exemption in Article 135(1)(a) of the VAT Directive, defined in the case-law as transactions where “the insurer undertakes, in return for prior payment of the premium, to provide the insured, in the event of materialisation of the risk covered, with the service agreed when the contract was concluded”. The Court found that the transactions were not insurance transactions. The company tried to argue that, by analogy with financial services, its services could benefit from the exemption because they formed a “distinct whole” and fulfilled “the specific, essential functions” of the insurance transactions. The Court rejected this argument, emphasising the difference in wording between the exemptions for insurance transactions and the exemptions for transactions concerning or relating to certain banking operations. The Court emphasised that this finding was not called into question by the principle of fiscal neutrality. That principle cannot extend the scope of an exemption in the absence of clear wording to that effect because it is not a rule primary law but rather a principle of interpretation to be applied concurrently with the principle of strict interpretation of exemptions.
The Court also found that the services could not benefit from the exemption for “services related” to “insurance and reinsurance transactions, … performed by insurance brokers and insurance agents”. The company was able to meet the first of the necessary conditions, namely that the service provider must have a relationship with both the insurer and the insured party. In this case the company was in a direct relationship with insurance company, performing activities in the name and on behalf of the insurance company. It also had an indirect relationship with the insured party in the context of the examination and management of claims. However, It was unable to meet the second condition, namely that the activities must cover the central aspects of the work of an insurance agent, such as the finding of prospective clients and their introduction to the insurer.
An interesting aspect of the judgment is that the Court commented that it was not necessary, as the UK Government had maintained, to refer to other European legislation in which the concepts such as insurance mediation, or the business activities of insurance brokers or agents were defined, because that legislation pursued a different object from that of the VAT Directive.
