In Minister Finansów v Aspiro SA, formerly BRE Ubezpieczenia sp. z.o.o. (C-40/15), the European Court of Justice (CJEU) considered the VAT liability of claims handling services.
Aspiro SA (Aspiro), a Polish company, provided claims handling services to an insurance company. It performed these services in the name of the insurance company, on the basis of a contract with the insurance company. The services included the preparation and processing of damage reports, damage investigation and contacting the insured where necessary. After carrying out these tasks, Aspiro would decide whether claims should be settled.
Aspiro argued that the services it performed were exempt from VAT. It submitted that the services constituted an element of a single supply of insurance services and formed a distinct whole, entirely related and necessary to the business of the insurance company.
The Polish tax authority accepted that settling of the claims was an insurance activity. However, it concluded that all the other services performed by Aspiro, although linked to the settlement of the claims, did not constitute insurance services. Accordingly, Aspiro did not benefit from the exemption.
Aspiro appealed. The domestic court annulled the Polish tax authority’s interpretation. In reaching this decision the court concluded that the Polish domestic law extended beyond what was provided for in the VAT Directive.
The Polish tax authority appealed the decision and the matter was referred to the CJEU for consideration of the scope of the insurance exemption.
The CJEU’s decision
The CJEU concluded that for the services to fall within the VAT exemption for insurance intermediary services, the supplier must satisfy the following two conditions:
- there must be a relationship with the insurer and the insured party, either directly or indirectly and
- its activities must cover the essential aspects of the work of an insurance agent, such as the finding or introduction of prospective clients.
Aspiro satisfied the first of these conditions. It was in a direct contractual relationship with the insurance company as a result of which it also had an indirect relationship with the insurance party.
As regards the second condition, the CJEU concluded that the test was not met. The settling of claims by and on behalf of an insurer is not linked in any way to the finding or introducing of potential clients. Accordingly, Aspiro was not considered an insurance intermediary within the meaning of Article 135(1)(a) of the VAT Directive and could not benefit from the insurance exemption.
Similar questions were raised in 2005 in Arthur Andersen C-472/03 and the CJEU has reached a similar conclusion. The services were not exempt as they were not provided by a business as part of finding prospective clients or introducing them to an insurer.
The decision confirms that the scope of the exemption for insurance activities is narrower than that for other financial services.
It will be interesting to see how the decision will be applied, particularly in the UK, where the exemption under UK law is wider than the strict EU position.
A copy of the CJEU’s decision is available to view here.