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Dealers’ guarantee commitments – Insurance premium tax treatment and VAT treatment

The Tax Law Committee of the German Association of Tax Advisers (Deutscher Steuerberaterverband e.V., DStV) has prepared and published a practice statement [in German] on insurance premium tax and VAT in the case of dealers’ guarantee commitments.

Last year already, the BMF had stated its position on the VAT treatment and insurance premium tax treatment for the guarantee commitments of motor vehicle dealers. The effective date of the principles mentioned there was postponed several times. The guidelines will now be applicable from 1.1.2023. In this respect, the administration has adopted the ruling by the German Federal Fiscal Court.

In the future, a motor vehicle dealer’s guarantee commitment in return for payment, as a service in its own right, will generally be subject to insurance premium tax. This will apply irrespectively of whether, in the event of a guarantee claim, a monetary payment or a repair is made. It should be noted that in view of the VAT exemption for the insurance benefit, in this respect, input tax deduction is not possible. In its report of 2.10.2022, the DStV pointed out that the BMF circular should apply across all industries and recommended that the companies concerned should check whether or not their agreements meet the criteria for any exemptions from the insurance premium tax liability. For example, if no separate fee is charged for the guarantee and if a purchase without a guarantee is not possible then there is no insurance benefit. 

Please note: A guarantee commitment in the context of a full maintenance agreement would likewise not trigger an insurance premium tax liability. This would constitute a VATable service of its own kind. If a company acts as an intermediary merely to provide insurance coverage then, likewise, no insurance premium tax will arise since the direct contractual relationship will exist between the customer and the insurance company.

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