Italian Insurance Tax and Warranty Services

The Italian Tax Authorities, in ruling no. 110/2024, have analysed the applicability of the Insurance Tax under Law no. 1261/1961(IT) in relation to a leading company in the automotive sector (the Applicant).

The Applicant provided its dealers with a warranty service to cover costs related to potential "mechanical and/or electrical failures" in used vehicles sold to customers. The dealer offered this service to customers based on specific technical conditions of the vehicle and pre-agreed conditions in the group. For providing these warranty services to the dealers, the Applicant received a fee from the dealer.

In connection with this warranty service, the Applicant entered an insurance contract with a foreign insurance company, authorized to operate in Italy. The contract covered the financial losses related to the repair work for suitable vehicles covered by the warranty plans.

The Applicant asked the Italian Revenue Agency to clarify whether the warranty could qualify as an insurance contract subject to the IT.

Regarding the insurance contract entered into between the Applicant and the foreign insurance company, article 1 of Law no. 1216 of 1961 states that non-life insurance policies (with some exceptions) are subject to the IT if the territoriality condition is satisfied. This is the case "when the policyholder has their domicile in the Italian territory, or, in the case of a legal entity, the registered office or establishment to which the contract refers or to which the insured persons are assigned." This means the insurance contract between the Applicant and the foreign insurance company wouldn’t be subject to the IT as the territoriality requirement hadn’t been fulfilled.

With reference to the services offered by the Applicant to the dealers in connection with the sale of used vehicles, the ruling also states that the service qualifies as a warranty and not as an insurance service. So the conditions for the applicability of the IT wouldn’t be met. The conditions for applying the IT are the existence of an insurance contract and that the policyholder is an insurance company, in accordance with civil and insurance law.