Insurance and claim handling are two distinct supplies for VAT purposes in the Netherlands
Dutch VAT Group X is a casualty insurer based in the Netherlands, which provides coverage in all EU Member States and is therefore legally required to appoint a claim manager in each EU Member State. As most of the damage occurred in France, Belgium and Germany, X incorporated legal entities in these jurisdictions to act as claim manager.
X self-assessed VAT on claim managing services from the group companies based in other EU Member States. According to X, the services rendered by the claim managing group entities to X and the insurance services rendered by X to its policy holders form a single composite supply for VAT purposes. As the claim handling is ancillary to the insurance services, X argues that these handling services should be exempt from VAT.
The Supreme Court rules that service supplied under a legal relationship between an insurer and its customer (policyholder) on the one hand, and a service supplied under a different legal relationship between another entrepreneur (ie claim manager) and another customer (ie insurer) on the other hand, do not constitute a composite supply for VAT purposes. As a result, the claim management service is a standalone service for VAT purposes and is not exempt from VAT.
Key takeaway
This judgment confirms that two entrepreneurs rendering different types of services (ie claims management and insurance) under different legal arrangements cannot constitute a single supply for VAT purposes. This judgment is not only relevant for the insurance sector but also provides relevant insights for businesses in other sectors. However, the principle cannot be abused: Part Service Srl C-425/06.
