Exemption from French VAT in the insurance sector: what you need to know

1. General framework for VAT exemption in insurance

1.1 Legal Basis

Article 261 C, 2° of the French Tax Code (FTC) provides for an exemption from VAT for activities related to insurance and reinsurance. This exemption applies to transactions that are directly related to the distribution and management of insurance contracts.

Before 2022, the tax authorities considered that the exemption was mainly conditional on the regulatory status of the operator. However, following the judgments of the CJEU (in particular the Aspiro judgment of 17 March 2016, C-40/15), a more objective approach was adopted. Now, the administration analyzes the nature of the benefits to determine whether they are part of the activity of an insurance intermediary.

The transactions that can benefit from the exemption are broad.

1.2 Distinction between exempt and taxable benefits

Exempt benefits mainly concern:

• The subscription and management of insurance contracts;
• Insurance intermediation (putting the parties in contact);
• Claims management when this activity is carried out by an insurance intermediary.

On the other hand, some services remain subject to VAT, in particular:

• Pure administrative and accounting management of contracts;
• Outsourcing IT and support tasks;
• Financial and statistical studies on the insurance sector.

2. Activity of insurance brokers and intermediaries

2.1 Role of insurance brokers

Insurance brokers play a critical role in the distribution and management of insurance contracts. Their activities include:

• Prospecting and advising subscribers,
• The design and structuring of insurance offers,
• The placement of risks with insurers.

This exemption also applies to related services provided by insurance brokers and intermediaries. As such, for the exemption to apply, it is necessary to determine whether the offer constitutes a complex transaction: if it constitutes one and the ancillary services are ancillary, by attraction, the latter benefit from the exemption applicable to insurance transactions (article 257 ter of the FTC - see below).

2.2 VAT exemption conditions for insurance intermediaries

For an insurance intermediary to benefit from VAT exemption, it must meet two essential conditions:

• Maintaining a relationship with the insurer and the insured : this relationship can be direct or indirect, in particular when the service provider acts as a subcontractor for a broker or other intermediary.
• To provide services that are characteristic of an insurance intermediary, directly linked to the essence of insurance business.

2.2.1 What is the concept of a link between the insurer and the insured?

Intermediary activity involves putting the parties in contact so that they can conclude a contract without having a direct interest.

The tax authorities specify that the relationship between an insurance intermediary, the insurer and the insured may be indirect, in particular when the service provider acts as a subcontractor for a broker or other intermediary.

Thus, when a wholesale broker delegates essential elements of its activity to agents in direct relationship with the customer, the transaction benefits from the exemption.

In some cases, several brokers may be involved in the same transaction:

• Co-brokerage implies that several brokers share an insurance transaction and each receive a portion of the remuneration, exempt from VAT.
• Sub-brokerage consists for a main broker to delegate part of his activity to a sub-broker, who receives a fee exempt from VAT if his role is indeed insurance intermediation.

The administration also provides that the exemption may apply when a broker manages or operates a brokerage portfolio that does not belong to him, provided that this portfolio is owned by a broker who is effectively acting as an insurance intermediary.

2.2.2 What constitutes an insurance intermediary activity?

Administrative doctrine recalls that this includes “the search for customers and the putting them in contact with the insurer, in order to successfully subscribe to insurance contracts (prospecting)” (BOI-TVA-CHAMP-30-10-70 no. 80).

It is as follows:

• “all actions consisting in identifying and approaching new potential customers, or prospects, in order to lead them to sign a contract”, without the effective conclusion of said contract being an indispensable condition.
• This includes, for example, the case where an operator managed an existing portfolio by offering new guarantees, extensions or to renew an existing policy.
• the formalities necessary for the issuance of contracts, the affiliation of new beneficiaries to an ongoing contract, the issuance and collection of premiums, the management and termination of policies, the management and settlement of claims, as well as the assessment of damages” (BOI-TVA-CHAMP-30-10-70 no. 90).

3. Exemption from ancillary services

3.1 Application criteria

The exemption extends to related services provided by insurance brokers and intermediaries if:

• the operation constitutes a complex operation ;
• Ancillary services are props to the main insurance benefits.

Thus, when an intermediary offers a global service including insurance and ancillary services, the latter can benefit from VAT exemption by attraction.

3.2 Examples of exempt ancillary services

• Assistance and advice in the management of insurance contracts.
• Prospecting and identifying customers for insurers.
• Management of the termination and renewal of contracts.

4. Exemption limits

Some services remain subject to VAT, even if they are linked to the insurance sector as long as they are not provided by an insurance broker or intermediary, but also when they are not ancillary to insurance transactions.

This covers:

• back office services (administrative management, IT assistance, financial studies) when they are not directly linked to an insurance transaction;
• the simple management of claims on behalf of an insurer, without an intermediary role.

5. Focus on co-brokers

In July 2024, the administration published a decree specifying the scope of the exemption in the context of co-broker activities (BoFiP BOI-RES-TVA-000148-20240724).

5.1 Contract management by a co-broker manager

In a co-brokerage scheme, managing co-brokers collaborate with providing co-brokers to manage group insurance contracts taken out by customers.

They ensure all management operations, including:

• Affiliation of beneficiaries,
• Appeal, collection and payment of premiums,
• Payment of benefits to insured persons,
• Renewal or transfer of contracts to other insurers.

Their remuneration, calculated as a percentage of the premium excluding taxes paid by the client to the insurer, covers all benefits. It may also include a rebate on the intermediary commission received by the contributor.

Given their active role in the affiliation and renegotiation of contracts, co-broker managers can be qualified as insurance intermediaries. Therefore, their services benefit from the VAT exemption provided for in article 261 C, 2° of the FTC.

The contours of this position of the tax administration, however, leave doubts about what certain elements referred to in the doctrine cover (joint participations, membership management, etc.). A case-by-case study is necessary to ensure that the scope of exemption is properly covered.

5.2 Participation of the co-broker manager in the distribution of contracts and VAT exemption

When a co-broker manager intervenes in the presentation of a comprehensive insurance offer (including risk coverage and management), this activity can be qualified as prospecting, even in the absence of specific remuneration.

Its role may include:

• The presentation of management services,
• Explanation of contract administration procedures,
• The promotion of care networks and services for beneficiaries.

Since this intervention contributes to the distribution of contracts, it is considered as a service relating to an insurance transaction and thus benefits from the VAT exemption provided for in article 261 C, 2° of the FTC.

5.3 Participation of the co-broker manager in the distribution of contracts and VAT exemption

A broker manager may be requested by an insurer as part of a partnership, outside the co-brokerage scheme, in order to optimize the management of benefits. This collaboration is frequent when an insurer responds to a public call for tenders to set up compulsory health coverage (PSCs) for public officials.

In this context, the broker manager:

• Works directly with the insurer, thus meeting one of the conditions for VAT exemption,
• Participate in the call for tenders by presenting the tender management component,
• Negotiates contract renewals and contributes to their governance,
• Markets possible optional guarantees.

These activities establish a link with the insured and fall under the typical benefits of an insurance intermediary. As long as they participate in the distribution and management of contracts, these transactions can benefit from the VAT exemption provided for in article 261 C, 2° of the FTC.

5.4 Management of contracts other than co-brokerage schemes and VAT regimes

When the management of contracts is carried out outside a co-brokerage scheme and the manager cannot be qualified as an insurance intermediary, the services concerned are subject to VAT.

In situations where the same manager is involved in contracts covered by the exemption and others considered to be simple support or stewardship services, a case-by-case analysis is necessary. This analysis must take into account the contractual relationships between the insurer, the contributing co-brokers and the managers in order to determine the VAT regime applicable to each service.

5.5 What to remember?

The publication of the administration of this famous rescript offers taxpayers the opportunity to oppose the interpretation published by the tax authority on the basis of article L80 B of the LPF.

However, each situation being specific and the summary being general without being precise enough concerning certain concepts (“distribution”, joint intervention, ... ), a case-by-case analysis must be carried out to avoid extending the scope of BoFIP, which, in principle, has no spirit.

6. Best practices for securing VAT exemption

6.1 Identify the services concerned

It is essential to precisely identify the services provided and to identify whether they are provided as part of an intermediation operation. Thus, they could be covered by the VAT exemption.

Contracts should therefore be structured accordingly.

6.2 Drafting contracts

Contracts should detail the services provided and specify their direct link to an insurance transaction.

6.3 Recourse to the tax rescript

Faced with uncertainties, it may be recommended to request a tax rescript in order to secure the application of the VAT exemption.

Conclusion

Exemption from VAT in the insurance sector is based on a detailed analysis of the activities carried out. If intermediaries meet the criteria defined by the administration, their services may be exempt. However, greater vigilance is required as to the contractual structure and the exact nature of the services provided.

Given recent developments and the uncertainties that remain, it is strongly recommended that professionals in the sector seek, in case of doubt, a tax ruling to secure their situation and avoid any subsequent tax adjustment.

‍

A question? Do not hesitate to contact us to discuss it.