VAT liability regarding “back office” services to the Insurance Industry

The European Court of Justice recently ruled in Case C-472/03 (involving Arthur Andersen & Co, Accountants and the Dutch State Secretary for Finance) that certain “back office” services provided to insurance companies do not come within the terms of the VAT exemption in the Sixth VAT Directive which applies to services provided by insurance agents. This ruling will impact on the VAT treatment of services, which are provided on an outsourced basis, to Insurers, a common practice throughout that industry. At present, under Irish legislation, some such services are regarded as exempt from VAT when supplied in Ireland.

Although this case concerned services provided in The Netherlands, the ruling will have an impact in other Member States. Revenue officials are currently studying its implications for Irish law. As part of that process, we will consult with the financial services industry and other interested parties.

Revenue would point out that, as regards insurance related services provided in Ireland, the provisions of the exemption in the current Irish legislation continue to apply. Also, until such time as Revenue has completed its study of the judgement, including its consultation process, and made an announcement as to the effects of the judgement on existing practice, providers of such services may continue to account for VAT on the basis of the existing practice.

For further clarification, please contact Donal Barry, VAT Interpretation, Financial Services & Property Branch (Tel. (01) 7024223; email dbarry@revenue.ie)