VAT On Insurance Business Transfers?

As an example of how obscure cases in the European Court of Justice (ECJ) can have unexpected consequences, the decision of the ECJ in Swiss Re Germany Holding GmbH v Finanzamt München für Körperschaften on 22 October 2009 takes some beating.

Background

A Swiss Re subsidiary in Germany sold to a Swiss reinsurance company 195 life reinsurance contracts. All policyholders were resident outside Germany, although some were based elsewhere in the EU. The transfer was not constructed as an insurance business transfer: each policy was novated with the consent of the policyholder.

The German tax authorities initially took the view that the transfer was a supply of goods and subject to VAT, which will be strange to anyone who has ever seen a reinsurance contract. The taxpayer appealed twice and the German Appeal Court decided that the transfer was a supply of services, but could not decide on the correct VAT treatment and accordingly referred the case to the ECJ.