THE BOTTOM LINE
- The location of risk for insurance premium tax is determined by where an asset’s commercial exploitation is managed, rather than the asset’s physical location.
- International companies with high-value, mobile, or remote assets (like satellites or offshore platforms) must assess tax liability based on where key business decisions and management activities occur.
- The transport insurance tax exemption is interpreted narrowly and does not apply to a satellite’s operational phase in orbit, which is considered its normal function, not an act of transport.
THE DETAILS
The case involved a Dutch company that owns and commercially operates a fleet of satellites. These satellites were insured by an affiliated company based in Luxembourg. The Dutch tax authorities levied millions in Insurance Premium Tax on the premiums paid by the Dutch entity, arguing that the insured risk was located in the Netherlands. The companies contested this, claiming the risk was located where the assets are—in space—or where they are technically controlled from in Luxembourg and the United States.
The ‘s-Hertogenbosch Court of Appeal sided with the tax authorities, providing a crucial clarification on the concept of location of risk under Dutch law and the EU’s Solvency II Directive. The court reasoned that the decisive factor is not the physical location of the insured asset, but the location of the activity whose risks are covered by the insurance policy. In this case, that activity was the commercial exploitation of the satellites. As all key commercial, financial, administrative, and legal activities related to this exploitation were conducted from the company’s head office in the Netherlands, the court deemed the risk to be located there.
The court also rejected the company’s secondary argument that the insurance should be exempt as a transport insurance. The company creatively claimed that after launch, the satellite’s platform (the “bus”) was effectively “transporting” its payload. The court dismissed this, ruling that a satellite’s movement in orbit is integral to its function, not an act of transporting goods. The platform and payload form a single, inseparable functional unit. Consequently, the tax exemption for transport insurance was denied for all phases following the initial rocket launch.
SOURCE
Gerechtshof ‘s-Hertogenbosch
