Mark-ups in group insurance at the Federal Fiscal Court – does this mean the end of the Federal Ministry of Finance Circular of 29/11/2017?

Mark-ups on group insurance – an everyday scenario

By far the most significant case concerned a question that has occupied insurers, group policy holders and their customers for years: are mark-ups charged in connection with group insurance policies subject to insurance premium tax (file ref. V R 3/24)?

A typical example is a leasing company that offers customers insurance cover for the leased vehicle when the lease agreement is concluded. This is made possible by an existing group insurance agreement between the leasing company and the insurer, in which the customers are included as insured persons.

The insurer only knows the net premium that it takes in. The amount the customer actually pays remains hidden from it.

The central issue is that the leasing company charges the customer more than it pays to the insurer and retains the difference as a mark-up.

The insurer and the leasing company do not agree on this mark-up. It is not part of the contractual arrangement between them, and the customer is not informed of its amount either. Such scenarios are widespread – such as in travel, electronics, rental and leased products.

The key question is therefore whether this mark-up forms part of the consideration subject to insurance premium tax, or whether it falls outside the taxable amount.

Mark-ups for group insurance – the legal question

In a genuine group insurance arrangement, the insurance contract is concluded solely between the insurer and the group policy holder. The insured persons are merely beneficiaries under insurance for the account of another within the meaning of section 43 f. of the German Insurance Contracts Act [VVG]).

There are essentially two possible ways to classify the mark-up for insurance premium tax purposes:

1. either as part of the taxable consideration within the meaning of section 1(1) in conjunction with section 3(1) of the Insurance Premium Tax Act [VerStG] 
   → the mark-up is also subject to insurance tax at 19%,
2. or, as a separate, non-taxable  consideration for a marketing or distribution service provided by the group policy holder
   → the mark-up is not included in tax

The tax treatment of the entire model depends on this classification. For affected businesses, particularly insurers, banks and asset managers, the issue can have a direct impact on core financial services tax processes.

How it all began – the Federal Fiscal Court 2016 and Federal Ministry of Finance Circular 2017

The dispute has its origins in the Federal Fiscal Court judgement of 7 December 2016 (II R 1/15). In this case concerning a travel insurance policy, the Federal Fiscal Court took the mark-up to be an implicit marketing fee between the insurer and the policy holder. The crucial point was that the mark-up was agreed between the parties.

The Federal Ministry of Finance Circular of 29 November 2017, supplemented in 2018, considerably broadened the implication of that decision and distinguished between two scenarios:

• a sales price with no breakdown: a tacit fee agreement is assumed → the mark-up is subject to tax
• the price is broken down (premium + commission): a stand-alone, non-taxable fee is recognised.

The key criticism is that the tax authorities infer an agreement that often does not exist, merely from the absence of a transparent price breakdown.

The change – the Cologne Fiscal Court judgement

In the leasing case at issue, the Cologne Fiscal Court held in favour of the policyholder in its judgment of 27 September 2023 (case no. 2 K 2132/21):

Mark-ups are not subject to insurance premium tax where there is no agreement between the insurer and the policy holder regarding the mark-up attributable to the insurance cover is immaterial.

In so judging, the court departed both from the 2016 Federal Fiscal Court judgement and expressly from the tax authorities’ position. An appeal ultimately led to the hearing before the Federal Fiscal Court on 9 July 2026.

The tendency of the Federal Fiscal Court hearing – will it depart from current practice?

The overall impression from the oral hearing suggests that the Federal Fiscal Court may be inclined to follow the Cologne Fiscal Court’s approach.

If this is confirmed in the reasons for the judgement, the consequences could be far-reaching.

• The concept of a notional implied fee agreement would no longer be sustainable.
• It would again be determined by the actual agreement between the parties
• The lack of clarity to customers would be insignificant
• The Federal Ministry of Finance would have to revise its Circular or significantly restrict it.

An individual check of the actual contractual conditions would replace general criteria.

Practical recommendations for action

Companies should act now:

• Keep cases open: avoid finalising tax audits and additional tax assessments where the issue remains relevant.
• Protect tax assessments: file objections where appropriate and apply for proceedings to be stayed or suspended.
• Review calculations: reassess existing models from an insurance premium tax perspective.
• Ensure transparent pricing: clearly distinguish between insurance premiums and commissions or other remuneration.

The two other cases
Alongside the main proceedings, the Federal Fiscal Court handled two other appeals:

“Functional disability” insurance (file ref. V R 13/24)
Is a multi-risk plan tax-exempt or does it count as accident insurance for tax purposes?

Refund of uncashed premium refund cheques (V R 19/24)
Is the issuance of a refund check sufficient for a refund claim or must it be cashed? 

Both cases concern key questions of classification in insurance tax law and are particularly relevant to how products are structured and billed. 

Conclusion

The cases show that insurance tax is much more dynamic than often assumed.

Mark-ups on group insurance in particular are facing a fundamental realignment. If the Federal Fiscal Court confirms the view of Cologne Fiscal Court, the Federal Ministry of Finance Circular of 29/11/2017 could become obsolete in its current form.

The written grounds remain to be seen – but they could lead to much more legal certainty for insurers and their customers.