Fire Protection Tax
The accounting logic for the German fire protection tax differs considerably from the insurance tax, since the insurance company itself and not the policyholder is the tax debtor. In this blog post I would like to present different mapping possibilities and outline a solution how insurance and fire protection tax can be booked in FS-CD and evaluated on contract level.
What is the fire protection tax?
The fire protection tax is levied on the insurance premium for the following types of insurance:
- Fire insurance including fire business interruption insurance (FBU)
- Residential building insurance, if fire risks are partially covered
- Household contents insurance, if fire risks are partially covered
The tax rates correspond to those of insurance tax, but the tax base is only a portion of the insurance premium:
|Insurance type||Tax rate||Insurance tax||Fire protection tax|
|Basis for measurement||Effective tax rate||Basis for measurement||Effective tax rate|
|Fire and FBU||22 %||60 %||13.2 %||40 %||8.8 %|
|Residential building||19 %||86 %||16.34 %||14 %||2.66 %|
|Household contents||19 %||85 %||16.15 %||15 %||2.85 %|
As of July 1, 2010
How is the fire protection tax posted?
Since, unlike insurance tax, the tax debtor is not the policyholder but the insurance company, there are significant differences in the posting logic.
The fire protection tax represents an expense of the insurance company, so the accounting record is "Fire protection tax expense" to "fire protection tax to be paid". In contrast, the accounting record for insurance tax is "receivables from policyholders" to "insurance tax payable". Together with the posting record for the premium, "Receivables from policyholders" to "Premium income", the following is an example of a household contents insurance:
|Receivables from policyholders||116.15||Premium income||100|
|Expense fire protection tax||2.85||Insurance tax to be paid||16.15|
|Fire protection tax to be paid||2.85|
How can the posting of fire protection tax with FS-CD be represented?
This article assumes that the calculation of taxes takes place in the policy system. You also want to analyze how the calculated taxes can be posted in FS-CD or FI-GL.
Assuming that the two accounts for fire protection and insurance tax to be paid are not managed as contract accounts in the FS-CD subledger, but as G/L accounts in the FI-GL general ledger (which is regularly done in practice), the problem arises that the posting rate for fire protection tax is a pure general ledger transfer posting.
One solution is to transfer the fire protection tax as a payment plan item with document category 23 (general ledger transfer posting) from the policy system to FS-CD. In this case, however, the document no longer has a reference to an insurance object, since this document contains only two general ledger items, but no subledger items. The recording obligations according to § 9 Fire Protection Act cannot therefore be provided by FS-CD, but must be provided by the policy system.
Another solution is to transfer the postings for fire protection tax directly from the existing system to the general ledger. Here, too, the problem of recording obligations arises - either individual postings with all necessary information in the general ledger or evaluation in the policy system.
One - albeit rather cumbersome solution - would be to transfer the fire protection tax in two debit positions, which both balance to zero on the policyholder's contract account. Together with premium and insurance tax, this would make a total of four payment plan items.
SAP Enhancement Package 6 (Business Function INS_FSCD_CI_4) opens up a new option for posting externally calculated taxes to FS-CD via the payment plan interface. SAP has added a number of new fields to the payment plan interface for this purpose:
- Type of tax position
- Amount of tax
- Tax rate
- Tax base amount
Together with the existing field "other tax code", the fire protection tax can be transferred in a payment plan item. Insurance tax can even be transferred together with the premium in a single payment plan item. This procedure also updates the reporting table DFKKREP06, with which you can easily fulfil the recording obligations.
Example with premium, insurance and fire protection tax:
|Field||Payment plan item for premium and insurance tax||Payment plan item for fire protection tax|
|Main/sub transaction GL||Premium||Expense fire protection tax|
|Main/sub Transaction subledger||Premium||Premium|
|Other tax code||Domestic premium taxes||Domestic premium taxes|
|Type of tax item||insurance tax||fire protection tax|
|Tax rate||19 %||19 %|
|Tax base amount||85.00||15.00|
In the debit position, the amount and the tax amount are added to create the subledger item, so that the receivable from the policyholder corresponds to the gross premium of 116.15 (the subledger item for fire protection tax is zero and is not posted).
For the two combinations of other tax code and tax item category, the corresponding G/L accounts for the insurance tax and fire protection tax to be paid are defined in account determination (posting area 0015). The debit position generates one general ledger item each.
The debit position also creates a general ledger item for each payment plan item for the premium income and the fire protection expense.
The resulting document in FS-CD thus has one subledger item and four general ledger items as shown in the example document above.
Translated with DeepL