In September 2025, the Fiscal Court of Cologne published the written reasons for its judgment of 6 November 2024 in case 2 K 434/16. The Court dismissed the action brought by a UK‑based insurer against a supplemental insurance‑tax assessment for December 2009. Premiums collected for German single‑ship companies for liability, legal protection, hull, and war risks were taxable in Germany because the relevant sea vessels were entered in the German ship register. The tax calculation using the standard rate of 19 percent on the net premiums collected complied with statutory requirements.

Facts and procedural history

The claimant, an insurer domiciled in the EU during the relevant period, is the legal successor to Z Limited, which underwrote sea‑vessel insurance for German single‑ship companies. The vessels were entered in the German ship register; at the same time, for the duration of reflagging, there was permission to fly foreign flags (Liberia, Malta). Following external audits at the shipping company and the single‑ship companies (not at the claimant), the tax office issued a supplemental insurance‑tax assessment against the claimant for December 2009, based on the premium payments documented in the audit reports. The objection was unsuccessful; the matter proceeded to litigation.

The claimant argued that the assessment lacked sufficient definiteness (insufficient specification of insurance relationships, policyholders, ship connection, and tax calculation), that the bases of assessment were unlawfully estimated, that the periodization was incorrect (with reference to § 10 para. 4 German Insurance Tax Act, "VersStG"), that the risk was not located in Germany due to reflagging, and that the calculation was erroneous (gross/net issue).

Formal lawfulness of the supplemental assessment

The court characterized the contested notice as a supplemental assessment under § 167 para. 1 and § 155 of the German Tax Code ("AO"), issued to the insurer as the person liable to remit the tax. The requirements of § 157 para. 1 AO for definiteness were met: The notice identifies the addressee, amount, period, and the type of risks (ship risks).

Further itemization is unnecessary where reference to the results of external audits is permissible, and the claimant can trace the specific insurance relationships and premiums using its own records and the audit reports.

Mentioning an estimate (§ 162 AO) does not undermine definiteness; the assessment was based on concrete payment evidence from the audits.

Discrepancies between the assessment and the objection decision regarding identification of policyholders were immaterial because both the shipping company and the single‑ship companies were contractually involved and the audit records support the allocation.

As to periodization, the senate held that § 10 para. 4 VersStG (special rule for assessments "determined on an external audit") did not apply because the external audit took place at the policyholders and the claimant was not the audited taxpayer. The rule of cash‑basis taxation therefore applies: the filing period is the month of payment (December 2009).

Material lawfulness: Risk location and taxability

Tax liability arises under § 1 para 2 sentence 2 no. 2 VersStG for vehicles of any kind that are required to be entered, or are entered, in an official or officially recognized register and bear an official registration plate. In this case, the sea vessels were entered in the German ship register and had an IMO number. The foreign flag flown during reflagging is irrelevant.

This interpretation accords with EU law. The CJEU, on a reference from the senate (judgment of 15 April 2021, C‑786/19), held that for insurance of risks associated with sea vessels, the Member State of the risk is the State that maintains the ship register in which the vessel is entered as proof of ownership. The flag does not establish a sufficiently concrete and immediate connection to the location of the risk. Germany, as the register state, is therefore a permissible nexus for levying insurance tax.

Tax calculation: Net premium and 19 percent IPT

Under § 5 para. 1 sentence 1 no. 1 VersStG, the tax is calculated on the insurance consideration; the standard rate is 19 percent (§ 6 para. 1 VersStG). The court followed the Federal Fiscal Court’s case law (judgment of 18 April 2024, V R 17/22), under which a premium agreed in ignorance of tax liability is treated as a net consideration and does not include insurance tax. § 7 para. 4 VersStG (now § 7 para. 9 VersStG) does not change this; the provision merely serves the civil‑law collection of the tax by the insurer from the policyholder.

Ancillary rulings

The court rejected the need to join policyholders (shipping company, single‑ship company, bareboat charterer) because the assessment was issued solely to the claimant and a uniform decision vis‑à‑vis third parties was unnecessary. An appeal was allowed due to the fundamental importance of the formal requirements for supplemental assessments considering § 10 para. 4 VersStG.

Practical significance

The judgment clarifies the procedural definiteness of supplemental assessments issued to insurers with reference to external audits at policyholders and confirms the EU‑law‑compliant link of risk location for sea vessels to register entry. Insurers should expect supplemental assessments based on net premiums where risks were not declared. Reflagging and the use of a foreign flag do not shift taxing right as long as the vessels remain entered in the German ship register.