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Swiss VAT treatment of insurance leads
Digital distribution channels are becoming increasingly important, and insurance leads are commercially interesting. Swiss VAT treatment of insurance leads is often less straightforward than it appears. The key question is whether the activity qualifies as a VAT-exempt insurance intermediary service or as a taxable referral, advertising or information service. In lead trading models, where customer data is generated and transferred without active involvement in concluding a specific insurance contract, the consideration could be treated as a taxable finder’s fee. This classification directly affects output VAT, acquisition tax and input VAT recovery.
What is a “Lead”?
In the insurance industry, a lead is a potential policyholder who has shown interest in insurance products or services and whose contact details may be used for follow-up. In practice, leads may range from a simple name, telephone number or email address to more enriched data, such as the type of insurance requested, preferred coverage, timing and basic risk information. Lead generation therefore sits at the intersection of marketing, sales and data management. From a VAT perspective, however, the decisive question is not what the parties call the dataset, but what the provider actually does in exchange for the remuneration.
VAT-exempt without credit insurance-specific supplies
For businesses active in the insurance sector, it is crucial to determine whether a service is taxable, and therefore generally allows input VAT deduction, or whether it is VAT-exempt without credit and consequently blocks the recovery of directly allocable input VAT. This distinction especially affects the input VAT recovery ratio of insurers and intermediaries with mixed activities.
Under art. 21 para. 2 no. 18 of the Swiss VAT Law, insurance and re-insurance services, social security insurance services and services rendered within the professional activity of insurance agents and insurance brokers are VAT-exempt without credit. The option to tax is excluded for these insurance-related exemptions in accordance with art. 22 para. 2 lit. a of the Swiss VAT Law. Professional activities of insurance agents and brokers typically include offering and/or concluding insurance contracts in the interest of insurers or potential policyholders and preparatory work directly aimed at concluding such contracts. Depending on the facts, this may also include portfolio management of new and existing policyholders, support in claim handling and aftercare leading to new contracts or amendments to existing ones.
By contrast, non-insurance-specific activities remain taxable subject to the standard VAT rate. This includes administrative support, general marketing, data collection, customer acquisition and other preparatory activities that are too remote from the conclusion of a specific insurance contract.
Finder’s fee
The key practical distinction is between insurance intermediation and a simple customer referral. If the provider merely identifies potential policyholders, collects their data and passes this information to an insurer or broker, the activity is generally not considered a professional service of an insurance agent or broker. Instead, it is treated as a service in the field of advertising or the provision of information. The remuneration – often referred to as a finder’s fee – is taxable at the standard Swiss VAT rate if the place of supply is in Switzerland, regardless of the commercial label used by the parties.
Swiss case law confirms this distinction. The Swiss Federal Supreme Court has held that a person is not acting as an insurance agent or broker if they merely recruit a customer or pass on addresses of potential customers without working towards the conclusion of an insurance contract (BGer 2C_434/2009 of 17 June 2010, E. 2.4; BGer 2C_552/2010 of 10 May 2011, E. 4.2). Conversely, where the provider prepares and mediates the conclusion of insurance contracts on a continuing basis, uses insurance materials, collects application information and forwards signed applications, the activity may go beyond a finder’s fee and qualify as VAT-exempt insurance intermediation (BGer 2C_434/2009, E. 3.1 ff.). Recent Federal Administrative Court case law has applied the same logic to lead generation and confirmed that the taxpayer must be able to evidence the insurance intermediary character of the service (BVGer A-5789/2018 of 27 May 2020, E. 4.3, confirmed by BGer 2C_562/2020 of 21 May 2021).
Lead trading within the insurance industry therefore typically requires close fact-finding. A model limited to generating and selling customer data should normally be treated as a taxable activity. A model in which the provider actively targets identified customers, advises or accompanies them and works towards the conclusion of a concrete insurance contract may need to be analysed separately.
Recipient location principle
Taxable lead generation and referral services generally follow the recipient location principle under art. 8 para. 1 of the Swiss VAT Act. Where the recipient is established in Switzerland, Swiss VAT is generally due if the supplier is registered for Swiss VAT or required to register. Where a Swiss lead generator supplies such services to a recipient established abroad, the place of supply is generally abroad and no Swiss output VAT is charged, although the turnover should still be considered for Swiss VAT reporting and input VAT purposes.
The reverse situation is equally important for insurers. If a Swiss insurance company purchases taxable lead generation services from a supplier abroad, the service is generally subject to acquisition tax pursuant to art. 45 lit. a of the Swiss VAT Act, because the service would be taxable if supplied in Switzerland. If, exceptionally, the service qualifies as VAT-exempt insurance intermediation, acquisition tax should not apply. The classification therefore has a direct cash-flow and cost impact for Swiss insurers buying leads from foreign platforms or group companies.
Input VAT deduction
The input VAT consequences depend on the role of the business. For the lead generator or platform selling taxable leads, input VAT incurred for taxable lead generation activities should in principle be recoverable, subject to the ordinary VAT requirements and any mixed-use corrections.
For the insurance company purchasing leads, the outcome is different. Leads are usually used to generate insurance contracts, i.e. VAT-exempt supplies without credit under art. 21 para. 2 no. 18 of the Swiss VAT Act. Consequently, Swiss VAT charged by a domestic lead provider – or acquisition tax due on services purchased from abroad – will normally not be recoverable to the extent the leads are used for VAT-exempt insurance activities. If the leads are used for both taxable and VAT-exempt activities, an appropriate allocation or input VAT correction is required.
This is the point that should be handled with care: The taxable nature of the lead sale does not automatically mean that the insurer buying the lead can recover the input VAT. The seller’s VAT position and the buyer’s input VAT recovery position must be analysed separately.
Deloitte's view
According to the SFTA practice and recent case law, leads do not automatically fall within the VAT exemption for insurance-specific supplies. As a rule of thumb, the mere generation, enrichment and transfer of customer data should be taxed as a finder’s fee, while only activities that are sufficiently connected to the conclusion of a specific insurance contract may qualify as VAT-exempt insurance intermediation.
Businesses should therefore review lead arrangements based on the actual scope of work, not only the contract wording. In particular, they should document who contacts the customer, who advises on the insurance product, whether the remuneration depends on a concluded contract, and how the leads are used. This will help determine the correct VAT treatment, assess acquisition tax on foreign supplies and avoid unexpected input VAT leakage for insurers.
