UAE VAT Update: Insurance

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Due to the ambiguities related to taxability of different types of insurances and the eligible VAT input credits, FTA has issued clarifications through insurance VAT guide. Some of the Key takeaways from the Insurance guide are covered in this update.
S. No.
Types of insurance
Liability of charges
1.
  • General insurance
  • Motor insurance
  • Real estate insurance
  • Fire and theft Contents insurance
  • Premium – standard-rated if the recipient is resident in the UAE
  • Zero-rated if the recipient is resident outside the GCC Implementing States, is located outside the UAE and the performance of the insurance services is not received by anyone in the UAE who would not be able to recover VAT incurred.
2.
Life Insurance
  • Individual
  • Group
  • Investment linked policy
  • Life annuity
  • Term Insurance
  • Exempt if recipient is resident in UAE;
  • Zero-rated if the recipient is resident outside the GCC Implementing States, is located outside the UAE and the performance of the insurance services is not received by anyone in the UAE who would not be able to recover VAT incurred.
3.
International Transport
  • Aviation/Marine Cargo
  • Transportation of Passengers
  • Premium – Zero-rated if in respect of international transportation services only, but not for travel insurance.
4.
Travel Insurance
  • Standard-rated if the recipient is resident in the UAE;
  • Zero-rated if the recipient is resident outside the GCC Implementing states, is located outside the UAE and the performance of the insurance services is not received by anyone in the UAE who would not be able to recover VAT incurred.
5.
Other Insurance
  • Public indemnity
  • Medical
  • Accident
  • Public liability
  • Standard-rated if the recipient is resident in the UAE;
  • Zero-rated if the recipient is resident outside the GCC Implementing states, is located outside the UAE and the performance of the insurance services is not received by anyone in the UAE who would not be able to recover VAT incurred.

 

Place of Supply for Real Estate Insurance Services
It has been clarified, that a supply of insurance in respect of real estate will not be considered a “service related to real estate” for the purposes of the place of supply. Therefore, the place of supply of the insurance relating to real estate has to be determined on the basis of the general place of supply rules, i.e. by reference to the Place of Residence of the supplier.
 Zero rated, if the insurance is exported, i.e. where the recipient of the Real Estate insurance is not located in the UAE or other GCC Implementing States
Recovery of Input VAT on Health Insurance
Health Insurance for employee
  • The provision of health insurance will be liable to VAT at 5%. Health Insurance is provided by an employer to an employee as a benefit which is part of a contract of employment
  • The employer will be able to recover the input tax on such products, subject to VAT recovery rules
Health Insurance for Employee’s family
  • An employer would only be able to claim the input VAT on the health insurance provided to employee’s families, if it is the legal obligation of the employer to provide the insurance
  • Hence, the input can not be claimed merely on the basis of employment contract since there has to be legal obligation under the labour laws of the respective emirates in relation to health insurance of the employee’s family.
  • the credit on the insurance premium of the employee can be claimed if, the labour law does not require the insurance of the employee’s family

Chirag Chawla
Outcome Solutions & Services
+971- 565318480 chirag.chawla@outcomess.com

 

Disclaimer: Please note that Author’s views are not binding on any authority or Court, and hence, no assurance is given that a position contrary to the opinions expressed herein will not be asserted by any authority and/or sustained by an appellate authority or a Court of law.