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The insurance industry has been grappling with some Value Added Tax (VAT) related challenges since the introduction of VAT in the United Arab Emirates (UAE) at the start of 2018.
In its recently published VAT Guide on Insurance, the Federal Tax Authority (FTA) provides helpful clarifications on some of the issues faced by insurers and companies related to the insurance industry.
Although the guide does not cover all insurance products and services, it provides clarity around key insurance products and insights on the FTA’s interpretation of some of the issues. The key points are:
- Travel insurance provided to UAE residents is not subject to the zero-rate of VAT.
- Insurance of real estate is not regarded as a service related to real estate for the place of supply rules, unless it is part of a composite supply that is related to real estate. This is different from the position in Saudi Arabia, where insurance of real estate is regarded as a real estate related service, as clarified by the General Authority of Zakat and Tax (GAZT).
- Partially exempt taxpayers (i.e. insurers providing both life and non-life insurance) are required to review their input tax recovery position to assure it reflects actual use. Taxpayers need to make sure that the apportionment of residual input tax is fair and reasonable.
- The VAT treatment of Islamic insurance (Takaful) needs to be analyzed on a case-by-case basis, whereby the VAT liability position of each Islamic insurance and re-insurance product should be ascertained through a “four-step” process set out in the guide.
Read the full article here.
