October 6, 2021Dated: | By admin | The Federal Tax Authority (FTA) has pointed out that all insurance and related services in the UAE will be subjected to VAT at the standard rate. However, the VAT liability of financial services is set as exempt if they are not conducted in return for an explicit fee, discount, commission, and rebate, or similar. The risks covered include fire, theft, other accidents, motor vehicles, loss of profits, general indemnity, health, life, and endowment business. According to the FTA regulations on VAT in the UAE, insurance services are services provided by businesses or persons which involve a contract which provides that the insured will become entitled to something on the occurrence of some event that involves some element of uncertainty whereby the insured have an insurable interest in the subject matter of the contract.In practice, the FTA guidelines on the VAT on insurance in the UAE states that, 1) the insurer makes an offer to the potentially insured party, which the latter either accepts or rejects; The parties must be in agreement as to the intention of the contract of insurance.2) there must be an intention to enter into a legal relationship under which one party has an obligation to provide insurance3) there must be some payment, right, or benefit offered by the potentially insured party to the contract of insurance. The premium forms the insured’s (policyholder’s) consideration in return for the insurer’s promise to pay according to the terms of the policy.Two specific types of insurance are however an exception:Life insurance and associated reinsurance are exempt from the VAT chargesInsurance relating to the international transport of goods and passengers is zero-rated.The supply of insurance and related services to a recipient established outside the GCC Implementing States will also be zero-rated.Whereas, the supplies of insurance and related services to a recipient established outside the UAE but within the GCC Implementing States have the following VAT treatments: Where the recipient is registered or registerable for VAT in the GCC Implementing State in which the insurance or insurance-related service is received, the supply is outside the scope of UAE VAT and the recipient is liable to account for the reverse charge in the other GCC member state at the prevailing rate of VAT applicable to that service in that state. Where the recipient is not registered nor registerable for VAT in the GCC Implementing State in which the insurance or insurance-related service is received, the place of that supply will be the UAE. In such instances, the supply will be liable to UAE VAT as normal and will have the related level of VAT recovered.Flying Colours has been assisting clients for the past 17 years in all matters related VAT in the UAE. For any queries or assistance, please feel free to reach out to our dedicated team at firstname.lastname@example.org or contact us on +971 4 4542366.