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November 27, 2017

VAT on insurance

VAT on insurance

Be prepared to shell out that extra buck by way of Value Added Tax (VAT) in the UAE from January 1, 2018.

Be prepared to shell out that extra buck by way of Value Added Tax (VAT) in the UAE from January 1, 2018. VAT, a consumer-based tax on the supply of goods and services, will have to be borne by the consumers, like sales tax in other countries.VAT, a consumer-based tax on the supply of goods and services, will have to be borne by the consumers, like sales tax in other countries.

The exempted categories are education, healthcare and certain food items. As per available information, no VAT will be payable on nursery school, pre-school, elementary school and government-funded university fees as these will be zero-rated. Non-government funded university fees may, however, be subject to VAT.

With VAT, the prices of insurance policies may rise by at least 5%. But there is a breather. Life insurance and life reinsurance are exempted from the new levy. Medical insurance premiums are expected to attract VAT. But where this is provided by an employer to an employee as a benefit as part of a contract of employment, the employer should be able to recover the input tax on such products.

The situation is expected to be much clearer once the Executive Regulations on VAT are released, which is expected very shortly.

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