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VAT SERVICES FOR INSURANCE BROKERAGE COMPANIES

The UAE Federal Tax Authority (FTA) guidance on the VAT requirements for insurance supplies comprises the aspects of insurance and related services for VAT plans, covering which functions and services are liable to VAT etc. The UAE system for insurance companies may seem incongruous in the modern world but its historical roots are strong and deep. Insurance is the pooling of funds from insured entities to compensate for the loss. The insured is protected from risk based on the frequency and severity upon the timely claim settlement by insurance brokers. Insurance companies have many facets as Dubai, therefore to select the best insurance policy is a baffling task. It is imperative to have an understanding of the best insurance provider who meets your preferences. CDA is one of the leading consultants for VAT service in UAE offering seamless VAT guidance and consulting for companies from all business sectors.

UAE VAT Guide for Insurance

The UAE Federal Tax Authority (FTA) rules and regulations for insurance supplies outline the VAT provisions that apply to insurance companies. A business register for VAT if their annual turnover exceeds the threshold of AED 375,000 as per the current year. There exists an option for voluntary registration if there is a threshold of AED 187,500. The government of UAE and the federal tax authority (FTA) defined this process of the threshold for registration and reporting of VAT. The tax that they have to pay to the FTA depends on the input VAT and the output VAT.

UAE VAT Categorization

Goods and services are alienated into three categories on which VAT will be applied:

VAT Exempted Category: It includes Health Sector, Education, Food and rent, local passenger transport, corporate businesses, first-time property buyers, residential leases and land buyers

Zero percent VAT: This category comprises goods and services listed for export and international services, certain education, precious metals, and health services and supplies, residential properties that are newly constructed and supplied within three years.

Five percent VAT: The five percent VAT in UAE includes electronics goods, clothes, food, fuel, communication services, entertainment, insurance services etc.

Insurance VAT Rules & Regulations in UAE

1. All insurance and related services are subject to VAT at the standard rate (5%)

2. VAT incurred to the standard-rated supply can be recovered in full. 

3. The supply of life insurance and associated reinsurance exempted from VAT

4. The supply of insurance services to entities outside the Gulf Cooperation Council (GCC) is zero-rated. 

5. Input VAT incurred may not be recovered in respect of exempt supplies. 

6. Where insurance and related services are supplied to a recipient within a GCC implementing state, special rules apply:

  • If the recipient is registered for VAT in the GCC state, then the supply is outside the scope of UAE VAT and the recipient is to account for VAT through reverse charge mechanism.
  • If the recipient is not registered for VAT in the GCC state, then the place of supply is considered the UAE and subject to VAT and eligible for input tax recovery accordingly.

7. VAT incurred on costs of non-life insurance and also to exempt supplies of financial services in life insurance must be apportioned based on input tax apportionment method.

8. Commission charged by the intermediary is a supply and is either liable to VAT at the standard or zero rates, or is out of scope, depending on the application of the place of supply rules.

9. Reinsurance is treated based on the reverse charge mechanism.

10. Recovery of input VAT on health insurance premiums based on 2 aspects: on the basis of employee’s employer can recover input tax on the premium paid as it is a benefit mentioned in the employment contract. In the case of insurance benefits provided to the family of an employee, the input tax can only be recovered only under legal obligation.

How Tax consultation and Tax Audit Helps Insurance companies

Tax consultation and tax audit services help insurance companies to take the notice of VAT journeys in the state. A good tax planning system helps to maintain the impact of new tax reforms on broader business goals of the company. The VAT consultancy services help:

  • To maintain the documentation of financial data including the premiums, policies etc.
  • To minimize the tax consequences regarding the wrong filings.
  • Receivables management and payables tracking.
  • Tax audit reports generation and decision making on tax credits.

How CDA helps you?

CDA experts are chosen because they are insightful regarding the procedures of the VAT. They know the right protocol to follow for the UAE VAT registration. That is why CDA is the first choice to be considered by the companies for their compliance with the VAT laws in the UAE. CDA offers various VAT services for insurance companies such as:

VAT Registration: Our tax experts will help you to obtain TRN for the company by submitting essential documents which include: Trade license, Authorized signatory documents (Emirates ID, Passports), Power of Attorney, Bank details, Financial statements of the previous year.

VAT Record Keeping: Our tax consultants help you to maintain the documents in a systematic manner which includes:

VAT Calculations and Return Filing: Before calculating VAT, your business must comply with rules to avoid any penalty. VAT return depicts the tax amount due for a particular tax period. CDA experts prepare VAT return filing on 201 forms and submit it to FTA authority.

VAT Implementation and Compliance: Ensuring business compliance with UAE VAT law is a complex task. Following each law concept and filing the tax for insurance companies.

VAT De-registration: It is the process of cancellation of TRN. Deregistration occurs when the taxable supplies fall less than the threshold limit as prescribed by FTA. Our VAT deregistration services are at a reasonable rate.

CDA Client portfolio

CDA is a well-established and experienced team in the field of Insurance, we have provided our service to insurance companies as well as brokerage which includes CFO services, Internal audit and external audit in compliance with the Federal Tax Authority. Our client portfolio is evidence of our excellent vat services for insurance companies.

“When it comes to financial and accounting matters, nobody can compete with him. I am sure that Charles and his team can satisfy all the clients as well. In my opinion, he is very good at controlling cost and advising for better decision making. Such a hardworking and dedicated individual is just a reason why we love the whole experience from CDA”

NABIL YASIN

Managing Partner, Al Nahdah National Insurance Brokers Co LLC

Frequently Asked Questions [FAQ]

1. How much do you charge for VAT Services?

VAT Service charges depend on the turnover and the number of transactions on supply.

2. How long VAT records to be maintained for?

Any taxable person must retain the VAT invoices and other notes for 5 years as per FTA.

3. How is VAT on reinsurance for life insurance treated?

Reinsurance for life insurance is exempted from VAT.

4. What is the deadline for VAT return filing?

The deadlines are clearly mentioned in the TRN certificate and it is monthly or quarterly based. The payment of due tax is on the 28th day of the tax period.

5. In the case of selling a vehicle is it possible to transfer the insurance?

It is not possible to transfer the cover as the insurance premium and terms are based on the experience of the driver.

6. Do Insurance brokers are liable to pay the full amount of Vat on policies issued on behalf of an Insurance company?

No, the insurance brokers are liable to pay Tax only on the percentage of his commission received

7. Is health insurance for employees are Taxable or not?

No, since health insurance falls under the category of Life Insurance it is exempted from Tax.

8. Do all non-life insurance products subject to VAT at 5%?

No, they are instances of zero-rating when the products are of export supply and outside the scope of VAT if it is an intra GCC supply.

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