Value Added Tax (VAT)

Frequently Asked Questions



What is VAT?

Value Added Tax (VAT) is a tax on consumption. It is a transaction based tax and will be charged on most transactions supplied by VAT registered businesses. In the GCC, the standard VAT rate will be 5%.

Implementation Date in the UAE

The Ministry of Finance in the UAE has published the VAT Decree – Law in an unofficial translation on August 27, 2017 and it was officially announced that VAT will be applicable in the UAE from January 1, 2018

VAT Calculation

Motor, Medical and other forms of Non–Life insurance policies are expected to be subject to VAT at the standard rate of 5%. The policy holder will pay the insurance company the 5% of the total premium reflected in the policy schedule.

VAT Collection and Remittance

Oman Insurance Company will collect the VAT from policy holders for the insurance services provided and will remit this to the UAE Federal Tax Authority (FTA) on a periodic basis.

VAT Application – For renewal of existing policies will VAT apply?

Yes, effective January 1, 2018 all medical and non–life insurance policies – new and renewed – will be subject to a 5% VAT Life insurance policies will be exempt from VAT, as presently understood.

VAT Application – In the event of a policy period extending from present date into the VAT effective period, i.e. post January 01, 2018, how will be VAT be calculated?

If the period of non–life insurance cover spans on or after 1 January 2018, VAT would be applicable on the premium (on a prorate basis if applicable). This applies to new policies being underwritten or policies which are renewed before 1 January 2018. Life insurance policies will be exempt from VAT, as presently understood (i.e. no VAT will be applicable on such premiums).

Additional VAT – If I incur any additional premium amount for policy cover extensions, will this be subject to VAT as well?

Yes, if the policy holder seeks any policy extensions after the initial premium payment, the additional premium will also be subject to the 5% VAT. The above is applicable for medical and other non–life insurance only. Life insurance premiums will be exempt, as presently understood.

VAT Refund – In the event of a policy cancellation, will the VAT amount also be refunded with the premium?

Yes, only if VAT has been charged and you have paid the VAT amount, we will refund the premium and VAT. No VAT will be refunded if there is no VAT charged with the initial premium.

VAT Exemption

Examples of exempt activities as below:

  • Life Insurance Services
  • Margin based financial services (e.g. interest)
  • Sale or lease of residential property (other than the first supply)
  • Sale or disposal of shares and hedging activities
  • Loans provided to employees

Specific list of exempt supplies will be communicated once the VAT Regulations is published.

VAT Payment – Do I pay VAT to a non–registered insurance intermediary like a brokers?

VAT on the non–life insurance premiums must be paid to OIC, irrespective of the VAT registration status of the insurance broker or agent. VAT that is charged by OIC to the policyholder and collected by the insurance broker or agent, will be paid by OIC to the UAE FTA.

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