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UAE VAT Fundamentals/Module 13: Financial Services & Insurance
7 min

Insurance — Life vs General

VAT treatment of insurance: life insurance is exempt, general insurance is standard-rated, and the treatment of premiums and claims.

Insurance VAT Treatment

Life Insurance: Exempt

Life insurance policies are exempt from VAT:

  • No VAT is charged on premiums.
  • The insurer cannot recover input tax on related expenses.

General Insurance: Standard-Rated

General insurance (non-life) is standard-rated at 5%:

  • Property insurance
  • Motor insurance
  • Liability insurance
  • Health insurance
  • Travel insurance

The insurer charges 5% VAT on the premium. The policyholder can recover the VAT as input tax if they are a registered business and the insurance is for business purposes.

Insurance Brokers and Agents

Insurance brokers and agents charge 5% VAT on their commission/fees, regardless of the type of insurance they arrange. The commission follows the standard place of supply rules.

Claims and Payouts

  • Insurance payouts: Not subject to VAT (they are not consideration for a supply).
  • Repair services paid by insurers: The repair company charges VAT to the insurer; the insurer recovers it as input tax.
  • Salvage: Sale of salvage goods by insurers follows normal VAT rules.

Reinsurance

Reinsurance (insurance for insurers) generally follows the VAT treatment of the underlying insurance:

  • Reinsurance of life insurance: exempt.
  • Reinsurance of general insurance: standard-rated at 5%.

Worked Example

A business pays AED 10,000 annual premium for property insurance + 5% VAT = AED 10,500. The business recovers AED 500 as input tax. The insurer charges 5% VAT and recovers input tax on its expenses (office, staff, reinsurance). If the insured property is damaged, the insurance payout is not subject to VAT. The repair company charges VAT to the insurer, which the insurer recovers.

Practical UAE example

**Dubai Motor Insurance**: A logistics company pays AED 5,000 + 5% VAT = AED 5,250 for fleet motor insurance. The company recovers AED 250 as input tax on its VAT return. The insurance broker charges 5% VAT on its AED 500 commission = AED 25. If a vehicle is damaged, the insurer pays the repair shop AED 3,000 + 5% VAT = AED 3,150. The insurer recovers the AED 150 VAT. The insurance payout itself is not subject to VAT.

Key takeaways

  • Life insurance is exempt — no VAT, no input tax recovery.
  • General insurance is standard-rated at 5% — premiums include VAT.
  • Brokers charge 5% VAT on commissions regardless of insurance type.
  • Insurance payouts are not subject to VAT; repair services follow normal rules.

Authoritative sources

Federal Decree-Law No. 8 of 2017 on Value Added Tax

United Arab Emirates — Federal Tax Authority · The VAT Law — Articles 1 to 82 (as amended by Federal Decree-Law No. 18 of 2022)

Effective: 1 Jan 2018Verified: 5 Oct 2026View source

Cabinet Decision No. 52 of 2017 on the Executive Regulations of the Federal Decree-Law No. 8 of 2017 on VAT

United Arab Emirates — Cabinet / Federal Tax Authority · Executive Regulations (as amended by Cabinet Decisions No. 46/2020, 24/2021, 88/2021, 99/2022, 100/2024, and 100/2025)

Effective: 1 Jan 2018Verified: 5 Oct 2026View source

FTA — VAT Guides, References & Public Clarifications

UAE Federal Tax Authority · Taxable person guides, tax invoice guides, input tax guides, designated zones, real estate

Effective: 1 Jan 2018Verified: 5 Oct 2026View source
Knowledge check

1. What is the VAT treatment of a general insurance premium?

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This lesson is general educational content, not individualized tax or legal advice. Always consult a qualified professional for your specific situation.