Is life insurance subject to VAT?

of the Board of Directors of the Federal Tax Authority, - the approval of the Board of Directors of the ،وعلى موافقة مجلس إدارة الهيئة االتحادية للضرائب - Federal Tax Authority, :قررت ما يلي has decided the following: 1. Where a Taxable Person provides or transfers في حال قام الخاضع للضريبة بتوفير أو نقل ملكية عقد.1 the ownership a life insurance/reinsurance فإن الخدمات،تأمين أو إعادة التأمين على الحياة contract, Services connected with that contract المرتبطة بذلك العقد ستعامل على أنها تُشكّل جزءا ً من shall be treated as forming part of the Exempt توريد التأمين على الحياة المُ عفى من ضريبة القيمة Supply of life insurance for Value Added Tax شريطة أن تكون تلك الخدمات ضرورية،المضافة (“VAT”) purposes, provided that such Services لتقديم ذلك التوريد ومتصلة اتصاالً مباشرا ً بتوفير عقد are necessary for making that supply, are وأن،التأمين أو إعادة التأمين على الحياة أو نقل ملكيته directly in connection with the provision or يُشكّل المقابل المستحق دفعه عن الخدمات جزءا ً ال transfer of ownership of the life يتجزأ من إجمالي المقابل المستحق دفعه بموجب عقد insurance/reinsurance contract, and that the وذلك وفقا ً ألحكام،التأمين أو إعادة التأمين على الحياة Consideration payable for those Services forms ) من الالئحة التنفيذية لقانون ضريبة القيمة42( المادة an integral part of the total Consideration .المضافة payable under the life insurance /reinsurance contract, in accordance with the provisions of Article 42 of the VAT Executive Regulation. 2. The exemption from VAT shall only apply to the يطبق اإلعفاء من ضريبة القيمة المضافة على الخدمات.2 Services referred to in Clause 1 above where the ) أعاله فقط في حال كانت1( المشار إليها في البند fees and charges relating to such Services are الرسوم والتكاليف المتعلقة بها مُ درجة ضمن قسط included within the insurance premium payable التأمين المستحق دفعه مقابل توفير عقد التأمين أو إعادة in respect of the provision of the life insurance/reinsurance contract, and no separate Consideration is charged for those Services. 2 وال يتم فرض أي مقابل منفصل،التأمين على الحياة .نظير تلك الخدمات

Article 42 – Tax Treatment of Financial Services 27 1. For the purposes of this Article: 25 Article amended as per Cabinet Decision No. 100 of 2024. 26 Clause amended as per Cabinet Decision No. 149 of 2026. 27 Article amended as per Cabinet Decision No. 100 of 2024. Cabinet Decision No. 52 of 2017 and its amendments – As published by the Ministry of Finance 32 a. The phrase “debt security” means any interest in or right to be paid money that is, or is to be, owing by any Person, or any option to acquire any such interest or right. b. The phrase “equity security” means any interest in or right to a share in the capital of a legal person, or any option to acquire any such interest or right. c. The phrase “life insurance contract” means a contract lawfully entered into to the extent that it places a sum or sums at risk upon the contingency of the termination or continuance of human life, marriage, similar relationships permitted under applicable law, or the birth of a child. d. The phrase “Islamic financial arrangement” means a written contract which relates to a supply of financing in accordance with the principles of Shariah and relevant laws. 2. Financial Services are Services connected to dealings in money (or its equivalent) and the provision of credit and include for instance the following: a. The exchange of currency, whether effected by the exchange of bank notes or coin, by crediting or debiting accounts, or the like. b. The issue, payment, collection, or transfer of ownership of a cheque or letter of credit. c. The issue, allotment, drawing, acceptance, endorsement, or transfer of ownership of a debt security. d. The provision of any loan, advance or credit. e. The renewal or variation of a debt security, equity security, or credit contract. f. The provision, taking, variation, or release of a guarantee, indemnity, security, or bond in respect of the performance of obligations under a cheque, credit, equity security, debt security, or in respect of the activities specified in paragraphs (b) to (e) of this Clause. g. The operation of any current, deposit or savings account. h. The provision or transfer of ownership of financial instruments such as derivatives, options, swaps, credit default swaps, and futures. i. The provision or transfer of ownership of a life insurance contract or the provision of re-insurance in respect of any such contract. j. The management of investment funds, which means “services provided by the fund manager independently for a consideration, to funds licensed by a competent authority in the State, including but not limited to, management of the fund’s operations, management of investments for or on behalf of the fund, monitoring and improvement of the fund’s performance”. k. The transfer of ownership of Virtual Assets, including virtual currencies. Cabinet Decision No. 52 of 2017 and its amendments – As published by the Ministry of Finance 33 l. The conversion of Virtual Assets. m. Keeping and managing Virtual Assets and enabling control thereof. n. Agreeing to do or arranging any of the activities specified in paragraphs (a) to (m) of this Clause, other than advising thereon. 3. The following financial services shall be exempted: a. Activities under Clause 2 of this Article where they are not conducted in return for an explicit fee, discount, commission, and rebate or similar. b. The issue, allotment, or transfer of ownership of an equity security or a debt security. c. The provision or transfer of ownership of a life insurance contract or the provision of re-insurance in respect of any such contract. d. Fund management services described in paragraph (j) of Clause 2 of this Article. e. Services specified in paragraphs (k) and (l) of Clause 2 of this Article, including services supplied on or after 1 January 2018. 4. Activities under Clause 2 of this Article shall be subject to tax where the consideration payable in respect of a supply of Services is an explicit fee, commission, discount, and rebate or similar. 5. Islamic finance products, being financial products under contract which are certified as Islamic Shariah compliant, which simulate the intention and achieve effectively the same result as a non-Shariah compliant financial product, will be treated in a similar manner as the equivalent non-Shariah financial product for the purpose of applying exemption from Tax. 6. Any supply made under an Islamic financial arrangement shall be treated in such a way as to give an outcome for the purposes of the Decree-Law and the decisions issued by the Authority, comparable to that which would be the case for their nonIslamic counterparts. 7. Where Article 31 of this Decision applies in respect of a supply of financial services, this supply should be treated as zero-rated.

3. Such fees that may be considered part of the تشمل الرسوم التي قد تشكل جزءا ً من التوريد المعفى.3 Exempt Supply of life insurance/reinsurance, الرسوم المتعلقة،للتأمين أو إعادة التأمين على الحياة include fees related to the management, بإدارة أو تشغيل أو تنفيذ عقد التأمين أو إعادة التأمين life وذلك متى، وأية خدمات أخرى مشابهة،على الحياة insurance/reinsurance contract, and any similar .استوفت الشروط المنصوص عليها في هذا التوجيه operation, or execution of a Services, provided they meet the conditions set forth in this Directive. 4. Services which are independent in nature, and ً التي ال تُش ّكل جزءا، تعد الخدمات المستقلة بطبيعتها.4 do not form an essential or necessary part of the أساسيا ً أو ضروريا ً من توفير عقد التأمين أو إعادة provision of a life insurance/reinsurance أو تلك التي يتم فرض مبالغ منفصلة،التأمين على الحياة contract, or for which separate amounts are توريدات مستقلة ألغراض ضريبة القيمة،بشأنها charged, are considered independent supplies .المضافة for VAT purposes. 5. The determination of whether a Service يتم تحديد ما إذا كانت الخدمة تُشكل جزءا ً من التوريد.5 constitutes part of the Exempt Supply of life ّالمُ عفى للتأمين أو إعادة التأمين على الحياة أو تُعد insurance/reinsurance or a separate supply shall توريدا ً مستقالً وفقا ً للحقائق والظروف المحيطة بكل be based on the facts and circumstances of each بما في ذلك طبيعة العالقة بين الخدمة وتوفير عقد،حالة case, including the nature of the relationship ومدى ضرورة،التأمين أو إعادة التأمين على الحياة between the Service and the provision of life وآلية تحديد واستيفاء،الخدمة لتوفير العقد أو نقل ملكيته insurance/reinsurance contract, the extent to وذلك وفقا ً ألحكام قانون ضريبة القيمة المضافة،المقابل which the Service is necessary for the provision .والئحته التنفيذية or transfer of that contract, and the manner in which the Consideration is determined and charged, in accordance with the provisions of the VAT Law and its Executive Regulation. 6. This Directive shall be published in the Official Gazette. 3 . يُنشر هذا التوجيه في الجريدة الرسمية.6

4. Insurance and VAT 4.1. The VAT treatment of insurance and related services in the UAE 4.1.1. General principle The general principle applicable in the Law and Executive Regulations is that all insurance and related services will be subject to VAT at the standard rate. The limited exceptions to this general principle are set out below at paragraphs 4.1.3 and 4.1.4. 4.1.2. Standard rated services As outlined above, supplies of insurance and insurance related services are subject to VAT at the standard rate (i.e. they are treated as taxable supplies). VAT incurred on costs wholly attributable to the standard rated supply can be recovered in full. Contracts of life insurance and general intermediation services are expressly defined as a financial service in the Executive Regulations:   ‘The payment or collection of any amount of interest, principal, dividend, or other amount whatsoever in respect of any debt security, equity security, credit, and contract of life insurance12. ‘Agreeing to do, or arranging, any of the activities specified in [Article 42(2)] paragraphs (a) to (i) of this Clause, other than advising thereon.13’ Under Article 42(3) of the Executive Regulations, the VAT liability of financial services is set as exempt in respect of:   Activities under Clause (2) of this Article where they are not conducted in return for an explicit fee, discount, commission, and rebate or similar; and The provision or transfer of ownership of a life insurance contract or the provision of re-insurance in respect of any such contract. For examples of the VAT liabilities of typical insurance charges, please see Appendix A. 4.1.3. Exported services The supply of insurance and related services to a recipient established outside the GCC Implementing States (whether or not they would otherwise have been exempt where supplied in the GCC) will be zero-rated (i.e. they are treated as taxable supplies). 12 Article 42(2)(i), Executive Regulations. 13 Article 42(2)(j), Executive Regulations. Page 11 VAT Guide | Insurance | VATGIN1