Federal Tax Authority or FTA in UAE has- issued public guidance for VAT requirements that are related to insurance supplies. It covers all the characteristics of insurance-related services in relation to VAT in UAE (VAT on Insurance UAE), including functions and services which are liable to taxation and the possibility for recovering input tax.
Generally, insurance-related services in UAE are all subject to tax at the current VAT rate of five percent. VAT that is incurred for costs that wholly attribute to standard rate supply may be refunded or recovered in full. But, life insurance, as well as associated reinsurance, are exempt from the supply of all insurance-related services that are for recipients established outside GCC states are zero-rated for VAT. Input VAT that is incurred can’t be recovered if it consists of exempt supplies; however, they may be recovered for supplies that are zero-rated.
Where insurance-related services are provided to recipients that are within the GCC implementing states, the rules that apply are as follows:
- If the recipient isn’t registerable or currently registered for VAT in a GCC implementing state, the place of supply will be considered as the UAE. The service will be subject to VAT with input tax recovery applied accordingly.
- For a recipient that is registerable or registered for VAT in a GCC implementing state, supply will be outside UAE VAT scope. The recipient should account for VAT using the reverse charge with the prevailing VAT rate applicable to the service the state. It is possible to recover input tax if the supply would’ve been exempt if it’s made in UAE.
- Where insurance-related services are being imported to UAE, the services will be taxable via reverse charge. If the importer is subject to a reverse charge, then a claim can be made for recovery of input tax.
Read also: Impact of VAT on IT Businesses
Why Insurance Companies Need Regulated Tax Agents in UAE
Most insurance companies seek the expertise and experience of regulated tax agents in UAE for the following reasons:
If you have an accountant helping you file your tax return, then you might think that you are already covered if the FTA orders a surprise audit for your insurance business. that is not necessarily true. A lot of individuals that are qualified in filing tax returns in UAE aren’t qualified in offering audit representation, which is very crucial in avoiding administrative fines and penalties. If you work with regulated tax agents in Dubai, the expert will be able to review and make the necessary changes to your tax return while offering you representation when an audit is scheduled by the tax authorities.
Proper Tax Accounting
It is impossible for an insurance business to keep accurate accounts of deductions and credits available. This means the odds are high that you’ve missed a couple when you previously filed your tax returns. Having a team of regulated tax agents in UAE look at your tax returns will help ensure that you got all credits and deductions that you’ve qualified for a fiscal year. If there are any that are missed, the experts will file an amendment in order to get your business additional refunds.
Correction of Errors
While it is always nice when you find out that you are getting a lot more money from the tax authorities in UAE, sometimes a review of your tax returns results in the exact opposite. With a team of seasoned and regulated tax agents in UAE, your filed tax returns will be reviewed. When they notice that there were incorrect calculations reported and you owe more to the FTA, you will still be able to benefit.
The incorrect numbers that were reported will soon be uncovered by the FTA. When the FTA finds mistakes in tax returns, you will end up with hefty fines and penalties. You’ll even be put on the schedule for an audit. When a team proactively reports mistakes before the tax authorities find out themselves, you will get lesser penalties and your insurance business will not be flagged by the FTA.
Greater understanding re: tax obligations
For many insurance companies in UAE, tax return filing involves a ton of guesswork and crossing fingers. They blindly hope that they are doing the process right. You will never have to worry about having your tax returns as you will be briefed by experts regarding your unique tax situation. You will know the credits and deductions that you are actually qualified for. What’s more, you’ll be able to understand your tax returns better so you can handle any questions the FTA might have with more confidence.
The skills and experience of regulated tax agents in UAE make them the best partners of insurance companies in UAE. To ensure that your tax obligations are all taken care of by experts, call us here in VAT Registration UAE!