Value Added Tax (VAT) Implementing Regulations determined the method of implementing the tax on insurance sector, in which life-insurance contracts were exempted from VAT that will be executed in the kingdom starting January.
According to the implementing regulations, all insurance products and contracts in the kingdom are subject to a five percent tax except for life-insurance contracts.
Activities that are included in the VAT such as insurance contracts and products are classified by the Saudi Arabian Monetary Authority as general insurance or health insurance.
The authority asserted that all life-insurance products licensed from SAMA will be exempted. It clarified that consumers and individuals will have to pay the VAT on any additional commission or fees for insurance mediation parties.
The General Authority of Zakat and Tax (GAZT) stated that the VAT wont have any consequences on due payments of clients and beneficiaries of insurance services.
GAZT affirmed that the VAT will become applicable in the first of January, and that all qualified establishments must be ready to implement it fully through getting introduced to the authority’s website – the website contains a guide that provides a simple explanation of the basic concepts demanded from establishments to implement the VAT in addition to a huge group of referral information and tools.
The authority, earlier, called on establishments whose annual revenues exceed SAR1 million (USD266.6 thousand) to register in the VAT before Dec. 20 to avoid any financial fines and termination of governmental services.