Does Travel Insurance Incur A Vat Charge?

Insurance Premium Tax (IPT) is a tax applied to insurance premiums received under taxable insurance contracts, with two rates: a standard rate of 12 and a higher rate of 20 for insurance supplied with selected goods and services. If you are registered for VAT, you must charge VAT when you make taxable supplies. The higher rate applies to travel insurance, mechanical or electrical appliances insurance, and some vehicle insurance.

VAT is charged on zero-rated supplies at the rate of 0. Zero-rated supplies are treated as taxable supplies in all respects, including the right of the person making the claim. Insurance transactions are exempt from VAT, but VAT cannot be recovered on goods and services bought in to make exempt supplies. The IPT rate currently stands at 12, but for certain covers, such as travel insurance, this amount jumps up to 20.

The Principal VAT Directive Article 135 mandates the exemption from VAT of insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents. When making insurance claims, VAT registered businesses follow a specific process, with the insurance company paying the claim net of VAT. This means that the insurance company pays the claim net of VAT.

In South Africa, insurance of international transportation of passengers and/or goods has been zero-rated since the enactment of the VAT law. However, the taxability of travel insurance remains the same. Insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents qualify for exemption. The supply will be liable to VAT at its corresponding VAT rate, and the intermediary collects for the premium on behalf of the (re)insurer.

Should VAT be included?

As a VAT-registered business, you must include VAT in the price of all goods and services, keep records of the VAT paid for goods, account for VAT on imported goods, report the VAT charged to customers and other businesses, send a VAT return to HM Revenue and Customs (HMRC) every three months, and pay any VAT owed to HMRC. The VAT you pay is usually the difference between the VAT paid to other businesses and the VAT charged to customers. If you charge more VAT than you paid, you must pay the difference to HMRC.

Can you claim VAT on professional indemnity insurance?

Insurance premiums are not subject to VAT on commercial and personal policies, but they are still taxed in the form of Insurance Premium Tax (IPT). The standard rate is 12, while higher rates are set at 20 for travel, mechanical or electrical appliances, and some vehicle insurance. IPT is lower than VAT and cannot be recovered, but there are exemptions available.

Is an insurance claim received an income?

Life insurance payouts due to the insured’s death are usually not taxable, but interest income is taxable and reportable. If a policy was transferred for cash or other valuable consideration, the insurance proceeds exclusion is limited to the sum of consideration paid, additional premiums paid, and certain other amounts. Some exceptions apply, but the taxable amount is generally reported based on the type of income document received.

What can I charge VAT on?

VAT is a tax levied on various goods and services, including hiring or loaning goods, selling business assets, commissions, items sold to staff, business goods used for personal reasons, and non-sales like bartering, part-exchange, and gifts. Charities have different rules for VAT, and VAT is not charged on goods or services that are exempt from VAT or unaffected by VAT (out of scope). These taxable supplies are considered ‘taxable supplies’.

What is the output VAT?

Output VAT is the amount of Value Added Tax (VAT) a business charges on sales of goods and services. Registered businesses must add this charge to each VATable sale. Output VAT is paid to HMRC at the end of a VAT period, minus input VAT or other deductions that can be reclaimed. For example, if a business makes £80, 000 in VATable sales over a quarter, it collects £16, 000 in VAT (£80, 000 x 20).

Can you claim VAT on Travelling?

VAT on aeroplane tickets for local business travel, including accommodation and other expenses, can be claimed. However, VAT on air travel is slightly different, not being a standard 15 on all of it.

Is there VAT on medicines in UAE?

UAE values providing high-quality healthcare services through its professional and disciplinary approach. Most healthcare services are subject to zero-rate VAT, allowing healthcare service providers to recover VAT incurred on associated costs. However, there are exceptions where Tax Invoices are subject to the standard rate of 5, such as services not basic or preventive, like cosmetics treatment. Healthcare service providers include hospitals, medical clinics, and diagnostic centers, both government-owned and private. A healthcare service may only be zero-rated if it is generally accepted in the medical profession as necessary for the treatment of the “recipient of the supply”, including any preventive treatments.

Is VAT charged on travel expenses?

VAT can be reclaimed on employee travel expenses for business trips, including transport, meals, and accommodation. Self-employed individuals can also reclaim VAT on other expenses, but flat rates for expenses cannot be used to reclaim VAT. It’s important to determine who counts as an employee.

Can we claim VAT on medical insurance in the UAE?

VAT is a legal obligation in the UAE for employers to recover VAT incurred on health insurance provided to their employees. In some cases, employers may be required to provide health insurance to their family members, which may affect the VAT treatment of the health insurance provided to the employee’s family members. VAT consultants in Dubai can assist businesses in resolving VAT-related issues related to employee health insurance.

In cases where the insurance intermediary (agent/broker) is the disclosed agent for an insurance transaction, the collection of premium from the insured and remission of the premium to the insurer are not considered supplies for VAT purposes. The commission charged by the broker to the insurer or insured is subject to VAT at the standard rate, zero-rate, or out of scope depending on the place of supply rules. VAT consultants in Dubai advise insurance agents to have clarity on what service they provide and to whom they are providing.

The introduction of VAT in 2018 was a significant regulatory reform that changed the business landscape of the UAE, impacting sectors such as real estate, education, and healthcare. The VAT treatment of insurance services has been subject to debate due to the presence of various products and services in the sector.

Is there VAT on insurance in Ireland?

VAT exemptions are available for certain supplies, such as postal services, medical services, education, and national broadcasting, financial services, insurance services, betting/gambling services, letting of immovable goods, and passenger transport services. Starting January 1, 2024, the VAT registration thresholds have been increased, with turnover thresholds for services from EUR 37, 500 to EUR 40, 000 and for goods from EUR 75, 000 to EUR 80, 000.

However, an option to tax is possible, subject to certain conditions. The exemptions apply to activities in the public interest, financial services, insurance services, betting/gambling services, and passenger transport services.

Do you charge VAT on insurance?

Insurance Premium Tax (IPT) is typically included in the insurance price, without VAT being charged.