UAE clarifies VAT exemption for life-insurance contract fees

Three conditions link a service to the exempt supply

A connected service forms part of the exempt life-insurance or reinsurance supply only where it is necessary for that supply, directly connected with providing or transferring the contract, and its consideration is an integral part of the total amount payable under the contract. The related fee must be included in the insurance premium; no separate consideration may be charged for the service.^[1]

Some management and execution fees can qualify

The directive says fees for managing, operating or executing a life-insurance or reinsurance contract can qualify when those conditions are met, as can similar services. By contrast, an independent or non-essential service, or one charged separately, is a separate supply for VAT. Classification depends on the facts and circumstances, including the service’s relationship to the contract, its necessity and how consideration is determined and charged.^[1]

Article 42 remains the statutory framework

Article 46 of Federal Decree-Law 8 of 2017 exempts financial services specified in the Executive Regulation. Article 42 of Cabinet Decision 52 of 2017 includes the provision or transfer of a life-insurance contract and related reinsurance within financial services and expressly exempts those supplies. Article 42 also generally taxes financial services where consideration takes the form of an explicit fee, commission, discount, rebate or similar amount. Directive 4 explains how that explicit-fee rule interacts with charges integrated into an exempt life-insurance supply.^[2][3][1]

Contract and billing design matter

Insurers and reinsurers should compare contract wording, premium schedules, invoices and internal service descriptions. A fee label alone does not determine the result: the service must satisfy the directive’s necessity, connection and integrated-consideration tests. Separately priced administration or other independent services remain outside the exemption. The directive was issued on 14 July and requires Official Gazette publication, but it states no separate commencement date, so none should be inferred.^[1][2][4]