Beta Version

Website Last updated:

May 15, 2026

Circular 2203002 provides the interpretive framework for VAT on motor insurance, covering premiums, claims, and salvage. All vehicle insurance premiums and ancillary benefits are subject to the 15% standard rate. The circular distinguishes between third-party indemnity (not subject to VAT) and comprehensive insurance repairs. In comprehensive cases, the insurer is treated as the customer if it manages repairs directly, enabling input tax deduction. It also clarifies that transferring completely damaged vehicles (salvage) to an insurer is a taxable supply if the insured is VAT-registered. This document clarifies Article 29 Clause 7 of the Implementing Regulations.

Treatments for Vehicles Insurance

Tax Circular | VAT | V.1 2203002

March 30, 2022

1. Definitions

2. Tax Treatments for Sales of Vehicle Insurance Premium

3. Commission

4. Tax Treatments for Vehicle Insurance Claims

5. Comprehensive Motor Insurance Claims

6. Tax Treatments for Deductibles and Percentage of Depreciation

7. Tax Treatments for Completely-Damaged Vehicles (Salvage)

This Circular

This Circular is issued by the Zakat, Tax and Custom Authority ("ZATCA") to provide its interpretation of the tax laws and provisions of the tax agreements in force at the time of issuance and their application in specific circumstances.

The opinions and interpretations provided in this circular are consistent with opinions provided by ZATCA through tax rulings and legal clarifications.

This circular is issued for informational purposes only. It should not be construed to constitute an amendment to the tax laws in force in Saudi Arabia.

The content of this circular does not include, or purport to include, all the relevant legal provisions relating to the subject matter.

Definitions

The following terms and phrases whenever mentioned herein shall have the meanings ascribed thereto, unless the context requires otherwise:

Contents

Definitions