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This ZATCA circular clarifies the VAT treatments for vehicle insurance in Saudi Arabia. It establishes that all vehicle insurance premiums and related fees are subject to the standard 15% VAT, in line with the principles of Article 29 of the VAT Implementing Regulations. The guide details the distinction between non-taxable indemnity payments for third-party claims and taxable supplies for comprehensive claim repairs where the insurer is the customer. It further explains the VAT implications for deductibles, the non-taxable nature of depreciation, and the conditions under which transferring a salvaged vehicle becomes a taxable supply.

Tax circular

VAT Treatments for Vehicle Insurance

Zakat, Tax and Customs Authority

V.1 2203002 | March 30, 2022

1. Definitions

2. Tax Treatments for Sales of Vehicle Premiums

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)

The Zakat, Tax and Customs Authority ("ZATCA", "Authority") has issued this Tax Circular for the purpose of clarifying certain tax treatments concerning the implementation of the statutory provisions in force as of the Circular's issue date. The content of this Circular shall not be considered as an amendment to any of the provisions of the Laws and Regulations applicable in the Kingdom.

Furthermore, the Authority would like to highlight that the clarifications and indicative tax treatments prescribed in this Circular, where applicable, shall be implemented by the Authority in light of the relevant statutory texts. Where any clarification, interpretation or content provided in this Circular is modified - in relation to unchanged statutory text - the updated indicative tax treatment shall then be applicable prospectively, in respect of transactions made after the publication date of the updated version of the Circular on the Authority's website.

Definitions

The following terms and phrases whenever mentioned in this circular, mean the definitions described in front of each of them, unless the context requires otherwise:

Contents

Definitions