Life insurance fees and charges now exempt from VAT when bundled with premiums

The Federal Tax Authority has issued Directive on Tax Transactions No. 4 of 2026, which clarifies the VAT treatment of fees and charges forming part of life insurance and life reinsurance contracts. Under the directive, services connected with life insurance or reinsurance contracts are treated as forming part of the exempt supply of life insurance for VAT purposes, provided the services are necessary for making that supply and directly connected with the provision or transfer of the contract. The exemption applies only when fees and charges are included within the insurance premium and no separate consideration is charged for those services. Fees that may qualify include those related to management, operation, or execution of insurance contracts. Services that are independent in nature or for which separate amounts are charged are considered independent supplies and remain subject to VAT. The determination of whether a service forms part of the exempt supply or constitutes a separate supply is based on the facts and circumstances of each case.