The Minister of Finance announced an increase in the Value-added tax (VAT) rate in his budget speech on 21 February 2018. The standard rate of VAT will change from 14% to 15% with effect from 1 April 2018. Short-term insurance premiums are subject to VAT therefore VAT inclusive Sums Insured and Premiums will be increased with effect 1 April 2018 to account for this Legislated change in the VAT rate.
While it is recognised that the setting of sums insured rests with the policyholder, the increase in VAT inclusive sums insured in the event of a VAT rate increase, is for technical reasons, to keep the policy in line with VAT exclusive coverage levels for VAT vendor policyholders and VAT inclusive coverage levels for non-vendor policyholders.
Following a high-level VAT rate change risk analysis across the short-term insurance industry, a detailed array of Frequently Asked Questions (FAQ’s) was compiled. It addresses different scenarios regarding the application of the VAT rate change. Please click here to access these FAQ’s .