VAT payback: UAE companies to benefit on their medical insurance expenses

Dubai: UAE companies that have been providing health insurance for family members of their employees can recover part of those costs incurred as VAT, as per the FTA. This came into effect late 2024.  

But now, in an update, the FTA said employers can reclaim some of the costs incurred on a retrospective basis.

This is how it works - “The extension of VAT credit for dependents’ insurance came into effect November 24,” said Chand, Senior Partner at MCA Gulf. “It is now clarified that this can be claimed retrospectively.

“What that means for employers is that dependent insurance input tax credit can be claimed pro-rata from November 15, 2024.”

But keep in mind that this retrospective impact kicks in only on VAT from November 15, 2024.

So, if the employer had paid health insurance premiums from April 2024 to Mar 2025, only the VAT incurred on the portion relating to November 15, 2024 to March 31, 2025 can be recovered.

“Employers need to be clear – this is not a VAT exemption that’s been announced but an input tax credit,” said Chand.

"This amendment would help companies to recover the additional VAT incurred on dependents' insurance - earlier this was allowed only if it was a legal obligation."

Healthcare premiums in the UAE have been on the rise, and represents a significant cost that employers need to bear on their books. Now, not all companies pay for dependents, but where this is applicable, a VAT-related refund would be welcomed by the concerned employers.

This is where businesses get to deduct the tax they already paid on inputs  from their output tax liability.

Under the new FTA update, UAE companies can recover VAT incurred to provide health insurance to their employees and employees’ families - regardless of whether there is a legal obligation to provide such health insurance or not.

This applies to any coverage taken for a spouse and up to three children younger than 18 years.

Recently, the UAE tax regulator had announced VAT exemption on trading in Bitcoin or other crypto assets.

The buying, selling and conversion of virtual assets, including Bitcoin, are exempt from VAT if supplied on or after January 2018,” said Chand.

“As this exemption is retroactive - i.e., effective from 1 January 2018 - the impact on historical transactions need to be reviewed.

“From a VAT perspective, crypto currencies are neither regarded nor treated as money.

“But the keeping and managing virtual assets and enabling control - as crypto wallets - is taxable if supplied in the UAE for an explicit fee, commission or similar charge.”