UAE Law and Practice Contributed by: Raghad Hammad and Huda Al Zein, BLK Partners
• General Insurance (Standard 5%): This is the most common category. If you buy insurance for your car, your home or your business liability, you will see a 5% tax added to the price. For health insur- ance, 5% also applies, though employers can often claim this tax back if they are providing the insurance for their employees as part of a taxable business. • Life Insurance (Exempt): To encourage long-term savings and protection, life insurance premiums are generally exempt from VAT. This means the insurance company does not add the 5% tax to your bill. • International Risks (0%): Insurance for goods being shipped internationally or for travellers going abroad may be “zero-rated”. This means the tax rate is 0%, which keeps the UAE’s logistics and travel sectors competitive globally. Corporate Tax on Insurance Profits While VAT affects the price you pay, Corporate Tax affects the insurance company’s earnings. • Standard Profit Tax: Insurance companies pay a 9% tax on their yearly net profits that exceed AED375,000. This started becoming a major factor for most companies in 2024 and 2025 as they filed their first returns. • Large Multinational Tax: Effective from 1 January 2025, very large global insurance groups (those with over EUR750 million in revenue) must pay a higher 15% minimum tax. This ensures that big international players pay a fair share, aligning the Starting on 1 January 2026, the government is making it easier for businesses to manage these taxes while also setting stricter deadlines: • Five-Year Limit: Businesses now have a strict five- year window to claim back any tax refunds they are owed. If they wait longer than five years, the money is forfeited to the government. • Digital-Only System: The UAE is moving away from paper tax certificates. Everything is shifting to a free digital system with QR codes for instant verifi- UAE with global tax standards. New Compliance Rules for 2026
cation, which reduces the administrative burden on companies. • Simplified Reporting: For insurance services bought from companies outside the UAE, the paperwork has been simplified. Businesses no longer need to “self-invoice” for these transac- tions, making international insurance deals faster to process. 3. Overseas Firms Doing Business in the Jurisdiction 3.1 Overseas-Based Insurers or Reinsurers The UAE maintains a strict “admitted” insurance regime. The approach distinguishes between provid- ing insurance for risks within the UAE (direct insur- ance) and reinsurance. Onshore (Mainland) Restrictions • Licensing Requirement: Overseas insurers can- not directly insure UAE-based assets or liabilities (onshore risks) without being licensed by the CBUAE. • Operating Models: A foreign firm may operate onshore via: (a) a Branch of a foreign company; (b) a Public Joint Stock Company (where at least 51% of shares must typically be held by UAE nationals, though exemptions apply under the Commercial Companies Law); or (c) a Representative Office, which is strictly limited to marketing and administrative support and cannot underwrite risks or issue policies. • Non-Admitted Prohibition: The 2025 Law introduc- es severe penalties for unlicensed activity. Carrying on licensed insurance or reinsurance activities in the UAE without CBUAE authorisation is prohib- ited, and fines for unlicensed operations may reach AED500 million. Recognition and Passporting • No Passporting: There is no “passporting” or auto- matic recognition of overseas licences in the UAE. Every entity must seek separate authorisation. • Equivalence: While there is no formal equivalence regime for direct insurance, the CBUAE recognises foreign reinsurers subject to applicable CBUAE
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