Islamic financial products (including Islamic Insurance) provided under a written contract which relate to a Supply of financing in accordance with the principles of Shari’ah and which simulate the intention and achieve effectively the same result as a non-Shari’ah compliant financial product shall be treated in a similar manner as the equivalent non- Shari’ah financial product for the purpose of applying the exemption for Financial Services.
Implying, when the intention of the Islamic insurance achieves effectively the same result as a non-Islamic product, VAT will be levied as if it a non – Islamic insurance product. In determining the correct VAT treatment for Islamic finance products, the purpose, structure and pricing of the Islamic product will be considered.
In certain cases, aspects of Islamic insurance may not have a direct equivalence in VAT treatment being applied. In such cases, the underlying purpose, features and circumstances of the product concerned must be taken into account when determining the appropriate VAT treatment.
Any significant difference in the overall liability between an Islamic insurance product and any non-Islamic counterpart arising as a consequence of differential treatment being applied will be addressed on a product by product basis
Providers of particularly complex or non-standard Islamic insurance products should analyse these carefully and consider seeking advice on the VAT liability of such products
Supplies of Financial Services specified are exempt from Tax, except where the payment for the service is by way of an explicit fee, commission or commercial discount.
Financial Services shall mean Services related to cash transactions, including, but not limited to the following transactions:
- The provision, or transfer of ownership of a life insurance or reinsurance contract.
- The provision of insurance cover or annuities under any investment scheme,
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