Motor insurance company must add VAT in third-party compensation, according to SAMA.

Motor insurance company must add VAT in third-party compensation, according to SAMA.

Saudi Central Bank (SAMA)

When resolving third-party responsibility claims, the Saudi Central Bank (SAMA) has mandated all motor insurance company to include the rate of value added tax (VAT) in the compensation.

The SAMA order was issued in response to allegations that certain motor insurance company failed to pay VAT while settling third-party responsibility claims.

The Central Bank issued a circular directing insurance companies to compensate the amounts paid as VAT based on repair invoices issued in accordance with the competent authority’s requirements, in addition to the compensation amount based on the repair costs issued by the Vehicle Damage Assessment agencies.

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Motor insurance company

According to the circular, which Okaz/Saudi Gazette received a copy of, the insurance firm must establish the third party’s eligibility to get VAT reimbursement and explain the compensation system when resolving vehicle claims.

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The circular, according to SAMA, is published to ensure the fairness of the compensation system for third parties in compliance with the VAT laws established by the relevant authorities. General insurance, protection and saving insurance, and health insurance are among the 30 insurance and reinsurance businesses regulated by the Saudi Central Bank in the Kingdom.

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In this regard, Dr. Adham Gad, an insurance and reinsurance economic analyst, stated that the SAMA circular tends to eliminate certain insurance firms’ reasons for failing to pay VAT and merely paying the cost of repair. “It was expressly stated in the circular that third-party liability includes the cost of repair plus the cost of VAT if the invoice for the repair charges included the permitted rate of VAT,” he added.


Works as an in-house Writer at Gulf Tech Plus and focuses on the latest smart consumer electronics. Closely follows the latest trends in consumer IoT and how it affects our daily lives. You can follow him on Facebook, Instagram & YouTube.

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