- Published: Friday, 29 May 2015 08:55
In Vanuatu the VAT law provides that an insurance company is entitled to claim back the VAT component of an indemnity payment made to one of their customers. An ‘indemnity payment’ is the payment made by an insurance company to a customer who has made a claim under their contract of insurance with the company.
Allowing a deduction for an indemnity payment is unusual under the VAT regime in that the registered person is not acquiring any goods or services, they are simply making a cash payment to the insured person. However these deductions are necessary so that the same treatment is given to indemnity payments as is given to payments made by the insurance company for replacement goods supplied to the insured person.
It is important to note that section 19(4) (e) of the VAT Act No 12 of 1998 [CAP 247] provides that insurance companies are entitled to claim 1/9th of indemnity payments only if the following conditions are met:
- the supply of insurance cover was a taxable supply;
- the payment is not in the form of goods or services;
- the supply of insurance cover was not a zero-rated supply made to a person who is both non-registered or a non-resident of Vanuatu;
- the payment is not to indemnify the registered person for loss of employment service earnings.