New Tax Update Allows Input Tax Credit for Family Medical Coverage
Dubai: UAE businesses that provide health insurance for employees’ family members can now recover part of the VAT paid on those costs, according to the Federal Tax Authority (FTA). This policy took effect in late 2024.
In a recent update, the FTA clarified that employers are eligible to reclaim some of these expenses retroactively.
How does it work?
“The VAT input credit extension for dependent insurance came into effect on November 24,” said Chand, Senior Partner at MCA Gulf. “It has now been clarified that companies can apply for this benefit retrospectively.”
This means that businesses can claim input tax credit for dependents’ insurance on a pro-rata basis starting from November 15, 2024.
However, the retrospective claim applies only to VAT incurred from November 15, 2024, onwards. For example, if an employer paid health insurance premiums covering April 2024 to March 2025, they can only reclaim VAT for the portion between November 15, 2024, and March 31, 2025.
“Employers should note that this is not a VAT exemption but an input tax credit mechanism,” Chand explained.
A Relief for Businesses
Rising healthcare costs in the UAE place a significant financial burden on companies. While not all employers cover dependents’ insurance, those who do will benefit from this VAT recovery.
Previously, VAT refunds on dependents’ health coverage were permitted only when legally required. With this amendment, businesses can now reclaim VAT whether the coverage is legally mandated or voluntarily provided.
This benefit applies to insurance coverage for a spouse and up to three children under 18 years old.
