- The VAT definition of “insurance” under section 1(1) has been amended to clarify that an arrangement qualifies as insurance only if a premium is paid.
- The change responds to uncertainty after the Capitec Bank Constitutional Court decision, which raised the possibility that some arrangements could be treated as insurance even where no premium was charged.
- Short-term insurance is intended to be taxed on a net basis: insurers charge output VAT on premiums and may claim input tax on qualifying claim or trade payments.
- The amendment prevents an input tax deduction where no taxable premium was charged, avoiding a VAT mismatch and unintended tax benefit.
- “Premium” is now defined as direct consideration for the insurance cover provided, restoring the intended VAT treatment of short-term insurance.
Source: sars.gov.za
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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