We have recently been informed about the planned implementation of Value Added Tax (VAT) on non-life insurance premiums, effective 1st July 2025, as introduced under the Value Added Tax (Amendment) Act, 2023 (Act 1107).
This tax will apply to all insurance policies, except motor and life insurance, which remain VAT-exempt.
Summary of Applicable Taxes:
- NHIL – 2.5%
- GETFund Levy – 2.5%
- COVID-19 Levy – 1%
- VAT – 15% (applied on the premium plus the above levies)
Illustration – For a Premium of GHS 1,000.00:
- Levies (2.5% + 2.5% + 1%) = GHS 60.00
- VAT (15% on GHS 1,060) = GHS 159.00
- Total Tax Payable = GHS 219.00
- Effective Tax Rate = 21.9%
Key Points to Note:
- Motor and Life Insurance policies are not affected by this tax.
- VAT-registered businesses may recover the 15% VAT component through their monthly tax filings, in accordance with GRA regulations. However, the levies (NHIL, GETFund & COVID-19) are not recoverable.
- The effective date for implementation is 1st July 2025, and any premiums paid on or after this date will attract the tax.