VAT on Insurance in Cyprus
Insurance premiums are exempt from VAT. But insurance broking, claims management and related services may be taxable.
In this guide
How VAT applies to insurance in Cyprus. Insurance premiums are exempt. Related services, insurance broking and claims handling have different treatments.
- Standard rate
- 19%
- Reduced rate
- 9%
- Reduced rate
- 5%
- Registration threshold
- €15,600
Insurance premiums
Exempt
All types
Insurance broking
Exempt
As intermediation
Claims management
Taxable
19% standard rate
Input VAT
Blocked
On exempt activities
Insurance as an exempt financial service
Insurance and reinsurance transactions are exempt from VAT in Cyprus as financial services under the EU VAT Directive. This applies to all types of insurance — general insurance covering property, liability and motor risks, life insurance and reinsurance. The insurance company does not charge VAT on premiums and cannot recover input VAT on costs directly related to its insurance activities. Insurance has been exempt from VAT across the EU since the original implementation of the VAT system.
Insurance broking and intermediary services
Services provided by insurance brokers and agents — introducing clients to insurers, advising on coverage, placing risks and negotiating terms — are also exempt from VAT as insurance intermediation services. The exemption applies where the intermediary is acting as a true agent or broker bringing together insurer and insured. A broker charging a fee for placing a policy does not charge VAT on that fee. This exemption aligns with the underlying insurance transaction.
What is taxable in the insurance sector
Not all services provided in connection with insurance are exempt. Claims management services — handling and processing insurance claims on behalf of insurers — are generally taxable at 19% where they are provided by a third-party company rather than being part of the insurer's own internal operations. Loss adjusting services provided by independent adjusters are taxable. Risk management consultancy and advice separate from actual insurance placement is taxable. Software and IT services provided to insurance companies are taxable.
Input VAT recovery for insurance businesses
Insurance companies making only exempt insurance supplies cannot recover any input VAT on their costs. IT systems, premises, professional fees, marketing — all carry irrecoverable input VAT. For large insurance companies this irrecoverable input VAT is a very significant cost. Insurance companies with any taxable activities — management services, software provision, taxable advisory — have a partial exemption position and can recover input VAT proportionate to their taxable activities.
Insurance Premium Tax — IPT — applies to some categories of insurance in Cyprus separately from VAT. IPT is a tax on insurance premiums at a specified rate and is different from VAT. Insurance premiums are exempt from VAT but may be subject to IPT. The two taxes are separate and not interchangeable.
Key takeaways
- ●Insurance premiums are exempt from VAT in Cyprus — all types of insurance including life and reinsurance
- ●Insurance broking and intermediation services are also exempt
- ●Claims management, loss adjusting and risk consultancy by third parties are taxable at 19%
- ●Insurance companies cannot recover input VAT on costs related to their exempt insurance activities
- ●Insurance Premium Tax applies separately from VAT to certain insurance categories
Frequently asked questions
Work out the VAT on your own figures
Add or remove VAT at any Cyprus rate, with the rates from our facts table.
Open the VAT calculator →