GST Treatments on Insurance and Takaful

As I’ve written before, the GST will effect on insurance and takaful. Do we really know the effect of insurance and takaful ? Let’s read this info about GST on Insurance and Takaful.

GST Treatments on Insurance and Takaful

Takaful Fund


1) In Malaysia, the agreement to enter into a takaful scheme between the participant and the takaful operator is based on different types of takaful operations for example the al-Mudharabah structure or al-Wakalah structure.

2) In an al-Mudharabah structure, fees or charges deducted from the takaful fund will not be subject to GST e.g investment performance fee and surplus administrations charges. Investment income and the fees charged are deposited into the takaful operator’s fund that is called the Shareholders Fund.

3) In a Wakalah structure, the wakalah fee (management fees) deducted by the takaful operator from the participants account (contributions paid by the participants) and paid to the shareholders fund is not subject to GST.

4) The following inter-fund transfers will not be subject to GST as it is not a supply for GST purposes :

(a) Participant and operator share of income – profit sharing arrangement
(b) Interest free loan from Shareholders fund to Takaful fund in the event of actuarial deficit in the takaful fund.
(c) Transfer of actual surplus between shareholders fund and takaful fund
(d) Transfers of funds in compliance with the Takaful Act 1984.

Insurance Fund

5) Management services arising from managing the general or life insurance fund provided by the insurer/takaful operator (refers to the funds managed in-house) is not subject to GST. However, such services outsourced to an external party will be subject to GST at a standard rate.

6) Investment activities such as trading of shares, money market instruments are not subject to GST.

7) Input taxes incurred on acquisition of goods and services in managing the general insurance fund, which is attributable to the issuance of the general insurance policy, are claimable. However, input taxes incurred in managing the life insurance fund, which is attributable to the issuance of the life insurance policy, are not claimable.

For more info about GST on insurance, download the GST Guide

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