SAMA obligates insurance companies to compensate vehicle owners for repairs, VAT

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The Saudi Central Bank (SAMA) mandated insurance companies to settle vehicle claims to the third party and compensate them for the value-added tax (VAT) according to the repair invoices issued in accordance with the requirements of the competent authority, in addition to compensation based on the repair costs issued by the vehicle damage assessment entity.

In a circular issued to insurance companies, SAMA added that when settling third party vehicle claims, the insurance company should clarify eligibility for VAT compensation and explain the compensation mechanism.

The circular came to ensure the fairness of third-party compensation mechanism in accordance with the provisions relating to VAT issued by the competent authorities.