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"Do I need to pay Vat on my insurance claim?"

A vendor's vehicle was hijacked. The agreement with the insurance company provides for a 10% basic excess and a 10% hi-jack excess. Total claim : R100 000, 10% Basic excess : R 10 000, 10% Hijack excess : R 10 000, Due by insurance company : R 80 000, In terms of Section 8(8) Vat output will be accounted for on the proceeds received from the insurance company i.e. R80 000. Will the two excess amounts paid by the vendor to the insurance company include Vat input which the vendor will be able to claim back? Should Vat input be allowed? Will an agreement of loss suffice or should the vendor request Vat invoices from the insurance company?

Added to
  • Input tax
  • Insurance claim
  • Hijack
  • Output tax
  • Insurer
  • Excess

Lenell Hattingh
 Expert  Lenell Hattingh asked on 14 Feb. 2013


1 answer

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Dee Bezuidenhout
 Expert Dee Bezuidenhout answered question on 18 Feb. 2013
Although the insured is entitled to a claim of R100 000, he receives only R80 000 because of the two excesses. In terms of section 8(8) of the Vat Act, he must declare output tax of R9 825 (R80 000 x 14/114) on the payment received from the insurer. The insured does not pay the excess to the insurer and there is no input tax claim.

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