The Impact of VAT on Insurers’ Subrogation Rights and Recovery Mechanisms in Ethiopia: A Comparative Legal Analysis under the 2024 VAT Proclamation
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Date
2025-07-01
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Addis Ababa University
Abstract
Subrogation allows the insurance company to recover money paid for settlements of claims from
liable third party for that loos and maintain financial stability and long-term solvency. The
importance of surrogation towards maintaining the efficiency of risk poling process, controlling
claims cost and affordability of premium price in the development of insurance markets like
Ethiopia has essential. There are controversies after that the Ethiopian VAT Proclamation, No.
1341/2024 has made a new clause under Art 40(6) that totally incorporate surrogation recoveries
in scope of taxable supply without clear legal rules that protect the representative capacity of
insurers and addressing legal remedy nature of subrogation recoveries. This research has
examined these controversies and analyzes the legal and practical implication of VAT on insurer’s
subrogation right. This research finds out the current legal framework of VAT creates ambiguity,
administrative inconsistencies as well as practical challenges. Therefore, any legal reform should
be made with clear legal framework, inclusive stakeholder engagement and effective strategies to
protect a right balance between revenue collection and log-term development of insurance
industry
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Subrogation allows the insurance company to recover money paid for settlements of claims from liable third party for that loos and maintain financial stability and long-term solvency