Kenya's High Court ruled on October 23, 2025, that the disposal of salvage motor vehicles by insurance companies remains exempt from value added tax under the country's VAT legislation, treating such sales as integral to the insurance transaction itself.

The court determined in Commissioner of Domestic Taxes v. ICEA Lion General Insurance Company Limited that the sale of salvage vehicles and the associated insurance indemnity constitute a single economic supply. The judgment emphasises that separating these elements would fundamentally alter the nature of the insurance transaction, thereby preserving the VAT exemption status for such disposals.

The ruling provides clarity for Kenya's insurance sector regarding VAT treatment of salvage vehicle disposals, confirming that these transactions fall within the scope of exempt insurance services rather than constituting separate taxable supplies subject to standard VAT rates.