GCC Indirect Tax Weekly Digest
February 4, 2019
FTA publishes financial services VAT guide
The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published a guide on the Value Added Tax (VAT) implications of the supply of financial services.
The guide covers a wide range of financial services, including (but not limited to) banking, mortgages, loans, investment banking, Islamic finance, equity and debt securities, and derivatives.
In general, when financial services are supplied for an explicit fee, discount, commission, rebate, or similar type of charge, the standard rate of VAT will be applicable on the separately identifiable charge.
On the other hand, financial services remunerated by an implicit margin or spread with no explicit fee are exempt from VAT, and the costs wholly attributable to making those supplies cannot be recovered.
Businesses making both taxable and exempt supplies will be required to apportion their input tax in order to recover only the recoverable amount. This is a complex process that most financial services institutions are required to perform. For more information, please refer to Deloitte’s alert and the corresponding guide on input tax apportionment methods.
For a detailed overview and analysis of the new financial services guide, please refer to Deloitte’s separately published alert.
For more information about the VAT treatment of financial services in the UAE, and the potential solutions Deloitte can offer, please reach out to Aamer Bhatti, Elliot Severs, or your usual Deloitte contact.
FTA provides procedural details of DTS scheme
The UAE FTA has published a brochure with an overview of the procedural aspects of the Digital Tax Stamps (DTS) scheme. The DTS scheme is intended to monitor excise tax compliance and prevent illicit trading of tobacco products.
The brochure summarizes the process whereby tax stamps with anti-counterfeit measures are ordered, delivered, applied, and traced through the supply chain.
The document also contains a timeline of the DTS scheme:
- 1 January 2019 – importers can order stamps to be sent to manufacturers for application to the packaging of cigarette products.
- 1 May 2019 – no cigarette products without a digital tax stamp may be imported in to the UAE. Penalties may apply for non-compliance.
- 1 August 2019 – no cigarettes may be stored, held out for sale, imported or produced anywhere in the UAE unless they have a digital tax stamp with end-to-end traceability. Penalties may apply for non-compliance.
GAZT adds interactive VAT return filing scenarios
The Kingdom of Saudi Arabia (KSA) General Authority of Zakat and Tax (GAZT) has added a section to its website with interactive scenarios for filing VAT returns for several types of businesses.
The scenarios allow users to practice filing KSA VAT returns by reading through each case and applying the information and figures to the simulated VAT return. Users are then informed whether their submission was correct or not.
This digest is for information purposes only and should not be construed as advice. It does not necessarily cover every aspect of the topics with which it deals. You should not act upon the contents of this alert without receiving formal advice on your particular circumstances.