July, 2019

FINANCIAL SERVICES – VAT

In today’s complex financial landscape, navigating VAT regulations—especially in the financial services sector—is not just about compliance; it’s a strategic imperative for sustainable growth. The UAE’s VAT framework for financial services is intricate, with varying treatments for standard-rated, zero-rated, and exempt supplies, as outlined in the Federal Tax Authority’s VAT Guide for Financial Services (VATGFS1).

At V-Tax, we specialize in demystifying these complexities, offering tailored consulting services to ensure your financial institution remains compliant while optimizing tax efficiency.

🔍 Why VAT Compliance Matters for Financial Services

• Regulatory Adherence: The UAE VAT Law (Federal Decree-Law No.8 of 2017) mandates strict compliance for financial services, from standard-rated fees (e.g., account maintenance, transaction charges) to exempt margins (e.g., interest income). Misclassification can lead to penalties or missed recovery opportunities.
• Input Tax Recovery: Financial institutions making both taxable and exempt supplies must apportion input tax. Our experts help design fair and reasonable methods (standard or FTA-approved special methods) to maximize recoverable VAT.
• Islamic Finance Parity: Ensuring Shariah-compliant products (e.g., Murabaha, Ijarah) receive VAT treatment equivalent to conventional finance—avoiding unintended liabilities.

📊 Key Challenges We Address

• Fee Classification: Determining whether a service is standard-rated (e.g., portfolio management fees) or exempt (e.g., equity security transactions).
• Cross-Border Services: Zero-rating for GCC/non-GCC recipients and reverse charge implications.
• Composite Supplies: Differentiating between single composite supplies (e.g., bundled loan products) and multiple supplies to apply correct VAT treatment.

🧩 Our Approach

We go beyond generic advice, partnering with banks, asset managers, and fintech firms to:

• Advise on Islamic finance structures and emerging products (e.g., derivatives, Sukuk).
• Audit existing VAT positions against VATGFS1 guidelines.
• Implement robust apportionment methodologies for input tax.

📞 Take the Next Step

Don’t let VAT complexities hinder your growth. Contact V-Tax at info@v-tax.com to schedule a consultation. Let’s build a compliant, tax-efficient future—together.