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Cabinet Decision No.52 on the Executive Regulations of Federal Decree-Law No.8 of 2017 on Value Added Tax, hereafter ‘the Executive Regulations’

Federal Decree-Law No.8 of 2017 on Value Added Tax, hereafter ‘the Law’.

Cabinet Decision No.52 on the Executive Regulations of Federal Decree-Law No.8 of 2017 on Value Added Tax, hereafter ‘the Executive Regulations

These are services which are provided by businesses or persons which in some way are connected with finance. Many such services will be directly related to money. This could mean dealings in money or its equivalent, or the provision of credit. It also includes more specialist types of finance (for example, hire-purchase or installment credit finance) or more long-term finance, such as shares or loan stock.

Some financial services may not have this direct link with money (for example, equipment leasing). In addition, there is a wide range of associated services that have a less immediate link to money (for example, financial advice, trustee services, and debt collection).

Other more peripheral activities include investment brokerage and the underwriting of securities.

Financial services typically comprise a complex series of transactions and the products offered by the sector are continually evolving, through innovation and technology. In addition, the means of remuneration for financial services can also be complex (for example, margin and spread).

Historically, transactions in the sector were complex to analyze and presented difficulties, both in identifying the supply chains and the values of the various supplies being made.

However, more recently, financial services have become more easily identifiable and measurable than in the past due to technological advancements and global developments in the manner in which transactions are conducted.

Accordingly, the starting point for the UAE VAT treatment of financial services is that VAT should be charged on financial services where it is practicable to do so.

Specifically, where fees or similar readily identifiable charges are made for the provision of financial service as defined in the Federal Decree-Law 1 and Executive Regulations 2, such fees will be liable to VAT at the standard rate.

2.2 Financial services – the VAT Law

2.2.1 What are financial services as defined by the Law?

As defined by Law 3 and Executive Regulations4, financial services are services connected to dealings in money (or its equivalent) and the provision of credit and include, but are not limited to the following:

  1. the exchange of currency, whether effected by the exchange of bank notes or coin, by crediting or debiting accounts, or otherwise;
  2. the issue, payment, collection, or transfer of ownership of a cheque or letter of Credit;
  3. the issue, allotment, drawing, acceptance, endorsement, or transfer of ownership of a debt security
  4. the provision of any loan, advance or credit;
  5. the renewal or variation of a debt security, equity security6, or credit contract;
  6. the provision, taking, variation, or release of a guarantee, indemnity, security, or bond in respect of the performance of obligations under a cheque, credit, equity security, debt security, or in respect of the activities specified in items (2) to (5) Above;
  7. the operation of any current, deposit, or savings account;
  8. the provision or transfer of ownership of financial instruments such as derivatives, options, swaps, credit default swaps, and futures;
  9. the payment or collection of any amount of interest, principal, dividend, or other amount whatever in respect of any debt security, equity security, credit, or contract of life insurance;
  10. Agreeing to do, or arrange, any of the activities specified in items (1) to (9) above, other than advising thereon.
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This article was published on  9 September 2023

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