Are financial services subject to VAT in the UAE?

Article 42 – Tax Treatment of Financial Services 27 1. For the purposes of this Article: 25 Article amended as per Cabinet Decision No. 100 of 2024. 26 Clause amended as per Cabinet Decision No. 149 of 2026. 27 Article amended as per Cabinet Decision No. 100 of 2024. Cabinet Decision No. 52 of 2017 and its amendments – As published by the Ministry of Finance 32 a. The phrase “debt security” means any interest in or right to be paid money that is, or is to be, owing by any Person, or any option to acquire any such interest or right. b. The phrase “equity security” means any interest in or right to a share in the capital of a legal person, or any option to acquire any such interest or right. c. The phrase “life insurance contract” means a contract lawfully entered into to the extent that it places a sum or sums at risk upon the contingency of the termination or continuance of human life, marriage, similar relationships permitted under applicable law, or the birth of a child. d. The phrase “Islamic financial arrangement” means a written contract which relates to a supply of financing in accordance with the principles of Shariah and relevant laws. 2. Financial Services are Services connected to dealings in money (or its equivalent) and the provision of credit and include for instance the following: a. The exchange of currency, whether effected by the exchange of bank notes or coin, by crediting or debiting accounts, or the like. b. The issue, payment, collection, or transfer of ownership of a cheque or letter of credit. c. The issue, allotment, drawing, acceptance, endorsement, or transfer of ownership of a debt security. d. The provision of any loan, advance or credit. e. The renewal or variation of a debt security, equity security, or credit contract. f. 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 paragraphs (b) to (e) of this Clause. g. The operation of any current, deposit or savings account. h. The provision or transfer of ownership of financial instruments such as derivatives, options, swaps, credit default swaps, and futures. i. The provision or transfer of ownership of a life insurance contract or the provision of re-insurance in respect of any such contract. j. The management of investment funds, which means “services provided by the fund manager independently for a consideration, to funds licensed by a competent authority in the State, including but not limited to, management of the fund’s operations, management of investments for or on behalf of the fund, monitoring and improvement of the fund’s performance”. k. The transfer of ownership of Virtual Assets, including virtual currencies. Cabinet Decision No. 52 of 2017 and its amendments – As published by the Ministry of Finance 33 l. The conversion of Virtual Assets. m. Keeping and managing Virtual Assets and enabling control thereof. n. Agreeing to do or arranging any of the activities specified in paragraphs (a) to (m) of this Clause, other than advising thereon. 3. The following financial services shall be exempted: a. Activities under Clause 2 of this Article where they are not conducted in return for an explicit fee, discount, commission, and rebate or similar. b. The issue, allotment, or transfer of ownership of an equity security or a debt security. c. The provision or transfer of ownership of a life insurance contract or the provision of re-insurance in respect of any such contract. d. Fund management services described in paragraph (j) of Clause 2 of this Article. e. Services specified in paragraphs (k) and (l) of Clause 2 of this Article, including services supplied on or after 1 January 2018. 4. Activities under Clause 2 of this Article shall be subject to tax where the consideration payable in respect of a supply of Services is an explicit fee, commission, discount, and rebate or similar. 5. Islamic finance products, being financial products under contract which are certified as Islamic Shariah compliant, which simulate the intention and achieve effectively the same result as a non-Shariah compliant financial product, will be treated in a similar manner as the equivalent non-Shariah financial product for the purpose of applying exemption from Tax. 6. Any supply made under an Islamic financial arrangement shall be treated in such a way as to give an outcome for the purposes of the Decree-Law and the decisions issued by the Authority, comparable to that which would be the case for their nonIslamic counterparts. 7. Where Article 31 of this Decision applies in respect of a supply of financial services, this supply should be treated as zero-rated.

4. Financial services and VAT 4.1 The VAT treatment of financial services in the UAE 4.1.1 General principle The general principle applicable is that financial services, as defined by the VAT Law and Executive Regulations, will be subject to VAT at the standard rate when they are supplied for an explicit fee, discount, commission, rebate or similar type of charge. 4.1.2 Standard-rated services Supplies of financial services where an explicit fee, discount, commission, rebate or similar type of charge is made are subject to VAT at the standard rate of VAT (i.e. they are treated as taxable supplies) to the extent of the amount of that separately identifiable charge. VAT incurred on costs wholly attributable to the standard rated supply can be recovered in full. 4.1.3 Banking Examples Types of financial service Operation of a bank account Money transfers Cash Mortgages (including commercial mortgages) 10 Examples of fees liable to standard rate VAT  subscription fee  transaction services fee  account opening or closing fee  withdrawal fee  deposit fee  replacement card fee  cheque book fee  bank statement fee  maintenance fee  transfer fee  SWIFT transfer fee  cash handling fee  cheque cashing fee  fee for provision of change  application fee  valuation fee  early repayment fee  administration fee  variation fee VAT Guide | Financial Services | VATGFS1