FTA Clarification: Is Qualifying SWIFT message Adequate for input VAT Recovery?
Banks and exchange houses in the UAE often receive interbank services from other non-resident financial institutions operating outside the UAE. From a UAE VAT perspective, these banks and exchange houses are treated as making supplies for themselves and are required to issue tax invoices to themselves regarding these supplies.
They are also required to meet all the other VAT obligations and account for the due tax. However, the banks and exchange houses can recover the input tax to the extent the cost is incurred to make taxable supplies provided that the required supporting tax invoices are obtained and retained.
However, the international bank charges and the underlying transactions are evidenced through Society for Worldwide Interbank Financial Telecommunications (SWIFT) messages that do not meet the requirements to constitute tax invoices for UAE VAT purposes.
The Federal Tax Authority’s (FTA) new Clarification provides insights into the acceptability of SWIFT messages to support tax recovery and the related VAT documentation requirements in the UAE. Tax agents in the UAE can advise you further in this regard.
Read ahead to know more about the highlights from the FTA Public Clarification:
Simplification from the FTA
The right to use the SWIFT communication service constitutes a service for VAT in the UAE. The UAE VAT regulations require financial institutions to issue a valid tax invoice to themselves for each SWIFT transaction for which they incur interbank charges.
However, due to the volume of SWIFT messages received, it is practically difficult to issue a tax invoice against each SWIFT transaction. FTA provides a simplification for this difficult situation. It states that a UAE financial institution is not required to issue a tax invoice to itself if it retains the relevant Qualifying SWIFT message as evidence of the transaction.
What is a Qualifying Swift Message?
The UAE FTA will accept a SWIFT message as a sufficient record to establish the particulars of the supply, provided the SWIFT message contains certain mandatory information. A swift message meeting these requirements is termed a Qualifying Swift Message. The best tax agents in the UAE can help you in this regard.
A qualifying Swift Message will contain the following mandatory information:
- Name and address of the non-resident bank (SWIFT sender/supplier)
- Name of the UAE financial institution receiving the service (SWIFT receiver/customer)
- Date of the transaction
- Swift Message Reference Number
- Transaction Reference Number
- Description of the Transaction
- Consideration Charged and the Currency Used
Input Tax Recovery Using Swift Messages
The financial institutions can recover the input tax in the first tax return or the immediately following tax period, in which the financial institution obtained the relevant supporting document and made payment or intends to make payment within 6 months of the agreed date for payment.
The Qualifying SWIFT message will be accepted as sufficient documentary evidence to support the recovery of input tax that relates to this specific imported service. However, the recovery of input tax is subject to the other normal VAT recovery rules in the UAE. Consult with the top tax agents in the UAE for more information on the process of tax recovery.
Implications for the Financial Services Sector
We consider the new FTA Clarification a welcome move for the UAE financial services sector. The simplification provided by the FTA significantly reduces the VAT administrative burden. VAT consultants in Dubai can help you further with the tax recovery procedures.
Hire the Best Tax Agents in the UAE
The new FTA clarification regarding the acceptability of SWIFT messages for input tax recovery will have a positive impact on the UAE financial institutions. However, the UAE financial services sector companies must determine whether the SWIFT message qualifies as a “Qualifying SWIFT Message” to be eligible for this simplification.
The best tax consultants in the UAE such as Tax Gian, a brand of Jitendra Tax Consultants (JTC), can help you with this. JTC is one of the leading tax agents in the UAE approved by the FTA. Tax Gian’s seasoned tax experts can support businesses to successfully meet their tax obligations such as VAT registration, VAT return filing, VAT group formation, VAT deregistration etc. We can provide you with our guidance, support, execution, and resolution of all your challenges encountered which will be based on the provisions and guidelines issued by the UAE FTA.
