The Central Bank of the UAE has asked local banks not to increase the existing fees for customers due to the upcoming value added tax (VAT).
"Banks and finance companies will not be permitted to exceed the fees structure for individual customers because of VAT," reads the notice sent by the apex bank to local banks in the UAE on Thursday. It also asked the banks not to increase their existing fees structure and levels for non-individual customers as a result of VAT.
As part of the GCC framework agreed among the regional bloc, the UAE will levy five per cent VAT from January 1, 2018, on a host of goods and services. Saudi Arabia will also join the UAE in implementing VAT. Other regional countries will implement the new tax at a later stage.
Mayank Sawhney, director of MaxGrowth Consulting, earlier told Khaleej Times that fees for processing, file opening, assessment, evaluation, account management, etc, charged by banks will be subject to five per cent VAT in the UAE. In case of credit cards, fees such as those for annual credit card fees, late payment, processing for transferring outstanding payment from one credit card to another, etc, will attract five per cent VAT, Sawhney added.
The central bank told banks and financial companies that they will absorb the applicable VAT until further instructions from the apex bank. Moreover, any applicable VAT on the services provided by the central bank will be absorbed by the apex lender, it added.
Meanwhile, The Federal Tax Authority (FTA) stressed that diplomatic missions and international organisations that do not conduct business will be registered in a system that doesn't require a tax registration number (TRN). However, international organisations that conduct business, import and export on regular basis should register for VAT like all businesses.
According to the FTA, businesses with a turnover below Dh375,000 are not required to register for VAT. If their turnover exceeds Dh187,500 and below Dh375,000 they may register voluntarily.
The FTA has noticed that some of the above-mentioned have submitted applications to obtain TRNs, and that some entities have requested them to present these numbers to continue their business transactions starting 2018. The FTA has urged businesses in the UAE that have not yet registered to register for VAT to avoid the risk of missing the January 1, 2018, deadline. This applies to businesses with taxable supplies and imports of goods and services that exceeded Dh375,000 over the previous 12 months. Taxable supplies are identified as all supplies of goods and services made, which are not exempt.
Recently, the FTA announced that businesses that commenced their registration after the timeframe specified by the authority were provided with provisional TRNs while they complete their tax registration requirements including the submission of any additional documents and information or amending any errors in their applications if needed.
The FTA has also called on businesses to verify the data entered in the application form, carefully review it and ensure its flawlessness before submitting, as faulty data could lead to the rejection of the application.