NO VAT on interest and dividends in the UAE

7 March 2019
Uae News

The Federal Tax Authority of the United Arab Emirates have issued a public clarification on the VAT Treatment of Bank Interest and Dividends. According to the FTA, passively earned interest income from banks deposits does not constitute a consideration for supply, similarly, dividends paid on shares is not a consideration for supply. VAT is imposed on the import and supply of goods and services at each stage of production and distribution, therefore, VAT implications arise only when there is a supply – if there is no supply, there is no VAT implication. Therefore, these income streams are beyond the scope of UAE VAT and there is no requirement to report them in the VAT return.

The FTA however pointed out that this position was only applicable to interest from deposits and It “does not have any bearing to the interest generated from extending loans or credit, which are exempt supplies for VAT purposes.”

VAT IT is on the cusp of extending its VAT Reclaim Service into the UAE and it is keeping a close eye on the VAT developments in the UAE.

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