SWIFT messages
Issue
Banks and exchange houses (collectively referred to as financial institutions) may only recover VAT imposed on international bank charges from banking institutions outside the UAE to the extent such costs are incurred to make taxable supplies and provided the financial institutions obtain and retain the required supporting documents.
In practice, such international bank charges and their underlying transactions are evidenced by SWIFT messages which do not meet the requirements to constitute tax invoices for UAE VAT purposes.
This Public Clarification clarifies the Federal Tax Authority’s (“FTA”) position on the acceptability of SWIFT messages for the purposes of documentation requirements and to support input tax recovery.
Summary
As taxable persons, when financial institutions receive interbank services from non-resident banks, they are regarded as making supplies to themselves in respect of these interbank services and are required to issue tax invoices to themselves in respect of these supplies. These financial institutions shall also be responsible for all other applicable tax obligations and to account for the due tax.
Financial institutions may only recover the related input tax to the extent the cost is incurred to make taxable supplies and provided that the required supporting tax invoices are obtained and retained.
Considering the volumes of SWIFT messages UAE financial institutions receive on a daily basis, it would be impractical to require financial institutions to issue a tax invoice to themselves for each SWIFT transaction.
Provided the SWIFT message contains sufficient information to establish the particulars of the supply, UAE financial institutions are not required to issue a tax invoice to themselves in respect of interbank services received from a non-resident bank and for which such SWIFT Communication has been received.
VATP036 – Input tax recovery – SWIFT messages – 02 02 2024 Download the complete