FTA Publishes Clarification on Bank Interest and Dividends
The Federal Tax Authority (FTA) has issued a publication to shed light on certain aspects of the VAT implementation, including Federal Law No. 7 of 2017 which covers the major aspects of tax procedures and Federal Decree-Law No. 8 of 2017 which covers the various aspects of value added tax and executive regulations.
Furthermore, Khalid Al Bustani, Director General of Federal Tax Authority stated that the public clarifications service offered through the authority’s official website will help to increase the awareness about tax among businesses and consumers as well as promote compliance in the process.
In its publication, the Federal Tax Authority (FTA) highlighted that supply is the basis of charging value-added-tax (VAT) and that tax can only be imposed when an import or supply has taken place. So if there is no supply, there is no VAT implication. And for this reason, there is no requirement for taxpayers to report bank interest from bank deposits and dividends.
The authority further clarified that the exemptions apply only to interests from bank deposits but any interest generated from extending loans or credit carries VAT implications are not included in this specific clarification.
Supply is the basis of charging value-added-tax (VAT)
and tax can only be imposed when an import
or supply has taken place.
Similarly, dividend returns earned by shareholders are also considered passive income and therefore outside the scope of Vat. However, any amount charged as a management fee is subject to VAT. This includes fees charged by a holding company to its subsidiaries.
Need further clarification of this issue or any issue related to VAT compliance in the UAE? Please do not hesitate to contact us. At Sarah Ferguson Tax Consultancy, we have been managing taxes for small businesses, real estate firms, and multinational corporations for more than 15 years.
With four offices spread across the UK and UAE and a team of certified accountants, we provide a wide range of services, including VAT management, tax returns, payroll, annual accounts, and bookkeeping services.