Article 29 - Financial Services

Supplies of Financial Services listed within this Article are exempt from VAT, except in cases where the Consideration payable in respect of the service is by way of an explicit fee, commission or commercial discount.

Financial Services include the following services:

1. the issue, transfer or receipt of, or any dealing with, money, any security for money or any note or order for the payment of money,

2. the provision of any credit or credit guarantee,

3. the operation of any current, deposit or savings account,

4. financial instruments, such as derivatives, options, swaps, credit default swaps and futures.

Islamic finance products, being financial products under contract which are Shari'ah compliant and which simulate the intention and achieve effectively the same result as a Non-Shari'ah compliant financial product will be treated in the same manner as the equivalent Nson-Shari'ah financial product for the purpose of applying exemption from Tax.

In cases where ownership of Goods is transferred temporarily as a part of a Shari'ah compliant financial product or as collateral in relation to a financing or other arrangement, but possession of those Goods is not intended to pass permanently to the recipient of the financial product, the transfer of the underlying Goods is not considered a separate Supply of Goods. A separate Supply of Goods which has been transferred as collateral shall be considered to be made upon the transferee becoming entitled to exercise full rights of disposal of the Goods or the transferee otherwise is acting in such a way that the transfer may no longer be considered temporary.

Under the principles described in the second and third Paragraphs of this Article, the following is a non-exhaustive list of Supplies which would be considered exempt Financial Services:

1. interest or lending fees charged with an implicit margin for any form of lending, including loans and credit cards,

2. interest or lending fees charged with an implicit margin for a mortgage or under a diminishing musharaka arrangement,

3. interest or lending fees charged with an implicit margin for finance, including finance leasing, hire purchase products or under a murabaha contract,

4. commissions charged on an implicit margin or spread for brokerage services, or under a mudaraba or wakala contract.

The issue or transfer of a debt security, equity security, or any other transferable document recognizing an obligation to pay a monetary amount to the bearer will be considered an Exempt Supply of Financial Services.

As an exception to paragraph (1) of this Article, the supply of a financial service consisting of the provision or transfer of a life insurance contract or a reinsurance contract on life shall be considered an exempt supply. The exemption shall also include cases where the consideration for the service is explicitly paid as a fee, commission, or trade discount. ^[37]

A life insurance contract means any contract of conventional insurance or takaful or other form of Islamic insurance provided by a regulated provider in the Kingdom which results in the payment of a sum contingent on death or other significant event of human life, or a similar contract provided by a Non Resident Supplier.