VAT Treatment of SWIFT Messages - VATP041
VATP041
VAT Public Clarification
SWIFT Messages
Please be informed that Public Clarification VATP041 replaces Public Clarification VATP036.
Issue
UAE Banks and exchange houses (collectively referred to as 'Financial Institutions') incur international bank charges from banks outside the UAE as a result of using the Society for Worldwide Interbank Financial Telecommunications ('SWIFT') communication system with these banks.
In practice, such international bank charges, and their underlying transactions, are evidenced by 'Swift Messages' which do not meet all the requirements to constitute Tax Invoices for UAE VAT purposes.
Financial Institutions may only recover VAT accounted for under the reverse charge mechanism in respect of Services received from banks outside the UAE to the extent such costs are incurred to make Taxable Supplies, provided that the Financial Institutions obtain, and retain the required supporting documents.
This Public Clarification clarifies the Federal Tax Authority's ('FTA') position on two distinct matters, i.e. the requirement to issue Tax Invoices in respect of SWIFT Messages, and the documentary requirements for Input Tax recovery in respect of these Services.
Kindly note that this Public Clarification applies only to SWIFT Services and not to any other Concerned Services.
Summary
As Taxable Persons, when Financial Institutions receive interbank Services from banks outside the UAE, they are regarded as making Taxable Supplies to themselves and are responsible for all applicable Tax obligations, including having to account for the Due Tax. As a consequence, the Financial Institutions are required to issue Tax Invoices to themselves in respect of these supplies.
Considering the volumes of SWIFT Messages that Financial Institutions receive on a daily basis, it would be impractical to require the 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 banks outside the UAE for which such SWIFT Message has been received.
Financial Institutions may only recover the related Input Tax to the extent the cost is incurred to make Taxable Supplies, provided that the required supporting evidence is retained.
Detailed analysis
Registrants are required to issue an original Tax Invoice when making a Taxable Supply and report such supply on their Tax Returns. Registrants may recover Input Tax to the extent costs are incurred to make Taxable Supplies, provided the relevant supporting documents are retained.
Receipt of SWIFT Services
Financial Institutions incur international bank charges from banks outside the UAE as a result of using the SWIFT communication system with these banks.
The provision of the right to use the SWIFT communication service constitutes a Service[1] for VAT purposes.
Where this Service is received by a Financial Institution in the UAE, according to the relevant place of supply rule in Article 30(2) of the Federal Decree-Law No 8 of 2017 on Value Added Tax and its amendments ('Decree-Law'), the place of supply is in the UAE.[2,3]
Consequently, where such Service is received from outside the UAE, it constitutes a Concerned Service[1] for UAE VAT purposes.
As a Taxable Person, the Financial Institution is regarded as making a Taxable Supply to itself when it Imports such Concerned Service, and the Financial Institution is responsible for all applicable VAT obligations, including accounting for VAT on the Concerned Service.[4]
Issuing Tax Invoices
Financial Institutions that are registered for VAT in the UAE are required to issue and deliver an original Tax Invoice to the recipient of taxable services supplied by the Financial Institution.[5]
Since the Financial Institution is regarded as supplying the Concerned Service to itself, it is required to issue a valid Tax Invoice to itself in respect of each SWIFT transaction for which it incurs interbank charges.
However, Article 59(7)(b) of the Executive Regulation provides that, where there are (or will be) sufficient records available to establish the particulars of any supply or class of supplies, and it would be impractical to require the issuance of a Tax Invoice by the Registrant, the FTA may determine that a Tax Invoice is not required to be issued in certain cases.[6]
Considering the administrative burden on the Financial Institution to issue Tax Invoices to itself for a high number of SWIFT Messages, the FTA recognises the impracticality for Financial Institutions to issue Tax Invoices in respect of these international bank charges imposed by banks outside the UAE as a result of using the SWIFT communication system with these banks.
Therefore, the SWIFT Message will be accepted as a sufficient record to establish the particulars of the supply, provided the following information is reflected on the SWIFT Message:
Name and address of the bank outside the UAE (SWIFT sender/supplier).
Name of the UAE Financial Institution receiving the Service (SWIFT receiver/customer).
Date of the transaction.
SWIFT Message reference number.
Transaction reference number.
Description of the transaction.
Consideration charged and currency used.
If the above requirements are met, the SWIFT Message ('Qualifying SWIFT Message') would be accepted as sufficient documentary evidence to prove the supply of the interbank Service received from the banks outside the UAE.
Considering the above, a UAE Financial Institution is not required to issue a Tax Invoice to itself if it retains the relevant Qualifying SWIFT Message as evidence of the transaction.
Input tax recovery
Financial institutions are entitled to recover Input Tax to the extent the cost was incurred for the purpose of making Taxable Supplies.[7]
The Input Tax may be recovered in the Tax Return relating to the first Tax Period, or the immediately following Tax Period, in which the Financial Institution obtained the relevant supporting document (for example, the invoice issued by the bank outside the UAE) and made payment or intends to make payment within six months of the agreed date for payment.[8]
For more information on the timeframe for recovering Input Tax, please refer to VATP017.
For purposes of Input Tax recovery, a Qualifying SWIFT Message would be treated as an invoice issued by the banks outside the UAE.[8]
Hence, the Qualifying SWIFT Message shall be accepted as sufficient documentary evidence under Article 55(1)(a)(3) of the Decree-Law to support the recovery of Input Tax that relates to this specific Concerned Service. The recovery will, however, be limited to the extent the costs are incurred to make Taxable Supplies.
Example
On 3 April 2025, a UAE Financial Institution uses the SWIFT communication system with a non-UAE bank and incurs banking charges from that bank. It receives the related Qualifying SWIFT Message for this Service on the same day.
The banking charges incurred are the Consideration for a Concerned Service and the UAE Financial Institution is regarded as making a Taxable Supply to itself.
The UAE Financial Institution is required to account for the Due Tax on the Service supplied by the banks outside the UAE under the reverse charge mechanism.
Since the UAE Financial Institution is considered as if making a Taxable Supply, it is required to issue a Tax Invoice (to itself) within 14 days from the date of supply of the Swift Service, i.e. on or before 17 April 2025.
However, as an exception to the requirement to issue a Tax Invoice, the Financial Institution would not be required to issue a Tax Invoice if it obtains and retains the related Qualifying SWIFT Message.[5,6]
The Financial Institution may recover the VAT incurred in respect of the SWIFT Message to the extent the cost was incurred to make Taxable Supplies, provided that the Financial Institution retains the relevant supporting documents.
For the purposes of Input Tax recovery, the Qualifying SWIFT Message will be accepted as sufficient documentary evidence under Article 55(1)(a)(3) of the Decree-Law.[8]
This Public Clarification issued by the FTA is meant to clarify certain aspects related to the implementation of Federal Decree-Law No. 8 of 2017 on Value Added Tax and its Executive Regulation, and their amendments.
This Public Clarification states the position of the FTA and neither amends nor seeks to amend any provision of the aforementioned legislation. Therefore, it is effective as of the date of implementation of the relevant legislation, unless stated otherwise.
Legislative References
In this clarification, Federal Decree-Law No. 8 of 2017 on Value Added Tax and its amendments is referred to as 'Decree-Law' and Cabinet Decision No. 52 of 2017 on the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax, and its amendments, is referred to as 'Executive Regulation'.
[1]Article 1 of the Decree-Law defines the following terms as:
'Concerned Services' â Services that have been imported, where the place of supply is considered to be in the State, and would not be exempt if supplied in the State.
'Import' â The arrival of Goods from abroad into the territory of the State or receipt of Services from outside the State.
'Services' â Anything that can be supplied other than Goods.
'State' â United Arab Emirates.
[2]Article 29 of the Decree-Law states that the place of supply of Services shall be the Place of Residence of the supplier.
[3]Article 30(2) of the Decree-Law states that, as an exception to what is stipulated in Article 29 of the Decree-Law, where the Recipient of Services is in Business and has a Place of Residence in the UAE, and the supplier does not have a Place of Residence in the UAE, the place of supply shall be in the UAE.
[4]Article 48(1) of the Decree-Law states that, if the Taxable Person imports Concerned Goods or Concerned Services for the purposes of his Business, then he shall be treated as making a Taxable Supply to himself, and shall be responsible for all applicable Tax obligations and accounting for Due Tax in respect of these supplies.
[5]Article 65(1) of the Decree-Law states that a Registrant making a Taxable Supply shall issue an original Tax Invoice and deliver it to the Recipient of Goods or Recipient of Services.
[6]Article 59(7) of the Executive Regulation states that, where the FTA considers that there are or will be sufficient records available to establish the particulars of any supply or class of supplies, and that it would be impractical to require that a Tax Invoice be issued by the Registrant, the FTA may determine that, subject to any conditions that the FTA may consider necessary:
Any of the particulars specified in Clauses 1 or 2 of the Article shall not be contained on a Tax Invoice.
A Tax Invoice is not required to be issued or delivered in certain cases.
[7]Article 54(1) of the Decree-Law states that the Input Tax that is recoverable by a Taxable Person for any Tax Period is the total of Input Tax paid for Goods and Services which are used or intended to be used for making any of the following:
Taxable Supplies.
Supplies that are made outside the UAE which would have been Taxable Supplies had they been made in the UAE.
Supplies specified in the Executive Regulation that are made outside the UAE, which would have been treated as exempt had they been made inside the UAE.
[8]Article 55 of the Decree-Law states that:
Taking into consideration the provisions of Article 56 of the Decree-Law, the recoverable Input Tax may be deducted through the Tax Return relating to the first Tax Period in which the following conditions have been satisfied:
If any of the following cases has occurred:
The Taxable Person receives and retains the Tax Invoice as per the provisions of the Decree-Law, provided that the Tax Invoice includes the details of the supply related to such Input Tax, or keeps any other document pursuant to Article 65(3) of the Decree-Law in relation to the supply on which Input Tax was paid.
...
The Taxable Person imports the Services, and receives and retains invoices in accordance with the provisions of the Decree-Law and its Executive Regulation in relation to the Import on which Input Tax was declared.
The Taxable Person pays the Consideration or any part thereof, as specified in the Executive Regulation.
If the Taxable Person entitled to recover the Input Tax fails to do so during the Tax Period in which the conditions stated in Clause 1 of the Article have been satisfied, he may include the recoverable Input Tax in the Tax Return for the subsequent Tax Period.