The FTA allows financial institutions to use SWIFT messages as a sufficient record for tax purposes, as long as certain information is included in the message.
If the SWIFT message has all the required information, the UAE financial institution can recover Input VAT on bank charges from a foreign banking institution.
Due to recent amendments in Article 55 of the Federal Decree-Law No. 8 of 2017, effective from January 2023, It is required to obtain and retain an invoice for any import of services, in order to claim Input VAT under the reverse charge mechanism.
Through the public clarification, the FTA has clarified that even in the case of an Import of Services Taxable Person
can issue a Tax Invoice to itself as a recipient of the supply, as the “VAT Administrative Exceptions” are available
only for Tax Invoices instead of Invoices.
Now, according to public clarification, a taxable person can request an exception to this requirement if it is impractical to receive invoices for certain types of import of services.
Based on this interpretation, it can be concluded that the recent clarification benefits financial institutions and other industries that deal with a high volume of daily transactions. In cases where it becomes impractical for a Taxable Person to issue tax invoices, an administrative exception can be requested from the FTA according to Clause 7(b) of Article 59 of the Executive Regulations to the Federal Decree-Law no. 8 of 2017. This exception can benefit many businesses otherwise struggling to keep up with issuing tax invoices.
It’s crucial to keep in mind that if you face a future tax audit, the Federal Tax Authority (FTA) will ask for proof of approval i.e. Administrative Exception Certificate from the FTA for this exception. You will also need to provide sufficient documentation to demonstrate the receipt and supply of services.
The good news is that the taxable person may request an exception from the FTA if they have maintained/obtained sufficient records to prove that they have received the service from outside UAE and can demonstrate to the FTA that the supplier was unable to issue invoices for the services provided.
This update allows for Administration exceptions to be made in situations where tax invoices are impractical, such as when importing services. This solution is much needed for businesses that are struggling with similar issues concerning the import of services.
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