bazaar accounting


What has been published?

  • FTA specifies that financial institutions can recover Input VAT under the Reverse Charge Mechanism on bank charges from banking institutions outside the UAE, provided that the cost incurred is to make taxable supplies and the taxable person has obtained and retained the supporting documents. However, SWIFT messages alone do not meet the requirements of supporting documents.
  • According to Article 48 of the Federal Decree-Law No. 8 of 2017, financial institutions are responsible for selfaccounting for VAT under the Reverse Charge Mechanism on transactions made through the Society for Worldwide Interbank Financial Telecommunications (SWIFT) with banking institutions which are located outside of UAE. This means that the financial institution must treat such transactions as if they were supplied by them, and issue a valid tax invoice to themselves as the recipient of the supply for each SWIFT transaction that incurs bank charges.
  • However, due to the high volume of SWIFT transactions that occur on a daily basis, financial institutions can request an exception to the issuance of tax invoices as per Clause 7(b) of Article 59 of the Executive Regulations to the Federal Decree-Law no. 8 of 2017. This clause specifies that if there are sufficient records available to establish the details of any supply or class of supplies, and issuing a tax invoice would be impractical, the FTA may determine that a tax invoice is not required to be issued in certain cases.

What are the requirements for alternative documents?

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.

  • Name and address of the banking institution outside of the UAE
  • Name of the financial institution in UAE receiving the service
  • Date of Transaction
  • SWIFT Message reference number
  • Transaction reference number
  • Description of the Transaction
  • Consideration charged and the currency used

Key Takeaways from the Public Clarification

Import of Services

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.

Local Supply of Goods/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.

Keeping records for FTA Audit

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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