UAE VAT – FTA Clarifies SWIFT Fee Rules for Banks

Editorial Team – [2025] 174 taxmann.com 415 (Article)

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1. UAE clarifies VAT treatment of SWIFT charges for Financial Institutions

Issued by the Federal Tax Authority (FTA), Public Clarification VATP041 outlines the treatment of international banking charges incurred through the SWIFT communication system under UAE VAT law. It replaces the earlier Clarification VATP036.

Background

Financial institutions in the UAE, including banks and exchange houses, regularly use the Society for Worldwide Interbank Financial Telecommunications (SWIFT) system to communicate with banks located outside the country. These institutions incur international banking charges for such communications.

However, SWIFT messages documenting these transactions do not satisfy all the requirements of a tax invoice as mandated under UAE VAT regulations.

VAT Liability and Self-Supply

Under UAE VAT law, when financial institutions receive services from non-resident banks through the SWIFT system, these services are treated as taxable supplies. As a result, the financial institution is deemed to be making a taxable supply to itself. This self-supply triggers VAT obligations, including the need to account for the due tax under the reverse charge mechanism.

SWIFT messages as Tax Invoices

Ordinarily, UAE VAT law requires registrants to issue and retain tax invoices for taxable supplies. In the context of SWIFT transactions, financial institutions would thus be required to issue tax invoices to themselves. However, the FTA recognises the impracticality of generating separate tax invoices for each individual SWIFT message due to the high volume of transactions.

According to Article 59(7)(b) of the Executive Regulation, the FTA may waive the requirement to issue tax invoices where sufficient alternative documentation is available and issuance is impractical.

In this regard, the FTA now allows qualifying SWIFT messages to serve as sufficient documentary evidence, provided they contain the following details:

• Name and address of the sending bank (located outside the UAE)
• Name of the UAE financial institution receiving the service
• Date of the transaction
• SWIFT message reference number
• Transaction reference number
• Description of the transaction
• Consideration charged and currency used

Where these conditions are met, a financial institution is not required to issue a self-invoice and the qualifying SWIFT message will be accepted as evidence of supply.

Input Tax Recovery

Input VAT incurred on SWIFT-related banking charges may be recovered, but only to the extent the cost was incurred in the course of making taxable supplies. Financial institutions must retain qualifying SWIFT messages as supporting documents to claim such recovery. These messages will be treated as invoices issued by the foreign bank for VAT purposes.

The claim must be made in the tax period in which the institution receives the qualifying message and either pays or intends to pay the consideration within six months of the agreed date. If missed, the input tax can be claimed in the subsequent tax period.

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