Banks in the UAE must charge VAT on some services at the standard 5% rate. You should know about these taxable services before you use your bank account. This knowledge helps you manage expenses, record them, and even claim input tax if you’re allowed. Let’s look at how VAT applies to everyday banking transactions in the UAE and what it means for account holders.
Banking Transactions and VAT Under UAE Law
The UAE VAT rules place banking transactions under the group of financial services. These transactions always involve money, so the government has given them specific tax rules. Not every bank transaction will have VAT, but many common services do.
How Banks Charge VAT on Your Accounts
Banks charge VAT on many fees. If you use your bank account, you might pay service charges, and those will include VAT. Banks collect VAT when they provide services like:
- Opening or closing an account
- Getting a bank statement
- Maintaining an account monthly or yearly
- Making a withdrawal at the branch
- Issuing new cheque books
- Subscribing to a priority or premium service
- Handling any special request
If you check your bank statement, you’ll find these fees listed, and VAT is usually added to the amount you pay.
VAT’s Impact on Money Transfers
Money transfers are a daily routine for many people. Banks often charge a fee to transfer money in or out of your account. No matter which bank you use, these fees are subject to 5% VAT. You can ask your bank how much they charge for each kind of transfer. When you pay this fee, VAT will always be included, so keep that in mind when you plan a transfer.
Cash Transactions and VAT at Banks
You might do cash-related transactions at your bank sometimes. Cashing a cheque, asking for change, or requesting special cash handling all can attract extra bank charges. These charges are also taxable at 5%. The bank will add VAT to these fees, so you’ll see the total cost on your bill or statement. It’s important to plan for these costs before you make cash transactions.
VAT on Card Services and Fees
Most people in the UAE use credit and debit cards for shopping and bills. Banks charge different fees for various card services, and most of these have VAT added at the 5% rate. Some fees that come with cards are:
- ATM withdrawal fee
- Getting a printed statement
- Cash withdrawal using a card
- Balance transfer fee
- Overdraft charges
- Bank commission on card payments
- Card authorization fee
- General card maintenance fee
Each time you use a card for something special, you should check with your bank about the exact fees. The final amount you pay always includes VAT.
VAT and Interest Earnings in Bank Accounts
People with savings accounts or deposits earn interest as income. UAE VAT law treats interest income differently. If you earn interest on deposits or similar products, that amount is outside the scope of VAT. The bank doesn’t add VAT to interest income, as long as no extra service is given in return. You only pay VAT when you use paid services, not on the interest you earn.
Why Proper VAT Accounting for Banks Matters
VAT rules for banks and financial services can seem complicated. If you’re a business owner or individual, you might face issues when you record bank charges or try to recover input tax. Correct accounting helps you:
- Avoid mistakes in VAT reporting
- Claim input tax on eligible business expenses
- Follow all UAE VAT rules and stay compliant
- Keep clear records for your business or personal accounts
If you get expert advice before making big banking decisions, you’ll find it easier to handle VAT and keep your books in order.
How Mubarak Al Ketbi (MAK) Auditing Can Support Your VAT Needs
You know, when it rains, it pours, but Mubarak Al Ketbi (MAK) Auditing will help you weather the VAT storm. Their experts guide you in VAT accounting, help you solve your banking issues, and make sure you follow every UAE tax rule.
- For more information, visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Or contact/WhatsApp on this number: +971 50 276 2132
