No VAT on ATM withdrawals from another bank
dubai — The UAE customers will not be charged five per cent VAT on withdrawal amount from the ATMs of the bank other than their own bank but on the Dh2 fee charged by the banks, according to tax experts.
For example, a customer has an account with bank X and if he withdraws Dh5,000 cash from bank Y’s ATM, he will not be charged on the withdrawal amount of Dh5,000.
“When you withdraw from your account, there is no transaction fee, so VAT does not apply to such situation,” said Nirav Shah, director, Fame Advisory.
The UAE will implement five per cent VAT on certain goods and services from January, 2018, as part of the GCC-wide agreement. Saudi Arabia is the only other Gulf country to join the UAE in implementing VAT.
However, the customers will be charged five per cent VAT on Dh2 fee which comes to around a nominal 10 fils per transaction.
“The VAT will be payable only on the fee charged by the banks which is a nominal amount of Dh2 per transaction in general. So after applying five per cent VAT, it will become Dh2.10 from January 1, 2018 onwards. In essence, it does not hit the customer’s pocket because even if you do 50 such transactions in a month, your total cost is going to become higher by Dh5,” said Mayank Sawhney, director, MaxGrowth Consulting.
He noted that the banks will have to absorb a lot of VAT charged to them by their vendors and suppliers as their costs because VAT on majority of their output is exempt. So they cannot recover input VAT they pay to their vendors for various goods and services procured by them.
However, the banks may increase their transaction fee for ATM withdrawals from other banks’ ATMs from Dh2 currently to Dh3 or Dh5 with effect from January 1, 2018, Sawhney added.
According to Nirav Shah, banks will be subject to include VAT on all their fees which will be displayed for customer and they need to do compliance at their end. These fees will increase to account for this new administrative burden that banks will have.
“If not immediately, banks may hike fee over the period,” Shah added.
waheedabbas@khaleejtimes.com