Remittances won’t have VAT, but service fees will

dubai — Expats in the UAE, who regularly send money home to their families, can breathe a sigh of relief as experts clarify that they don’t have to pay value added tax (VAT) on the amount of money that they are remitting.

Speaking to Khaleej Times, Sudhesh Giriyan, COO of Xpress Money, noted that there has been a lot of speculation.

“With the signing of the executive regulations on VAT, we finally have the answers,” he said. “While sending money abroad, the five per cent VAT will only be applicable on the remittance fees and not the entire amount to be sent. This comes as good news for remitters as there will only be a bare minimum increase in the fees for money transfers, which will be almost inconsequential.”

Naveen Sharma, chairman of the Institute of Chartered Accountants of India – Dubai Chapter, noted that there is a general misconception that there will be a five per cent impact on consumers after VAT is introduced, which is incorrect.

“As the major items in the consumer’s spending is out of the VAT domain such as residential rents, the majority of educational fees, and the majority of healthcare related services, we expect the impact on the consumers to be in the region of 1.2 per cent to 1.8 per cent,” he said. “When it comes to sending money back home, there will be no VAT applicable on the amount remitted, however VAT will be charged on the exchange house charges.”

— rohma@khaleejtimes.com