As per the newly implemented value-added tax (VAT) in UAE, most of the banking and financial services have been exempted from the VAT.
VAT Exempt on Financial Services in UAE
The Executive Regulation on the UAE VAT law gives a comprehensive definition of the financial services and categorizes products and services on which VAT is applicable.
Spread-based products and services, as well as margin-based products, has been exempted from the VAT.
Loans, mortgages, credit cards etc are in the VAT exempt category. As per the norms, Islamic Banking finance services with profit rates have been relieved of the VAT. So no VAT shall be imposed on products like loans, mortgages, credit cards etc.
Do Check Out: VAT on ATM Withdrawals (for same banks and other banks) in UAE
Financial and Banking Services under VAT
Albeit most financial services have been exempted, there are however some services on which the client/customer is required to pay a 5 per-cent VAT. For example, services which include an explicit fee, commission, discount or rebate will have to adhere to 5 per-cent VAT.
For those who use credit cards, No tax will be charged on interests.