UAE: Clarification of VAT recovery on SWIFT Messages limited to financial institutions
Financial institutions must account for tax on interbank services received from foreign banks under the reverse charge mechanism.
The Federal Tax Authority (FTA) in April 2025 issued Public Clarification value added tax (VAT) P041—replacing VATP036—to address the requirement to issue tax invoices by financial institutions with respect to SWIFT Messages, and the documentary requirements for input tax recovery related to these services.
UAE banks and exchange houses incur international bank charges from foreign banks for using the SWIFT communication system. These charges are evidenced by SWIFT Messages, which do not meet all the tax invoice requirements.
Financial institutions must account for tax on interbank services received from foreign banks under the reverse-charge mechanism. They are required to issue self-tax invoices for these supplies. However, due to the impracticality of issuing tax invoices for each SWIFT transaction, the FTA accepts that financial institutions do not issue tax invoices to themselves regarding interbank services provided that the SWIFT Message contains sufficient information to establish the particulars of the supply (i.e., qualifying SWIFT Message).
Additionally, financial institutions may only recover the related input tax to the extent the cost is incurred to make taxable supplies, provided that sufficient documentary evidence is retained. In this context, the FTA accepts that a qualifying SWIFT Message would be treated as sufficient documentary evidence to support the recovery of input tax that relates to the interbank services.
For more information, contact a KPMG tax professional in the UAE:
Keith Donegan | keithdonegan@kpmg.com
Luis Alonso | lalonso1@kpmg.com