VAT on ATM Withdrawals (for same banks and other banks) in UAE

According to tax experts, Five percent VAT will not be levied from the UAE customers in case they withdraw money from ATMs of other Banks, however, VAT will still be applicable on the Dh2 fee deducted by banks on such inter-bank ATM transactions.

Let’s consider an example. Suppose that a customer has an account in X Bank and he withdraws cash, Dh5,000 from Y’s ATM. In that case, the VAT will not be charged from the customer on withdrawing amount of Dh5,000.

Nirav Shah, Director of Fame Advisory said, “When you withdraw from your account, there is no transaction, so VAT does not apply in such case.”

According to the GCC agreement, From 1st January 2018, VAT at the standard rate of five percent will be applied to specific goods and services. Saudi Arabia is another member of GCC country which will be implementing VAT from 1st January.

The five percent VAT will be imposed on the Dh2 fee charged by banks when the customers withdraw money from ATMs of other Banks – which converts to approximately 10 films per transaction.

Mayank Sawhney, Director of MaxGrowth Consulting said, “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 percent VAT, it will become Dh2.10 from January 1, 2018, onwards. In essence, it does not hit customers’ pockets because even if you do 50 such transactions in a month, your total cost is going to rise maximum by Dh5.”

Sawhney further said that it is anticipated that the banks might increase their transaction fee, in respect of cash withdrawn from ATMs by using other Bank cards, from Dh2 to Dh3 or Dh5, after the implementation of VAT reform from 1st January 2018.

According to Nirav Shah, banks will be liable to impose VAT on all kinds of fees which customers would be liable to pay, for which they are required to maintain compliance from their side. Banks will have to face the burden of new administrative and the fees are likely to increase.

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