Banks and exchange houses (collectively referred to as financial institutions) often engage with non-UAE banks using the SWIFT communication system. In this process, international bank charges are incurred, and under the updated guidance where VATP041 Replaces VATP036, these charges now fall under more clearly defined VAT treatment.
As these charges pertain to services provided by overseas suppliers, they are considered “Concerned Services” under UAE VAT Law. This brings them squarely within the scope of the Reverse Charge Mechanism (RCM) — requiring UAE-based institutions to account for VAT as if they were both the supplier and recipient.
From VATP036 to VATP041: What Changed?
- Broader Scope & Clearer Guidance
While VATP036 was focused narrowly on the input tax recovery aspects, VATP041 expands the scope to cover:
- The requirement to issue tax invoices under the RCM.
- The documentary conditions for valid input tax recovery.
- Formal Recognition of “Qualifying SWIFT Messages”
Both clarifications acknowledge that SWIFT messages are not tax invoices. However, VATP041 takes a practical leap by formally introducing the concept of a “Qualifying SWIFT Message” — a record that can:
- Replace the need for a self-issued tax invoice under RCM
- Serve as sufficient evidence to support VAT input recovery
- To qualify, the SWIFT message must include:
According to the revised requirements under VATP041 Replaces VATP036: In order to be eligible, the SWIFT message must contain the following information:
- Name and address of the non-resident bank
- Name of the UAE financial institution
- Transaction date
- SWIFT message reference number
- Transaction reference number
- Transaction description
- Amount charged and currency used.
Final Words
The Federal Tax Authority (FTA)‘s swift replacement of VATP036 with VATP041 signals its intent to streamline VAT compliance for high-volume, cross-border banking operations. By formally recognizing SWIFT messages as valid alternatives to traditional tax invoices, the Authority has balanced regulatory compliance with commercial practicality. For tailored assistance with VAT compliance and documentation, RVG Chartered Accountants offers expert guidance to financial institutions.
