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Central Bank issues new notice on the application of VAT

Posted on 28-Jun-2018 12:19 AM
Central Bank issues new notice on the application of VAT

The Central Bank of the United Arab Emirates (“Central Bank”) has recently issued a notice to UAE banks and finance companies on the application of VAT to the capped fees charged in respect of loans and other services offered to individual customers.

The newly issued Notice No.157/2018 (“Notice”) replaces a previous notice issued by the Central Bank (Notice No. 421/2017 dated 28 December 2017) which restricted banks and finance companies from increasing their existing fee structures for individual and non-individual customers and instructed them to absorb any applicable VAT until further notice. The notice states:

“This Amendment applies to and forms part of the Regulations Regarding Bank Loans and Other Services Offered to Individual Customers (29/2011) (the “Regulations”). It applies specifically to Appendix 2 of those Regulations, which set out the “Maximum Limits for Fees and Commissions Charged on Retail Customer Service”. Upon coming into force, this Amendment replaces the previous version of Appendix 2 and is mandatory and enforceable in the same manner as the Regulations. This Amendment also replaces any other fee caps set out by the Central Bank at this time but not future caps set outside the scope of this document.

All fees set out in this Amendment are exclusive of UAE VAT charges.

Banks and finance companies will need to notify and seek approval from the CBUAE ex-ante for any planned introduction of a new fee or a change in existing fee levels (which are larger than 5%) not capped by this Amendment. Such notifications can be submitted to the CBUAE during the first 5 business days of April and October of any given year.”

Key Takeaways:

·

Appendix 2 of the Regulations Regarding Bank Loans and Other Services Offered to Individual Customers (Circular 29/2011) has been amended;

·

Fee caps are exclusive of UAE VAT;

·

Banks and finance companies will need to notify and seek approval from the Central Bank ex-ante for any planned introduction of a new fee or a change in existing fee levels (which exceeds 5%) for fees which are not capped;

·

The Notice is applicable prospectively with effect from 19 June 2018; and

·

Banks and finance companies need to provide the Central Bank with a full list of fees charged within 30 days from the effective date of the Notice.


Banks and finance companies should consider the impact of the new Notice on their existing fee structures, ensure compliance with the VAT legislation if they decide to pass on the VAT to their customers and communicate with their customers on any changes to their existing fee structures.


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