You are probably aware that the UAE and other Gulf Cooperation Council (“GCC”) countries are introducing VAT on 1^st January 2018. VAT is a consumption tax that will be imposed on most domestic supplies of goods and services in the UAE at a standard rate of 5%, with few exemptions and zero-ratings applied to specified goods and services.

At Finance House PJSC (“FH”), we are preparing for VAT implementation by taking the necessary steps to ensure that we comply with all requirements before the deadline. The Ministry of Finance (“MoF”) has already released the GCC VAT framework (“VAT framework”) and has published a compilation of Frequently Asked Questions (“FAQs”) on its website www.mof.gov.ae to increase awareness about the applicability of VAT.

The MoF has also set up the Federal Tax Authority (“FTA”) to govern VAT and other taxes in the UAE, and a dedicated website, www.tax.gov.ae provides necessary information.

We will be required by law to charge you VAT on all taxable supplies made by us, which are likely to include the explicit fees we charge for services provided. The terms and conditions of your agreements, as available on the Finance House website, will be updated accordingly. As per the UAE VAT law, margin/interest and currency spreads charged by us are likely to be exempt from any VAT.

If you are conducting business in the UAE, we request you to take necessary steps to ensure your registration and compliance for VAT in the UAE.

1- Register for VAT

If you are operating a business with annual sales turnover likely to be more than AED 375,000 you are required to register for VAT through the FTA eServices portal. In the event that you have an annual sales turnover of less than AED 375,000 and more than AED 187,500, you may consider voluntarily registering for VAT purposes.

If you have a business banking or a merchant relationship with Finance House, we would request you to submit the attached form along with a copy of your Tax Registration Certificate to any Finance House branch or handover the same to your Relationship Manager. Please submit this to us no later than 26^th December 2017.

2- Evaluate the VAT treatment for the goods and services that you supply

Based on the information publicly available, we understand that most of the goods and services supplied within UAE would attract VAT at a standard rate of 5% with a few exceptions. The exceptions may be in the form of VAT zero-ratings or VAT exemptions. In addition, if services are provided to non-UAE GCC customers who are VAT registered in that specific GCC country, then UAE VAT of 5% will not be charged.

Finance House has begun this process and it is likely that even though interest rate or margin we charge on our products will be exempt from VAT, VAT will still be chargeable at the standard rate (5%) on all of our taxable supplies, such as fees for services as per our schedule of charges (“SOC”).

3- Evaluate the availability of input VAT recovery

As VAT is a consumption tax, the overall burden of VAT sits with the final consumer and is not designed to be a cost for businesses. If a business only makes taxable supplies it is expected that it will be able to recover input VAT charged to it by its suppliers in full.

If you have a business banking or a merchant relationship with Finance House, we will support your input VAT claim by issuing valid VAT invoices in a timely manner for all of the services that we provide to you with effect from 1^st January 2018. The particulars to be contained on a tax invoice are specified in the VAT regulations of the UAE and we will ensure that our invoices comply with these.

4- Conclusion

If you have not already commenced a process to ensure your registration and compliance for VAT in the UAE, we request you to prioritize it and ensure your readiness before the regulations take effect.

We will provide you with updates as new details on VAT are issued by relevant government authorities. You may also wish to consult independent tax advisors in the UAE for specific advice pertaining to your circumstances.