The UAE is the sixth top remittance-sending country in the world, with the country’s expatriates sending more than $19 billion (Dh70 billion) in one year to friends and families back home.
This is why when news broke out regarding the implementation of VAT (Value Added Tax), Filipino expats in the UAE have started wondering how this will affect their regular remittances.
According to the latest information from the Ministry of Finance, it is planned that financial services will be subjected to a narrow exemption model. Fee-based financial services will generally be subject to the standard rate of 5% VAT.
Fees charged on remittance services can be categorized as “fee-based financial service,” The Khaleej Times reported.
The concept of VAT on remittance services, however, shall not be mistaken with the tax on remittances. If remittance services would be subject to standard VAT rate, the VAT due will be based on the fee charged and not the amount of the remitted money. Thus, the eventual impact of VAT on remittance services can be very small in comparison to taxes on the amount remitted.
OFWs are one of the largest in terms of remitters in the UAE, joining Indians, British, Egyptians, and Bangladeshis among the top nationalities remitting money back to their respective home countries.
