The impact of VAT on Financial Services
It is expected that, in 1 January 2020, Qatar will introduce a broad value-added tax (VAT) at a standard rate of 5%, according to the Gulf Cooperation Council VAT Framework (GCC framework).
All businesses in Qatar will be affected by the introduction of VAT. However, the implications are likely to be more complex for the Financial Services sector.
Most financial services are categorized as exempt supplies for VAT purposes, meaning that no VAT has to be charged to customers (output VAT). However there are exceptions, which will covered further in this flyer. On the other hand, financialinstitutions are likely to pay VAT (input VAT) on goods and services they procure; e.g. for IT services, advisory services or building utilities.
In general, input VAT can be deducted if the goods or services that were procured are then used to deliver taxable supplies. However, VAT laws do not permit taxpayers to deduct input VAT if these expenses are related to the delivery of exempt supplies. As a consequence, input VAT could create a final burden for financial institutions.