VAT and Payment Processing Services

Key Actors in payment processing services

Cardholder

• Individuals and corporates who obtain a card from an issuing bank

Issuer

• Banks and financial institutions issuing debit and credit cards to their customers 

Merchant

• Businesses accepting card payments for the goods or services they are selling 

Payment Network Operators

• Businesses providing infrastructure process for payments made with cards 

Acquirer

• Banks and financial institutions offering merchants the capabilities to accept payments through debit and credit cards 

Typical fees for payment processing services

Payment Network Operators

• Membership Fee

• Assessment Fee

• Transaction Fee 

Issuer

• Subscription/Renewal Fee

• Interchange Fee

Acquirer

• Discount Rate Fee

• Point-of-sale rental fee

• Payment gateway fee

• Joining / set up fee

• Administration fees 

Key Considerations 

The Federal Tax Authority (FTA) did not provide its view on the VAT treatment of payment processing services and its related fees in the Financial Services VAT Guide dated July 2019.

In determining the VAT treatment of payment processing services, the following points may be considered by Financial Services companies:

a. Does the fee qualify as the consideration for a supply of services?

b. Who is the supplier and who is the recipient of the services?

c. Does the service qualify as an exempt financial service? d. Is the recipient of services outside the UAE at the time the service is performed?