Spain draft legislation includes the Income Inclusion Rule and a Qualified Domestic Minimum Top-up Tax (QDMTT) applicable for fiscal years starting on or after 31 December 2023, as well as an Undertaxed Profits Rule (UTPR) generally applicable for fiscal years starting on or after 31 December 2024. In addition, the draft legislation contains a Transitional CBCR Safe Harbor, a Safe Harbor for QDMTT and a Transitional UTPR Safe Harbor. The draft bill was subject to public consultation until 19 January 2024.
Current Practice
Receipt of concerned Services;
As a taxable person, the financial institution is regarded as making a taxable supply to itself when it imports such concerned service and is responsible for all applicable VAT obligations and accounting for VAT on the service.
Then, the financial institution is required to issue a valid tax invoice to itself as the recipient of the supply concerning each SWIFT transaction for which it incurs interbank charges.
Issue with Current Practice
Administrative burden to issue tax invoices to itself for a high number of SWIFT-related concerned services; impracticality for financial institutions to issue tax invoices in respect of international bank charges incurred from non-resident banking institutions as a result of using the SWIFT communication system with these non-resident banks.
Welcome Clarification
Financial institutions are not obligated to issue a tax invoice to themselves for interbank services received from non-resident banks if the necessary information is contained within the SWIFT message (Qualifying SWIFT Message) to establish the particulars of the supply.
For purposes of input tax recovery, considering the nature of the Qualifying SWIFT message, it is accepted as sufficient documentary evidence to support the recovery of input tax that relates to this specific imported service. The recovery of input tax is subject to the other standard VAT recovery rules.
What’s SWIFT Charges? How did it become taxable?
Financial institutions incur international bank charges from banking institutions outside the UAE due to using the Society for Worldwide Interbank Financial Telecommunications (“SWIFT”) communication system with these non-resident banks.
The provision of the right to use the SWIFT communication service constitutes a service for VAT purposes.
If this service is received by a financial institution that is a resident of the UAE, according to the general place of supply rule, the place of supply is in the UAE.
Consequently, where such service is received from outside the UAE, it constitutes a concerned service for UAE VAT purposes.
