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VAT on Financial Services

The exempt vs taxable distinction that costs banks millions.

FINANCIALMarch 2026 · 7 min read

Exempt vs Taxable

Service VAT Status Key Detail
Lending / deposits Exempt Margin (interest spread) is exempt
Letters of credit Taxable Fee-based — standard-rated
Bank guarantees Taxable Commission/fee — standard-rated
Foreign exchange Exempt Spot and forward FX margin
Securities trading Exempt Buying/selling equities, bonds
Brokerage commissions Taxable Intermediary fees — standard-rated
Fund management Taxable Management fees — standard-rated
Insurance premiums Exempt Life and general insurance

⚠️ Input Tax Trap: Banks and financial institutions making both exempt and taxable supplies can only recover VAT on inputs attributable to taxable supplies. The partial exemption method determines the recoverable percentage — this can be worth millions of dinars annually.

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