Blog

UAE Guide: What is VAT on Options in Dubai and Abu Dhabi?

VAT in UAE
VAT on Options in UAE

An option or a financial option, gives the buyer a correct to buy or sell an underlying financial instrument at a specified price prior to or on a specified future date. The specified price is known as the strike price and is set with reference to the spot/market price. This strike price can be at a premium or at discount to the spot price. The right to buy an underlying financial instrument at a specified price on a predetermined date is called Call option, and the right to sell an underlying financial instrument at a specified price on a predetermined date is called Put option. Option premium is the fee for selling/ buying an option

Tax Treatment in Dubai, Abu Dhabi, Sharjah, UAE

As per Executive Regulation (ER) of the VAT Law in Dubai, the issue, allotment or transfer of ownership of an equity security or debt security is exempt from tax. In a clarification vide VATP014 issued by the FTA it is also made clear that supplies of options in respect of debt securities and equity securities in return for premiums are exempt from VAT. However, supplies of options in respect of underlying commodities or other non-debt and non-equity instruments in return for explicit premiums is taxable.

Options under the context of debt or equity security will qualify as “Exempt financial services”, hence exempt from VAT. If a supplier has paid a VAT tax of 5% on such transaction before 31st of July, 2019, then a credit note for the same is to be issued to the recipient. Output tax on such options which has been accounted for on a prior VAT return can be adjusted by the supplier in the VAT return for the period in which the credit note was issued.

Similarly, a recipient that has already deducted input tax related to such a supply and receives a credit note to correct the VAT treatment would have to negatively adjust the input tax in the tax return in Dubai, UAE for the tax period in which the tax credit note was received.

For more information on this topic, please visit our Blogs Section or Contact Us.
For enquiries Phone (UAE): +971 567952590

Related Articles:

Top VAT Consultants in Dubai UAE (2024)

1.     UAE Guide: What are VAT Groups in Dubai?

2.     UAE Guide: How to apply for VAT Registration in Dubai and Abu Dhabi?

3.     UAE Guide: How does VAT Regime work in Dubai?

4.     UAE Guide: How does VAT Return submission work in Dubai?

5.     UAE Guide: Duties and Eligibility for Tax Agent in Dubai

6.    UAE Guide: What are Steps to submit VAT return in Dubai?

7.     UAE Guide: What is Special VAT Refund in Dubai?

8.     UAE Guide: What is Impact of VAT on E-commerce Business in Dubai and Abu Dhabi?

9.     UAE Guide: How to Apply for VAT registration Number in Abu Dhabi and Dubai?

10.  UAE Guide: How to De-register your Firm under VAT in Dubai and Abu Dhabi?

11.  UAE Guide: What is FTA Audit File of VAT in Dubai?

12.  UAE Guide: What are the FTA Accredited VAT Accounting Software for Dubai?

13.  UAE Guide: What is Exports and Imports under VAT in Dubai?

14.  UAE Guide: What is Zero Rated and Exempt Supply Under VAT in Dubai and Abu Dhabi?

15.  UAE Guide: How to De-register from VAT in Dubai?

16.  UAE Guide: How to Claim Your VAT Refund in Dubai and Abu Dhabi?

17.  UAE Guide: What is Cabinet Decision No. 52 of 2019 by FTA for Abu Dhabi and Dubai?

18. UAE Guide: How to Generate Invoices under VAT Law in Abu Dhabi and Dubai?

19.  UAE Guide: What is the Provision of VAT refund for Business visitors in Dubai and Abu Dhabi?

20.  UAE Guide: What is Impact of VAT on Sale of Business in Dubai?

21.  UAE Guide: How to Amend VAT Details in Dubai and Abu Dhabi?

22.  UAE Guide: What are VAT Designated Zones in Dubai?

23.  UAE Guide: What is VAT on Telecommunication & Electronic Services in Dubai?

24.  UAE Guide: What is VAT on Financial Services & Islamic Finance Products in Dubai?

25.  UAE Guide: What is VAT on Real Estate Services in Dubai?

26.  UAE Guide: What is VAT on Education Services in Dubai?

27.  UAE Guide: What is Related Parties under VAT law in Dubai?

28.  UAE Guide: What is VAT Profit Margin Scheme in Dubai?

29.  UAE Guide: What is VAT Reverse Charge Mechanism in Dubai?

30.  UAE Guide: What is VAT Capital Assets Scheme in Dubai?

31.  UAE Guide: What is VAT on Healthcare in Dubai?

UAE Guide: What is VAT Tax Group in Dubai?

What is the process of Internal Auditing?

Auditing Role in Modern Cybersecurity Challenges

How Artificial Intelligence Will Change the Auditing Function

What is Auditing Evidence? How External Auditors support their Opinion?

Value Addition for Business with Auditing

Compliance and Auditing: Are these both the Same?