KPMG organised a seminar to provide insight into how the introduction of Value-Added Tax (VAT) will affect the financial services sector. The seminar was the latest in KPMG’s ‘Freshly Brewed’ series, which brings together banking CFOs to discuss industry trends and topics.
Addressing professionals, KPMG’s global head of indirect tax for the financial services sector, Gert-Jan van Norden said banks and other financial service providers in Qatar will need to think carefully about their procurement processes, operating models and systems to prepare for the upcoming introduction of VAT,
Whilst the draft framework and legislation has not yet been published, Qatar’s legislation is likely to mirror global best practice. With this in mind, it is probable that the country’s financial services providers will feel the impact of VAT more than other sectors - as elsewhere in the world, financial services providers are exempt from charging customers VAT on margin related activities (such as interest on loans), but are liable to pay VAT on goods and services procured, Norden said.
This differs from most other sectors, which are able to charge customers VAT and offset VAT that they pay when procuring goods and services. “Banks will have to think carefully about how to manage the potential increase in costs as a result of unclaimed VAT," said Norden.
"Passing costs on to customers is an obvious way to mitigate the impact of VAT, however with margins already being low, this may prove difficult. Consideration will also have to be given to the legal implications of potentially altering existing contracts, and the effect that raising prices on new contracts will have on competitiveness”, he said.
