UAE currency exchanges to pass on VAT to consumers
Sending remittances from the UAE will become slightly expensive as the currency exchange houses in the country confirmed that they would pass on the VAT charges on the remittance fee to the consumers from January 1, 2018.
However, the industry executives believe that the rise in the fee due to VAT will not affect remittances from the country.
"We do hundreds of thousands of remittances, so 5 per cent VAT on the (remittances) charges will be passed on to the consumers. Whether it's 80 fils or Dh1, it's going to be passed on," said Rajiv Ashok Raipancholia, treasurer, Foreign Exchange & Remittance Group (FERG), a body comprising businesses engaged in the money exchange and remittances industry.
"For remittances, with amount up to Dh1,000, we charge Dh16 and for amount over Dh1,000, we charge Dh22 on average. But some exchange houses charge slightly lower in the range of Dh10 and Dh15," said Raipancholia, who is also CEO of Orient Exchange.
Replying to a question on how much fee is collected by the currency exchange houses in the UAE, he said it's difficult to quantify because there is not enough information shared by the industry players.
From January 1, 2018, the UAE government will impose 5 per cent VAT on certain goods and services under the GCC agreement. Implemented across more than 150 countries worldwide, the UAE's 5 per cent VAT is among the lowest in the world.
Mohammed Al Ansari, chairman, FERG, said that being a small chip of charges, it is not going to affect the amount that will be remitted because the tax will be levied only on the fee not on the amount to be transferred.
"Five per cent VAT on the fees will range between 50 fils to Dh1 or slightly more per transaction. I assume it doesn't affect the volume of transfers. However, VAT will affect other businesses such as trade as 5 per cent is a considerable amount," he added.
Meanwhile, he said VAT would not be levied on exchanging currencies by the residents or visitors.
Adeeb Ahamed, secretary, FERG, said VAT is definitely a good thing but is it the right time is the question being asked by the business community.
"I am sure the government must have thought over well. The leadership of the country has always thought well for the business community and this decision will also lead us to a good position.
"You're talking about VAT on fees of around Dh1-2. It's not going to make a major impact as such," said Ahamed, who is also managing director of Lulu International Exchange.
Remittances to remain flat
Al Ansari predicted that the remittances this year would be flat, in line with the last year's figures.
FERG chairman predicted remittances from the UAE would be in the range of Dh120 billion to Dh130 billion with an average of Dh10 billion transferred a month.
Lulu International's Ahamed also noted that remittances growth will be flat this year as there is no spike in the numbers.
"It's not very alarming nor very disappointing because of regional issues. But international marketers are on a very positive note at this point of time, so we are in a good situation," he adds.
According to the UAE Central Bank figures, the total value of remittances by foreign workers in the UAE reached Dh78 billion during the first half of 2017, representing 48.5 per cent of the total balance of payments in the country in 2016 amounting to Dh160.8 billion.
Indian workers continued to be top remitters followed by Pakistanis, Filipinos, Egyptians and the British.
There are approximately 125 exchange houses in the UAE with over 1,000 branches, employing around 13,000 people with UAE nationals making up 9.5 per cent of the workforce.