Article 36 of the GCC Common VAT Agreement outlines the tax treatment for financial services. It establishes that services performed by banks and financial institutions licensed within a Member State are exempt from VAT. Despite this exemption, these institutions are entitled to reclaim Input Tax, with the specific refund rates to be determined by each individual state. The article includes a critical exception in subsection 3, which grants each Member State the authority to override this exemption and apply any other tax treatment to financial services, providing significant policy flexibility for local implementation within the financial sector.
Chapter 6 - Exceptions
Article 36 - Financial Services
Financial Services performed by banks and financial institutions licensed under the laws in force in each Member State shall be exempt from Tax. Banks and financial institutions may reclaim Input Tax on the basis of the refund rates determined by each State.
As an exception to subsection 1 of this Article, each State may apply any other tax treatment to financial Services.
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