On 15 October 2026, the IRD released a specific notice regarding the Value Added Tax on Financial Services (VAT on FS) for the month of September 2026. VAT on Financial Services is levied under the Value Added Tax Act No. 14 of 2002 (as amended) on the value addition attributable to financial services supplied by banking institutions, insurance companies, and other financial service providers. The standard rate applicable is 18% on the value addition calculated per the prescribed formula.
Key Takeaways
- Monthly Payment Obligation: Registered financial service providers must remit the VAT on FS for September 2026 by the statutory due date. The notice reiterates the calculation methodology for value addition, which includes explicit and implicit fees, interest margins, and other financial income.
- Return Filing Requirements: Alongside payment, taxpayers must furnish the VAT on FS return (FS 01) electronically. The return must reconcile the value addition declared with the audited financial statements and monthly management accounts.
- Input Tax Credit Restrictions: The notice reminds taxpayers that input tax credits on expenses attributable to exempt financial services are restricted. Proper apportionment using the turnover ratio method is mandatory to avoid disallowance during audits.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement