How much tax UAE expats have to pay on remittance fee?

Although it has been confirmed that there will be a service tax from July 1 on the fees paid by Non Resident Indians (NRIs) for sending money back home, it is not clear the amount of tax the expats in the UAE have to pay for each transaction.

In principle, the Indians in the UAE may have to pay a 12.36 per cent service tax on the fee paid by them on remittance. At the moment Dh 15 is the fee charged by most of the money exchange centres in the UAE on each transaction. But it is not clear whether the service tax will be levied on the fee paid in the UAE or the fee charged (if any) by banks in India for the same transaction as too many technical issues are involved.

Vayalar Ravi, the minister of overseas Indian Affairs, told Gulf News yesterday that most probably the tax will be levied on the fees charged by Indian banks but he was awaiting further clarifications from the ministry of finance to confirm it.

An official at the Foreign Exchange and Remittance Group - U.A.E, a common platform of money exchange centres in the country, told Gulf News yesterday that Indian banks do not charge any fee on individual [remittance] transaction from the UAE.

But a top financial consultant said it is not clear how the government is going to collect the tax -whether from abroad or through banks in India.

The new Indian laws empower the government to impose service taxes on transactions [towadrs India] being carried out abroad especially by the foreign money exchange centres having branches in India , said Sachin Menon, partner and the National Head of Indirect Taxes at KPMG. “But many technical issues are involved in it and we have to wait and watch,” he said.

Indirect tax may be known by bank statement alone