A VAT-registered person may earn interest income by depositing money in a bank account or by holding fixed deposits, recurring deposits, or any other similar bank deposit. In addition, a VAT-registered person may earn dividend income by holding shares in a company.
This Public Clarification discusses the VAT implications of the interest income generated from bank deposits and dividend income.
Passively earned interest income generated from bank deposits does not amount to consideration for a supply. Similarly, dividend income received by merely holding shares in a company does not constitute consideration for a supply.
Passively earned interest income from bank deposits and dividend income is, therefore, outside the scope of VAT, and there is no requirement to report them in the VAT return.
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