Is VAT applicable on used cars in UAE? FTA clarifies

The Federal Tax Authority (FTA) asserted that only those goods which have previously been subject to VAT before the supply in question may be subject to the profit margin scheme. As a result, stock on hand of used goods which were acquired prior to the effective date of Federal Decree-Law No. (8) on Value Added Tax, or which have not previously been subject to VAT for other reasons, are not eligible to be sold under the profit margin scheme. VAT is, therefore, due on the full selling price of such goods.  Read more...

UAE clarifies when companies must de-register from VAT

Companies registered to pay value added tax in the UAE must apply to remove themselves from the system if they stop operating or anticipate a drop in the value of their taxable sales to below Dh187,500 per annum, the government said on Saturday.

Failure to de-register could elicit a fine from the UAE Federal Tax Authority, the official body that administers the tax said in a statement. Read more...

FTA issues guidelines for foreign businesses' VAT refund in UAE

The Federal Tax Authority (FTA) has outlined four conditions that would allow foreign businesses to recover value-addded tax (VAT) incurred in the UAE.

To be eligible for the VAT refund, the first condition is that foreign businesses must not have a place of establishment or fixed establishment in the UAE or in any of the VAT-implementing GCC states. Read more...

UAE clarifies rules on payment of VAT on commercial real estate

When The 5 per cent VAT on commercial real estate must be paid prior to the completion of an asset sale, not afterwards, the UAE's Federal Tax Authority (FTA) said on Wednesday.  Read more...

Firms can't recover VAT on entertaining non-employees

Companies in the UAE will not be able to recover value-added tax (VAT) paid on entertainment expenses for non-employees, according to a new clarification issued by the Federal Tax Authority (FTA).  Read more...

FTA clarifies goods eligible for profit margin scheme

The Federal Tax Authority (FTA) on Wednesday said it had determined three main categories of "eligible goods" for calculating value-added tax (VAT) on the basis of the profit margin scheme. They are second-hand goods, meaning tangible moveable property that is suitable for further use as it is or after repair; antiques; and collectors' items.  Read more...

FTA classifies labour accomodation for VAT payment

The Federal Tax Authority said on Tuesday that it classified labour accommodation into two categories for tax payment purposes taking into consideration whether the facility provides additional services making it subject to the standard 5 per cent Value Added Tax or a purely residential building and therefore exempt from VAT. Read more...

More relief as three UAE free zones are out of VAT scope

The UAE's Federal Tax Authority (FTA) has added three new free zones to the list of designated zones that will be out of the five per cent VAT scope imposed earlier this year. Read more...

No VAT on sale of leased commercial property by taxable person, says FTA

Leased commercial property will not be considered a supply during its sale by the taxable person, therefore, it will not be taxable, the Federal Tax Authority (FTA) and Dubai Land Department (DLD) clarified on Tuesday.  Read more...

Federal Tax Authority: Impact of VAT on Sales of Gold and Diamonds to Be Reduced Between Registered Dealers According to Reverse Charge Mechanism

The Federal Tax Authority (FTA) asserted that the new Cabinet Decision issued to regulate Value Added Tax (VAT) incurred by gold and diamond dealers registered with the FTA seeks to establish the adequate legislative environment and infrastructure for the gold and diamonds sector to thrive. Read more...

FTA announces VAT refund procedure for UAE nationals

The Federal Tax Authority (FTA) has set three requirements and procedures for UAE nationals to refund Value Added Tax (VAT) incurred on new residences. Read more...

FTA outlines licensing procedure for exhibition, conference services

The Federal Tax Authority, FTA, on Wednesday said the removal of Value Added Tax, VAT, on services provided at exhibitions and conferences seeks to cement the UAE's status as a leading destination for local, regional and international forums. Read more...

Cabinet approves resolution on VAT refunds for UAE exhibitions, conferences

The Cabinet has approved a resolution pertaining to Value Added Tax (VAT) on conferences and exhibitions, in line with the government's ongoing efforts to support this sector and to enhance the country's status as a hub for meetings, incentives, conferences and exhibitions (MICE). Read more...

Company directors are required to pay 5% VAT

The earnings of the director of a company are subject to value-added tax (VAT) if he undertakes services on a regular and independent basis and if the earnings exceed the mandatory registration threshold of Dh375,000, according to a note issued by the UAE's Federal Tax Authority (FTA). Read more...

No VAT on sale of leased commercial property by taxable person, says FTA

Leased commercial property will not be considered a supply during its sale by the taxable person, therefore, it will not be taxable, the Federal Tax Authority (FTA) and Dubai Land Department (DLD) clarified on Tuesday.  Read more...

Why UAE consumers must ask for tax receipt 

The Federal Tax Authority (FTA) has asked all UAE consumers to demand tax receipts from retailers when purchasing products or services to prevent attempts to manipulate the tax system. Read more...

Businesses in UAE must display VAT inclusive prices to avoid penalties: FTA

The Federal Tax Authority (FTA) has asserted that all businesses subject to Value Added Tax and Excise Tax must display prices of goods and services inclusive of tax in order to avoid administrative penalties. Read more...

Here are 3 easy steps for VAT registration in UAE 

The Federal Tax Authority (FTA) said a taxable person or an official representative can register for value-added tax (VAT) in 3 easy steps through its website, taking no longer than 15 to 20 minutes. Read more...

All you need to know about registering for VAT? 

Consumer or supplier? FTA clarifies who'll pay VAT 

The UAE's Federal Tax Authority (FTA) on Saturday clarified whom between suppliers and end-consumers should pay value-added tax (VAT) on goods and services delivered in 2018. Read more...

What is VAT?

Value Added Tax ( VAT) is an indirect tax that is collected incrementally, based on the surplus value, added to the price on the work at each stage. It is imposed on supplies of goods and services that are bought and sold. The ultimate consumer generally bears the cost of VAT.

What is the effective date of VAT in the UAE?

Federal Decree-Law No. (8) of 2017 on Value Added Tax was issued on 23^rd August, 2017 and is effective from 1^st January, 2018.

What VAT is charged on?

In principle, VAT applies to all provisions of goods and services. VAT is assessed and collected on the value of goods or services that have been provided every time there is a transaction (sale/purchase). The seller charges VAT to the buyer, and the seller pays this VAT to the government.

What are the VAT rates?

VAT has been introduced at a standard rate of 5%. However, some goods and services are exempt or zero rated.

How is VAT collected?

Businesses are responsible for documenting their business income, costs and associated VAT. Registered businesses charge their customers VAT and pay VAT to their suppliers. The difference between these sums is claimed from or paid to the government.

How to pay VAT due to the FTA?

FTA has confirmed that various electronic channels and mechanisms have been activated to facilitate paying tax fees through a wide network of banks, exchange offices and finance companies in the state. Registrants also can pay the taxes through UAEFTS, main money transfer system, which offers direct linkage between the Central Bank of the UAE and the 'Federal Tax Authority. This allows immediate transactions of tax payments to entities covered by the system, through bank accounts and from 77 bank branches, exchange offices and finance companies around the UAE.

In an effort to streamline the process for taxable persons, the FTA provided seven different payment methods to process any payable tax to the Authority through the E-Dirham platform in the e-Services portal on its website.

The FTA chief called on businesses registered for VAT to create e-Dirham accounts as soon as possible if they do not already have one, stressing that the e-Dirham is a safe method to pay for government services and VAT. Issued by the Ministry of Finance in collaboration with First Abu Dhabi Bank, the system covers seven channels including e-Dirham Cards, Point of Sales (POS) terminals, ATMs, CDMs, Self-Service Kiosks, Mobile Payment Services, Digital Wallet and Online Direct Transfer Services that enable customers to top-up their e-Dirham cards through their bank accounts.

Is VAT in addition to customs duty?

Yes, VAT is payable in addition to the custom duties. VAT is calculated on the value including custom duties.

What is zero rated for VAT?

Zero-rated means that the goods are still VAT -taxable but the rate of VAT you must charge your customers is 0%. You still have to record them in your VAT accounts and report them on your VAT Return. Examples include: books and newspapers.

What is the difference between exempt and zero rated VAT?

The main difference between zero rate and exempt supplies is that the suppliers of zero-rated goods and / or services can still reclaim all their input VAT, but the suppliers of exempt goods are either not registered for VAT or if they are, they cannot reclaim their input VAT.

Do suppliers of zero-rated and exempt supplies charge VAT?

Suppliers do not charge tax on a zero-rated or exempt supply.

Who are suppliers of zero-rated supplies?

Registrants who could be suppliers of zero-rated services and goods include exporters, real estate developers, airlines, schools, clinics, hospitals, etc.

What are zero-rated supplies? 

Supplies subject to the zero rate are listed in Article 45 of the Federal Decree-Law no. (8) of 2017 on Value Added Tax, such as:

• Exports of goods and services.

• International transport of goods and passengers.

• Certain means of transport, such as trains, trams, vessels, airplanes.

• First sale/rent of residential buildings.

• Aircraft or vessels designated for rescue and assistance by air or sea.

• Certain investment precious metals.

• Certain healthcare services and related goods and services.

• Certain educational services and related goods and services.

What is exempt?

Exempt supplies are not taxable supplies for VAT purposes. VAT is not charged on exempt supplies and the supplier cannot recover any VAT on expenses incurred in making those exempt supplies. Exemptions will also be strictly applied as they are an exception to the normal rule that VAT should be charged.

What are Exempt Supplies?

Exempt supplies are listed in Article 46 of the Federal Decree-Law no. (8) of 2017 on Value Added Tax, such as:

• Financial services including life insurance and reinsurance of life insurance as well as financial services that are not conducted for an explicit fee, discount, commission, rebate or similar type of consideration.

• Residential buildings, other than the residential buildings which are specifically zero-rated.

• Bare land.

• Local passenger transport.

Is Registration mandatory? if so, who is required to register?

As per Article 13 of Federal Decree-Law No. 8 of 2017, Mandatory Tax Registration is required as follows:

Every Person, who has a Place of Residence in the State or an Implementing State and is not already registered for Tax, shall register in the following situations:

• Where the total value of all supplies referred to in Article (19) exceeded the Mandatory Registration Threshold over the previous 12-month period.
• Where it is anticipated that the total value of all supplies referred to in Article (19) will exceed the Mandatory Registration Threshold in the next thirty (30) days.

Every Person, who does not have a Place of Residence in the State or an Implementing State and is not already registered for Tax, shall register for Tax if he makes supplies of Goods or Services, and where no other Person is obligated to pay the Due Tax on these supplies in the State.

The Executive Regulation of this Decree-Law shall specify the time limits that a Person has to inform the Authority about his liability to register for Tax and the effective date of Tax Registration.

If I make zero-rated supplies, do I need to register?

As a supplier, you must register for VAT if your taxable turnover (which includes zero-rated supplies) exceeds AED 375,000 in a 12-month period, or if you expect your taxable turnover (which includes zero-rated supplies) to exceed AED 375,000 in the next 30 days. However, you can ask for an exception from registration if, and only if, you do not make any other supplies which are taxable at the standard rate of 5%. If exception from registration is granted, then you will not submit regular tax returns and you will not be able to recover input tax incurred.

If I make exempt supplies, do I need to register?

If all the supplies you make are exempt, you do not have to register for VAT. In such a case, you cannot recover tax incurred on business purchases. Examples of such would be owners of property who rent their properties for residential purposes.

What are the VAT-related responsibilities of businesses?

All businesses in the UAE will need to record their financial transactions and ensure that their financial records are accurate and up to date. Businesses that meet the minimum annual turnover requirement (as evidenced by their financial records) will be required to register for VAT. Businesses that do not think that they should be VAT registered should maintain their financial records in any event, in case we need to establish whether they should be registered.

VAT-registered businesses generally:

• must charge VAT on taxable goods or services they supply;
• may reclaim any VAT they’ve paid on business-related goods or services;
• keep a range of business records which will allow the government to check that they have got things right

If you’re a VAT-registered business you must report the amount of VAT you’ve charged and the amount of VAT you’ve paid to the government on a regular basis. It will be a formal submission and it is likely that the reporting will be made online.

If you’ve charged more VAT than you’ve paid, you have to pay the difference to the government. If you’ve paid more VAT than you’ve charged, you can reclaim the difference.

When are Registered businesses required to file VAT returns?

Taxpayers must file VAT returns with the FTA on a regular basis (quarterly or for a shorter period, should the FTA decide so) within 28 days from the end of the tax period in accordance with the procedures specified in the VAT legislation. The Tax returns shall be filed online using eServices.

Do I need to file returns if I only supply zero-rated supplies?

If you do not qualify for an exception from registration, then you must file tax returns with the FTA. You will also be entitled to recover input tax incurred on business purchases subject to the normal conditions.

Under which conditions will businesses be allowed to claim VAT incurred on expenses? 

VAT on expenses that were incurred by a business can be deducted in the following circumstances:

• The business must be a taxable person (the end consumer cannot claim any input tax refund).
• VAT should have been charged correctly (i.e. unduly charged VAT is not recoverable).
• The business must hold documentation showing the VAT paid (e.g. valid tax invoice).
• The goods or services acquired are used or intended to be used for making taxable supplies.
• VAT input tax refund can be claimed only on the amount paid or intended to be paid before the expiration of 6 months after the agreed date for the payment of the supply.

Will businesses have to report on their business in each of the Emirates?

It is expected that businesses will need to complete additional information on their VAT returns to report revenues earned in each Emirate. Guidance will be provided to businesses with regards to this.

It is expected that the rules will be relatively straightforward for most businesses and will be based, for example, for B2C transactions, on the location of the transaction (e.g. in a retail environment, the location of the shop).

How will real estate be treated?

The VAT treatment of real estate will depend on whether it is a commercial or residential property.

Supplies (including sales or leases) of commercial properties will be taxable at the standard VAT rate (i.e 5%).

On the other hand, supplies of residential properties will generally be exempt from VAT. This will ensure that VAT would not constitute an irrecoverable cost to persons who buy their own properties. In order to ensure that real estate developers can recover VAT on construction of residential properties, the first supply of residential properties within 3 years from their completion will be zero-rated.

Will it be possible to issue cash receipts instead of VAT invoices?

A supplier registered or required to be registered for VAT must issue a valid VAT invoice for the supply. To be considered as a valid VAT invoice, the document must follow a specific format as mentioned in the legislation. In certain situations the supplier may be able to issue a simplified VAT invoice. The conditions for the VAT invoice and the simplified VAT invoice are mentioned legislation.

Will there be any VAT that businesses are not allowed to claim?

VAT will not be deductible in respect of expenses incurred for making non-taxable supplies. Furthermore, input tax cannot be deducted if it is incurred in respect of specific expenses such as entertainment expenses e.g. employee entertainment.

Will VAT be paid on imports?

VAT is due on the goods and services purchased from abroad.

In case the recipient in the State is a registered person with the Federal Tax Authority for VAT purposes, VAT would be due on that import using a reverse charge mechanism.

In case the recipient in the State is a non-registered person for VAT purposes, VAT would be paid on import of goods from a place outside the GCC. Such VAT will typically be required to be paid before the goods are released to the person.

 

Will there be VAT grouping?

 

Businesses that satisfy certain requirements covered under the Legislation (such as being resident in the UAE and being related/associated parties) will be able to register as a VAT group. For some businesses, VAT grouping will be a useful tool that would simplify accounting for VAT.

 

Will there be bad debt relief?

 

VAT registered businesses will be able to reduce their output tax liability by the amount of VAT that relates to bad debt which has been written off by the VAT registered business. The legislation will include the conditions and limitations concerning the use of this relief.

What are the cases that would lead to imposition of penalties?

Penalties will be imposed for non-compliance.

Examples of actions and omissions that may give raise to penalties include:

• A person failing to register when required to do so;
• A person failing to submit a tax return or make a payment within the required period;
• A person failing to keep the records required under the issued tax legislation;
• Tax evasion offences where a person performs a deliberate act or omission with the intention of violating the provisions of the issued tax legislation.

Which free zones are Designated Zones for VAT purposes?

Abu Dhabi: Free Trade Zone of Khalifa Port | Abu Dhabi Airport Free Zone | Khalifa Industrial Zone

Dubai: Jebel Ali Free Zone (North-South) | Dubai Cars and Automotive Zone (DUCAMZ) | Dubai Textile City | Free Zone Area in Al Quoz | Free Zone Area in Al Qusais | Dubai Aviation City | Dubai Airport Free Zone

Sharjah: Hamriyah Free Zone | Sharjah Airport International Free Zone

Ajman: Ajman Free Zone

Umm Al Quwain: Umm Al Quwain Free Trade Zone in Ahmed Bin Rashid Port | Umm Al Quwain Free Trade Zone on Shaikh Mohammad Bin Zayed Road

Ras Al Khaimah: RAK Free Trade Zone | RAK Maritime City Free Zone | RAK Airport Free Zone

Fujairah: Fujairah Free Zone | FOIZ (Fujairah Oil Industry Zone)

VAT for Tourists and Non-Residents

Will tourists also pay VAT?

Yes, tourists are a significant source of revenue for the UAE and will pay VAT at the point of sale. Nevertheless, we have set the VAT rate deliberately low so that VAT is a limited burden on all consumers.

Tax Refunds for Tourists Scheme

Will visiting businesses be able to reclaim VAT?

It is intended that we will allow foreign businesses to recover the VAT they incur when visiting the UAE. This is important as it encourages them to do business and also, because a lot of other countries have VAT systems, it protects the ability of UAE businesses to recover VAT when visiting other countries (where the rates are a lot higher). For more details, click on this LINK

Will non-residents be required to register for VAT?

Non-residents that make taxable supplies in the UAE will be required to register for VAT unless there is any other UAE resident person who is responsible for accounting for VAT on these supplies e.g. VAT under reverse charge mechanism.

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