Update on VAT in the UAE

Update on VAT in the UAE

VAT News Update

The countdown for the implementation of VAT has started, UAE is now ready to welcome 2018 and implement the VAT starting on 1st January.

All UAE residents and visitors will be liable to 5% VAT.

In August 2017, the executive regulations that details the threshold for mandatory and voluntary registration was released and the registration of UAE companies to VAT commenced In October 2018.

Mandatory registration: AED 375,000 and above

Voluntary registration: AED 187,000 and above

The executive regulations has also explained how a business may remove itself from paying taxes and de-register from VAT. The registrant must apply for deregistration if it meets any of the cases set out in Federal Decree-Law. One of the main reasons for de-registration is not meeting the threshold of Dh375, 000 in annual revenue. Mandatory deregistration is also possible as per the FTA as they may cancel a company’s TRN if it has stopped generating taxable supplies and no future plans to generate taxable supplies.

The FTA will cancel the tax registration number of the company once de-registration is approved and all outstanding taxes, returns and administrative penalties have been paid. De-registration will take effect from the last day of the tax period.  Tax groups may also be deregistered, if they fail to meet the requirements set out for tax groups and if the companies are no longer financially associated, or if tax group would lead to tax evasion.

Early this month, FTA has also announced the list that summarizes all supplies and services, which will be considered as zero-rated and VAT exempted and subject to 5% VAT.

VAT treatment on select industries:

Private and public-school education (excluding higher education) and related goods and services provided by education institution

0%

Higher education provided by institution owned by government or 50% funded by government, and related goods and services 0%
Education provided by private higher educational institutions, and related goods and services 5%
Nursery education and pre-school education 0%
 School uniforms 5%
 Stationery 5%
 Electronic equipment (tablets, laptops, etc.) 5%
 Renting of school grounds for events 5%
 After school activities for extra fee 5%
 After school activities supplied by teachers and not for extra charge 0%
School trips where purpose is educational and within curriculum 0%
School trips for recreation or not within curriculum 5%

Healthcare:

Preventive health care services including vaccinations 0%
Healthcare services aimed at treatment of humans including medical services and dental services 0%
Other healthcare services that are not for treatment and are not preventive (e.g. elective, cosmetic, etc) 5%
 Medicines and medical equipment as listed in Cabinet Decision 0%
 Medicines and medical equipment not listed in Cabinet Decision 5%
 Other medical supplies 5%

Oil and Gas:

 Crude oil and natural gas 0%
 Other oil and gas products including petrol at the pump 5%

Transportation:

Domestic passenger transportation (including flights within UAE) Exempt
International transportation of passengers and goods (including intra-GCC) 0%
Supply of a means of transport (air, sea and land) for the commercial transportation of goods and passengers (over 10 people) 0%
 Supply of goods and services relating to these means of transport and to the transportation of goods and passengers 0%

Real Estate:

Sale and rent of commercial buildings (not residential buildings) 5%
First sale/rent of residential building after completion of construction or conversion 0%
First sale of charitable building 0%
Sale/rent of residential buildings subsequent to first supply Exempt
Hotels, motels and serviced accommodation 5%
Bare land Exempt
Land (not bare land) 5%
UAE citizen building own home 5% (recoverable)

Financial Services:

 Margin based products (products not having an explicit fee, commission, rebate, discount or similar)                  Exempt
Products with an explicit fee, commission, rebate, discount or similar 5%
Interest on forms of lending (including loans, credit cards, finance leasing) Exempt
Issue, allotment or transfer of an equity or debt security Exempt

Insurance and Re-insurance:

Insurance and reinsurance (including health, motor, property, etc) 5%
Life insurance and life reinsurance Exempt

Food and Beverages: 5% VAT rate

Telecommunications and electronic services: Wired and wireless telecommunications and electronic services: 5% VAT rate

Telecommunications and electronic services:

 Sovereign activities which are not in competition with the private sector undertaken by designated government bodies Considered outside VAT system
 Activities that are not sovereign or are in competition with the private sector VAT rate dependent on good/service ignoring provider

Non-Profit Organizations:

Activities of foreign governments, international organizations, diplomatic bodies and missions acting as such (if not in business in the UAE) Considered outside VAT system
Charitable activities undertaken by societies and associations of public welfare which are listed by Cabinet Decision Considered outside VAT system
Activities of other not for profit organizations (not listed in Cabinet Decision) which are not business activities Considered outside VAT system
Business activities undertaken by the above organizations VAT rate dependent on good/service ignoring provider

Free zones:

Supplies of goods between businesses in designated zones Considered outside VAT System
Supplies of services between businesses in designated zones VAT rate dependent on service
ignoring location
Supplies of goods and services in non-designated zones  VAT rate dependent on good/service
ignoring location
Supplies of goods and services from mainland to designated zones or designated zones to mainland VAT rate dependent on good/service
ignoring location

Other:

Export of goods and services to outside the GCC implementing states 0%
Activities undertaken by employees in the course of their employment, including salaries Considered outside VAT system
Supplies between members of a single tax group Considered outside VAT system
Any supplies of services or goods not mentioned above (includes any items sold in the UAE or service provided) 5%
Second hand goods (e.g. used cars sold by retailers), antiques and collectors’ items 5% of the profit margin

  source: Khaleej Times and MOF website

Stender & Partners Management Consulting as a VAT Registration Specialist can process the VAT registration for your business.

For further information about VAT, please email us at dubai@stender-partners.com or call us on

+971 4 372 1271.

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2017-12-24T14:40:59+00:00