UAE draft VAT Executive Regulations
- 7 November 2017 | Richard Asquith
The United Arab Emirates has today issued draft Value Added Tax Executive Regulations for the introduction of the 5% indirect tax on 1 January 2018. The UAE published its VAT law, based on the VAT principles agreed in the Unified GCC Agreement for VAT published, in the Official Gazette on 21 April 2017.
The Regulations add details to key areas such as: registration obligations; zero and nil rating for certain supplies; liability to VAT of financial services; VAT return obligations; and VAT treatment of supplies between Gulf States.
- Businesses providing taxable supplies may apply for a voluntary VAT registration if their sales exceed AED 187,500 per annum
- Businesses providing exclusively zero-rated supplies may apply for an exemption from the obligation to VAT register
- The mandatory VAT registration threshold is AED 375,000 sales per annum
- A registration application must be submitted within 30 days of being obliged to register
- Tax Groups may be formed for multiple, related parties businesses to register under one number – one taxable party, the ‘representatives’, takes on the responsibility to prepare and submit the consolidated return
- Deregistrations are permitted on the cessation of the taxable supplies, or on the tax authorities decision
VAT becomes due on the earlier of:
- The invoice date
- The delivery of the goods or performance of the service
- The payment date
Place of supply rules
- For real estate, a supply is deemed to take place in UAE where the services is directly connected with UAE real estate
- Domestic transport services are deemed to be supplied from the place where the transport commences
- For goods transported to another GCC State which has implemented VAT (‘implementing state), the place of supply is the destination provided adequate proof of transportation can be obtained
The following goods and services shall be zero-rated for VAT purposes (note: all foods will be standard rated):
- Goods physically exported to other VAT registered businesses outside of the UAE or other implementing state provided commercial evidence of the transport is retained by the vendor
- if supplied to a customer that does not have a establishment in UAE and it outside of the country at the time of supply. The exception is real estate in UAE.
- Supply of international transportation services for passengers and goods
- The supply or import of precious metals
- New residential property supplies
- Education services if supplied by an accredited government body
- Healthcare services provided by a body linked to the state
- Approved pharmaceuticals
The following services will be exempted from VAT:
- Financial services related to dealing in money (e.g. FX, debt securities, loans, bank accounts, derivatives or similar, issuing shares and life insurance)
- Other financial services attracting a fee or commission are liable to VAT
- Residential buildings with a lease longer than 6 months
- Bare land
- Local passenger transport
VAT Free Designated Zones
Special geographical areas within the UAE, but outside of the UAE VAT regime. They are created upon a decision but the Cabinet. They have security measures and customs controls to monitor the movement of goods. The transfer of goods or provision of services within the Zones will not be subject to VAT - similar to the bonded warehouse concept. Import VAT becomes payable when any goods leave the Zone.
The following VAT is not recoverable against VAT on taxable supplies:
- Entertainment for non-employees
- Personal use vehicles and other goods for employees
- Employee-use goods not directly associated with the provision of taxable supplies
VAT invoices must include the following details:
- Name and address of supplier
- VAT Number
- Unique VAT invoice number
- Date of invoice, and date of supply if different
- Description of the goods/services provided
- Unit prices, quantity or volumes of the supplies
- Any discount offered
- VAT calculation and gross amount due in AED (any rate of exchange used)
Simplified invoices may be issued to non-tax payers or if the consideration is below AED 10,000. Electronic invoices may be issued if the vendor has secure storage facilities, and the authenticity of the invoice can be guaranteed
- The standard VAT reporting period is 3 months
- VAT returns must be received by the 28th of the month following the reporting period.
The VAT return includes:
- Name, address and tax registration number of the tax payers
- The tax period
- Submission date
- Values of taxable supplies made, and output VAT charged
- Values of zero rated supplies made
- Values of exempt supplies made
- Value of taxable supplies consumed, and input VAT claimed
- Total value of VAT due
- Goods or services provided before the implementation of VAT will be treated as having been provided on the implementation date
- A payment for the services prior to the implementation date will be disregarded for determining the time of supply after the implementation date
- The value prior to VAT implementation of any goods or services will be treated as exclusive of VAT
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