Zero-rated deliveries are charged at a 0% VAT rate, but input tax deductions are allowed on purchases (as opposed to exempt supplies). In many cases, this can lead to a VAT refund for excess input tax. A company must register for VAT if its taxable supplies and imports exceed AED 375,000 per year. The government will introduce rules requiring businesses to be clear about how much VAT a person has to pay for each transaction. Based on this information, individuals can decide if they want to buy something. Here you can find more information about VAT and VAT registration with the Federal Tax Authority (FTA) of the United Arab Emirates. You can also find the VAT User Guide here Suppliers of non-pure hydrocarbons will have to pay VAT at the standard rate on their deliveries from 1 January 2023, as opposed to crude oil and natural gas supplies, which are zero-rate. Here you will find a selection of companies with VAT expertise from our members or members of the AHK Legal Network. The following categories of services are exempt from VAT: Zero-rated goods – Additional goods are listed in Article 45 (clauses 4, 5 and 6) as subject to zero VAT. These include the importation of means of transport, the importation of goods related to means of transport and the importation of rescue aircraft and vessels. A voluntary declaration can no longer be submitted by the taxpayer after 5 years after the end of the tax period concerned. VAT is charged at 0% for the following main categories of supplies: Declaration of the international exhibitor and conference participant VAT refund system for tourists comes into effect on November 18, 2018 EY LLP (USA), Middle East Tax Desk, New York You can access the VAT law of the United Arab Emirates in Arabic and English.
Provision of certain educational services and provision of relevant goods and services Deliveries of certain means of sea, air and land transport (e.g. aircraft and ships) As a result, the cost of living is likely to increase slightly, but this will vary depending on the lifestyle and spending habits of the individual. If a person spends primarily on things that are exempt from VAT, they are unlikely to see a significant increase. On 26 September 2022, the President of the United Arab Emirates, H.H. Sheikh Mohamed Bin Zayed Al Nahyan, issued Federal Legislative Decree No. 18 2022 amending certain provisions of Federal Law No. 8 2017 on Value Added Tax (VAT Act). According to Article 26 of the VAT Act, the time of delivery of regular payments is the previous moment: VAT-registered businesses must declare to the government the amount of VAT they have collected and the amount of VAT they have regularly paid. This will be an official submission and the report will be online.
Date of delivery in special cases – Article 26(1), which determines the time of delivery in particular cases, includes the date on which one year has elapsed since the date of delivery or service as one of the events relating to the time of delivery. Tourists to the UAE also pay VAT at the point of sale. Some investment-grade precious metals (e.g., gold, silver with 99% purity) The President of the United Arab Emirates issued Federal Decree No. (18) of 2022 amending certain provisions of Federal Decree No. 8 of 2022 on Value Added Tax (VAT). The amended provisions will come into force on January 1, 2023. Article 45 of the amended Legislative Decree now covers the “importation” of the following supplies, which may be invoiced at zero rate (under certain conditions): Similarly, a company may register voluntarily if its expenses exceed the threshold for voluntary registration. This last possibility of voluntary registration aims to allow start-ups without turnover to register for VAT. VAT is one of the most common types of excise taxes in the world. More than 150 countries have introduced VAT (or equivalent tax on goods and services), including the 29 members of the European Union (EU), Canada, New Zealand, Australia, Singapore and Malaysia. The obligation to issue tax invoices within 14 days, extending the invoicing requirements to periodic deliveries and new zero-rate deliveries, obliges taxable persons to carefully review the amendments to the VAT Amendment Act to ensure that they can adapt their systems and processes to ensure that they operate in accordance with the law. VAT also applies to tax-registered businesses operated on the mainland of the UAE and in free zones.
However, if the UAE cabinet defines a particular FTZ as a “designated zone”, it must be treated as being outside the UAE for tax purposes. The transportation of goods between designated areas is tax-free. Place of residence of a contracting authority – Article 33 defines the domicile of a principal as the domicile of the representative. Under the current VAT Act, it has been determined that the domicile of the agent should be the domicile of the principal. For more information on this call for tenders, please contact: If a taxable person bears input VAT on his business expenses, this input VAT may be refunded in full if it relates to a taxable supply made or to be supplied by the registered person. If, on the other hand, the expense relates to a non-taxable supply (e.g., exempt supplies), the registrant cannot recover the input tax. The United Arab Emirates applies a national reverse charge mechanism to certain supplies, where the taxable customer of the supply must declare VAT on the supply and not on the supplier. Webinar – VAT in Saudi Arabia and the United Arab Emirates: new bills Companies should review the amended legislative decree to determine the impact of the changes on their operations and readiness no later than January 1, 2023. In addition, the amendments to the limitation period extension encourage companies to review their historical tax and reporting positions (e.g. through health checks or mock audits) and to voluntarily disclose errors within the prescribed period before being informed of an audit or evaluation. The governments of the United Arab Emirates and the United Arab Emirates provide citizens and residents with many different public services, including hospitals, roads, public schools, parks, waste control, and police services.
These services are financed from State budgets. VAT provides our country with a new source of revenue and helps to continue to provide high-quality public services in the future. It is also helping the government achieve its vision of reducing reliance on oil and other hydrocarbon revenues. VAT was introduced in the UAE on 1 January 2018 at the standard rate of 5%. The Chairman of the Authority is His Highness Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, Minister of Finance, while His Excellency Khalid Al Bustani takes over as Director-General directly from his role as Under-Secretary for International Financial Affairs in the Ministry of Finance – a role he has held for more than 37 years. FTA will work with the Ministry of Finance to achieve economic diversification in the UAE, with a focus on profits from non-oil sources. It will strive to improve the UAE`s financial stability, providing advice and support to businesses and consumers to ensure they meet their obligations and fully understand the application of taxation in the country. Refund of input VAT paid by public authorities and charities – Article 57 now explicitly states that public authorities may recover input VAT paid for the supply of public authority activities. Similarly, non-profit organisations can recover input VAT paid for the supply of relevant charitable activities.
The FTA may, at its discretion, assign a different tax period to certain types of corporations. If you do not file a tax return within the allotted time, the offender will be prosecuted in accordance with the provisions of Cabinet Decision No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the United Arab Emirates (PDF, 1 MB). The UAE cabinet has defined some of the free trade zones as designated areas. These are treated as “outside the United Arab Emirates” for tax purposes. The movement of goods and services within and between these zones is exempt from taxes. The list of designated areas can be found here. After the expiry of this five-year period, no correction by voluntary disclosure is permitted. This is a change from the current situation where audited taxpayers could correct errors through voluntary disclosures.
However, certain supplies made by public authorities are excluded from the scope of VAT if they are not in competition with the private sector or if the entity is the sole supplier of such supplies. Certain public bodies are entitled to VAT refunds, in order to avoid budgetary problems and to create a level playing field between outsourced and outsourced activities. VAT adjustment – The VAT adjustment provided for in Article 61(1) now covers a scenario where the taxable person applies incorrect tax treatment. In this case, the taxable person must now issue a tax credit to adjust the VAT. For general enquiries regarding registration and/or tax application, you can contact the Federal Tax Administration via the application form or call 600 599 994 or 04-7775777. Businesses are expected to use mainly input VAT (recoverable in relation to the total amount) as the basis for allocation, although it is possible to use other methods if they are fair and agreed with the federal tax administration. Supplies made by government agencies are generally subject to VAT. This ensures that public authorities are not unfairly favoured over private companies. For more information, please contact AHK Dubai. In particular, it is advisable to review previous VAT returns and ensure that any corrections are made by means of a voluntary declaration within five years of the end of the relevant period.
