United Arab Emirates plans to introduce VAT in 2018

The United Arab Emirates published its Value Added Tax decree law on 27th August 2017, paving the way for the introduction of the indirect tax on 1st January 2018.  The standard VAT rate will be 5%, with a nil rate for certain goods.

The detailed Executive Regulation, providing guidance on VAT compliance processes, will be provided at a later date.

UAE VAT law

The key elements of the new law cover:

  • 5% on taxable supplies and imports
  • VAT registration requirement threshold (Dh 375,000) and calculations, including voluntary registration option (if revenue above Dh 187,500)
  • Setting up VAT groups
  • Determining the date of supply for VAT purposes
  • Place of supply of goods and services rules
  • VAT nil-rating on the supply of goods and services within other GCC states which have implemented VAT
  • Exemptions on supply of service rules i.e. taxable where supplied
  • Role and impact of tax agents
  • Determining the value of taxable supplies, discounts and imports
  • Mixed supply rules
  • Supplies subject to zero rating:
    • Exports
    • International passenger transport
    • Import of precious metals
    • First supply (within 3 yrs of construction) residential properties
    • Crude oil and natural gas
    • Publically provided education
  • Exempt supplies
    • Financial services, including insurance
    • Supply of residential building (subject to zero rating clauses)
    • Land
    • Passenger transport
  • Reverse charge rules, including imports and movements from other GCC VAT implementing rules – more details to be provided in Executive Regulation
  • The right to recover input VAT, including import VAT incurred on goods subsequently moved to UAE (onward supply relief)
  • Credit notes and bad debts
  • VAT invoice requirements, FX treatment and requirements for date of issuance
  • Tax credits, carry forwards and when refunds may be made
  • VAT recovery for non-resident businesses and consumers
  • Penalties
  • Record keeping requirements, including:
    • Invoices, credit notes etc
    • Import and export records
    • Minimum period for retaining records will be contained with the Executive Regulation
  • Transitional rules for the launch of VAT