UAE 2018 VAT launch questions

Mon 11th Sep 2017

Ahead of the January 2018 launch of VAT in the United Arab Emirates, a number of major questions remain following the publication of the VAT Law degree at the end of August.

These include:

  • What is the impact on contracts signed prior to the launch of the tax (or its announcement) with no VAT exclusive pricing term?  The VAT Law says in article 80(2) that the price will be treated as inclusive of VAT.  It goes on to say in 80(3) that the forthcoming Executive Regulation will provide special provisions. It is not clear if these could override 80(2), which could lead to a 5% VAT loss for vendors.
  • Which financial services are VAT exemption? The Law states that financial services will benefit from an exemption from VAT – although this means input VAT suffered will be irrecoverable. However, some services may still be subject to the indirect tax and these will only be known with the Executive Regulation is published.
  • How the record barter trade, which is currently outside the scope of IFRS reporting but is generally liable to VAT.
  • The UAE liability to import VAT, which may be payable even by resident companies.
  • The lack of jurisdictional oversight on the treatment of intra-GCC trade, such the European Union’s European Court of Justice.
  • Will Free Zones be subject to VAT? The Law only refers to Designated Zones. This means the 40-odd Free Zones, with attractive tax and customs regimes, may be liable to VAT.
  • Invoice disclosure requirements are still unknown.
  • VAT return requirements are unknown.

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