The United Arab Emirates on Tuesday issued the executive regulations for value-added tax (VAT), which are expected to be implemented across the emirates from January 1 next year.
The regulations include details on the registration procedures, deregistration, thresholds, due dates, exemptions and the treatment of exports, tourists and business visitors, with regards to paying VAT.
The executive regulations kept the mandatory registration threshold at 375,000 dirhams ($102,096), and the voluntary threshold at 187,500 dirhams ($50,912). The regulations also allowed two or more 'taxable persons' to register as a tax group.
A tax registrant can apply to deregister from paying VAT to the Federal Tax Authority (FTA) only under two conditions, it said. The first is if the registered person or entity stops producing taxable supplies and does not expect to produce any more over a period of one year and secondly, if the value of the taxed supplies or taxable expenses incurred over the previous year was less than the voluntary registration threshold.
It said the prices of all taxable supplies should be inclusive of VAT. Tax returns should be filed to the FTA every quarter and no later than the 28th day in the month following the end of the tax period
Zero-rated and exempted supplies
The regulations kept unchanged the information published in the UAE’s VAT law - issued in August - with regards to the goods and services that will be exempted from paying VAT or those subject to a zero -rated VAT, which allows suppliers to reclaim VAT paid on business costs.
It confirmed that exports to destinations outside of the GCC-implementing states and the international transportation of goods and services will be subject to VAT at a zero rate.
Precious metals used for investment purposes will also be subject to VAT at a zero rate.
The UAE is a leading hub for diamond and gold trade. Officials from the two industries had urged the state’s authorities to apply a zero rate of VAT on all gold and diamond items.
According to the executive regulations, recently-built residential properties will also be subject to VAT at a zero rate for the first three years after a property’s completion, to allow developers to recover VAT on construction costs.
Health services, with the exception of treatments for cosmetic purposes, will be zero-rated. Only medicines and medical equipment that will be specified in a separate decree to be issued at a later date by the cabinet will be subject to a zero rate of VAT.
The exempted goods and services included empty lands, local public transport, and residential properties provided that they will be rented for a period of over six months or to a tenant that holds an Emirates ID card. Most financial services that are not undertaken for a specific fee will also be exempted, including the purchase or sale of equities, bonds, derivatives, currency exchanges, payments, loans, interest payments and operations related to current, deposit or saving accounts.
Education
Most educational goods and services including reading materials related to the curriculum will be subject to a zero rate of VAT. However, school uniforms, electronic devices, food and beverages and non-educational school trips will be exempted from the zero rate VAT privilege.
The regulations also stated that all educational establishments, with the exception of higher education institutes that are not totally or partially owned by the government, will be subject to VAT at the zero rate. However, educational establishments and the curricula offered have to be recognised by governmenl entities responsible for regulating the sector to be eligible for the zero rating.
Exports
According to the executive regulations, the UAE’s direct and indirect exports of goods and services to anywhere outside the GCC-implementing states will be subject to VAT at a zero rate.
The regulations stated that companies working in the direct and/ or indirect export businesses should provide official documents issued by a local customs department such as airway bill, bill of lading, consignment note or certificate of shipment in order to be approved for a zero rate of VAT.
The regulations also set guidelines for exported services. It said zero-rated exported services must not be directly related to any real estate situated in the UAE or to any movable personal assets located in the country.
Tourists and business visitors
The regulations state that the FTA will implement a VAT refund scheme for business visitors. However, it only said that the cabinet “may issue” a decision with regard to introducing VAT refunds to tourists, which would specify the date at which such a refund scheme will come into effect, as well as spelling out mechanisms for refunds, plus limitations on claims.
All six GCC countries agreed last year to introduce VAT at a standard rate of five percent to generate alternative non-oil sources of income after the global fall of oil prices. Oil has for decades been the traditional source of revenue for most GCC countries. So far, only Saudi Arabia and the UAE have said they will implement VAT from January 1, 2018.
The publication of the executive regulations on the Ministry of Finance’s website on Tuesday morning represents the last major piece of legislation ahead of the implementation of VAT.
The regulations said that VAT will be implemented across the emirates from 7am on January 1, 2018.
(Reporting by Yasmine Saleh; Editing by Michael Fahy)
(yasmine.saleh@thomsonreuters.com)
© ZAWYA 2017
The regulations include details on the registration procedures, deregistration, thresholds, due dates, exemptions and the treatment of exports, tourists and business visitors, with regards to paying VAT.
The executive regulations kept the mandatory registration threshold at 375,000 dirhams ($102,096), and the voluntary threshold at 187,500 dirhams ($50,912). The regulations also allowed two or more 'taxable persons' to register as a tax group.
A tax registrant can apply to deregister from paying VAT to the Federal Tax Authority (FTA) only under two conditions, it said. The first is if the registered person or entity stops producing taxable supplies and does not expect to produce any more over a period of one year and secondly, if the value of the taxed supplies or taxable expenses incurred over the previous year was less than the voluntary registration threshold.
It said the prices of all taxable supplies should be inclusive of VAT. Tax returns should be filed to the FTA every quarter and no later than the 28th day in the month following the end of the tax period
Zero-rated and exempted supplies
The regulations kept unchanged the information published in the UAE’s VAT law - issued in August - with regards to the goods and services that will be exempted from paying VAT or those subject to a zero -rated VAT, which allows suppliers to reclaim VAT paid on business costs.
It confirmed that exports to destinations outside of the GCC-implementing states and the international transportation of goods and services will be subject to VAT at a zero rate.
Precious metals used for investment purposes will also be subject to VAT at a zero rate.
The UAE is a leading hub for diamond and gold trade. Officials from the two industries had urged the state’s authorities to apply a zero rate of VAT on all gold and diamond items.
According to the executive regulations, recently-built residential properties will also be subject to VAT at a zero rate for the first three years after a property’s completion, to allow developers to recover VAT on construction costs.
Health services, with the exception of treatments for cosmetic purposes, will be zero-rated. Only medicines and medical equipment that will be specified in a separate decree to be issued at a later date by the cabinet will be subject to a zero rate of VAT.
The exempted goods and services included empty lands, local public transport, and residential properties provided that they will be rented for a period of over six months or to a tenant that holds an Emirates ID card. Most financial services that are not undertaken for a specific fee will also be exempted, including the purchase or sale of equities, bonds, derivatives, currency exchanges, payments, loans, interest payments and operations related to current, deposit or saving accounts.
Education
Most educational goods and services including reading materials related to the curriculum will be subject to a zero rate of VAT. However, school uniforms, electronic devices, food and beverages and non-educational school trips will be exempted from the zero rate VAT privilege.
The regulations also stated that all educational establishments, with the exception of higher education institutes that are not totally or partially owned by the government, will be subject to VAT at the zero rate. However, educational establishments and the curricula offered have to be recognised by governmenl entities responsible for regulating the sector to be eligible for the zero rating.
Exports
According to the executive regulations, the UAE’s direct and indirect exports of goods and services to anywhere outside the GCC-implementing states will be subject to VAT at a zero rate.
The regulations stated that companies working in the direct and/ or indirect export businesses should provide official documents issued by a local customs department such as airway bill, bill of lading, consignment note or certificate of shipment in order to be approved for a zero rate of VAT.
The regulations also set guidelines for exported services. It said zero-rated exported services must not be directly related to any real estate situated in the UAE or to any movable personal assets located in the country.
Tourists and business visitors
The regulations state that the FTA will implement a VAT refund scheme for business visitors. However, it only said that the cabinet “may issue” a decision with regard to introducing VAT refunds to tourists, which would specify the date at which such a refund scheme will come into effect, as well as spelling out mechanisms for refunds, plus limitations on claims.
All six GCC countries agreed last year to introduce VAT at a standard rate of five percent to generate alternative non-oil sources of income after the global fall of oil prices. Oil has for decades been the traditional source of revenue for most GCC countries. So far, only Saudi Arabia and the UAE have said they will implement VAT from January 1, 2018.
The publication of the executive regulations on the Ministry of Finance’s website on Tuesday morning represents the last major piece of legislation ahead of the implementation of VAT.
The regulations said that VAT will be implemented across the emirates from 7am on January 1, 2018.
(Reporting by Yasmine Saleh; Editing by Michael Fahy)
(yasmine.saleh@thomsonreuters.com)
© ZAWYA 2017
