Latest update by the Ministry of Finance on VAT implementation in UAE
Ministry of Finance has initiated a series of VAT workshops and key points from the first session conducted are as follows:
The effective date is 1st January 2018 as:-
- Anticipated. 5% is the standard rate
- Confirmed by the ministry. Established
- “Federal Tax Authority” and two tax laws
- Tax Procedure Law (for Governance)
- VAT Law (For Application)
- A Blanket treaty for GCC Countries Known as “GCC VAT Treaty/Agreement”
- Turnover Registration threshold
- Mandatory AED 375,000/- and above.
- Voluntary AED 187,500/- to AED 375,000/-
- Not allowed for Less than AED 187,500/-
- The VAT registration starts from Q3 of 2017.
- The VAT law is expected be released in 2 months’ time. The detailed regulations will be issued later in the year.
- The filing of returns and tax payment will be through the online portal. Most likely the return submission will be on a quarterly basis. The timeline to submit will be a month after the expiry of the period.
- VAT return format will include a summary of transactions during the period with the breakup of supplies in each of the 7 Emirates in UAE.
- VAT Invoices
- Rounded to the nearest fills
- Issued within 14 days
- Accounting records to be kept for 5 years
- Mention “TAX Invoice”
- Time of supply
- TRN of supplier
- Accounting of Invoices by Emirate wise in the system
- Applicability of VAT in free zones are yet to be clarified.
- Exemptions/Zero/Standard Rate supplier: (Subject to changes/guidelines)
- Health – 0%
- Education – 0%
- Financial Services – Exempted
- Export of goods and services-0%
- Real Estate
- New residential units – 0%
- Used residential units – Exempted
- Commercial Units – Standard rate
- Life insurance – Exempted
- Long term rental – Exempted
- Short term rental (Hotel Stay) – 0%
- Land – Exempted
- Government bodies
- Charity organizations
- International Event Hosting Bodies
- Fisherman and farmers
- VAT refund for tourist will most likely be not there considering the low rate of 5%.
- The system of ‘VAT Groups’ will be available in UAE where the companies under common control can file a single VAT return and make a single tax payment. This will be helpful in case of companies with several subsidiaries.
- Reconsiderations ( If errors are happened on filing)
- Appeals (3 Stage system)
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