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
  1. Tax Procedure Law (for Governance)
  2. VAT Law (For Application)
• A Blanket treaty for GCC Countries Known as “GCC VAT Treaty/Agreement”
• Turnover Registration threshold
  1. Mandatory AED 375,000/- and above.
  2. Voluntary AED 187,500/- to AED 375,000/-
  3. 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
  1. Rounded to the nearest fills
  2. Issued within 14 days
  3. Accounting records to be kept for 5 years
  4. Mention “TAX Invoice”
  5. Time of supply
  6. TRN of supplier
  7. 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)
  1. Health – 0%
  2. Education – 0%
  3. Financial Services – Exempted
  4. Export of goods and services-0%
  5. Real Estate
     1. New residential units – 0%
     2. Used residential units – Exempted
     3. Commercial Units – Standard rate
  6. Life insurance – Exempted
  7. Long term rental – Exempted
  8. Short term rental (Hotel Stay) – 0%
  9. Land – Exempted
• Exceptions
  1. Government bodies
  2. Charity organizations
  3. International Event Hosting Bodies
  4. Self-constructions
  5. 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.
• Escalations
  1. Reconsiderations ( If errors are happened on filing)
  2. Appeals (3 Stage system)
  3. Litigations