Value Added Tax (VAT) in UAE

Value Added Tax (VAT) in UAE

1) VAT in UAE is to be implemented from 1st January 2018

2) The following items are going to be exempted from the ambit of VAT

a)       Healthcare

b)      Education

c)       Local Transport

d)      Residential Real Estate, including long term leases on residential properties

e)       100 other Essential items

3) Registration Criteria for VAT

a)    Taxable person having revenue of more than AED 375,000 in year shall be liable to register for VAT.

b)    If a taxable person having revenue or expenditure above AED 187,500 upto AED 375,000 shall have the voluntary option to register for VAT.

c)     VAT Registrations shall begin in Third Quarter of 2017.

4) There shall be no Input Tax Credit available on the Custom Duty paid by taxable person, (i.e. VAT Shall be payable over and above the Custom Duty paid by the importer of goods). Custom Duty shall form a part of the Cost of Goods on which the VAT shall be levied.

5) Taxable Person shall include persons located within UAE or outside UAE or GCC.

6) The rules of Place of Supply shall be applied for test of applicability of VAT

For Goods 
Location of the Goods where the supply takes place shall be considered for VAT. (i.e. if the goods are being exported outside UAE or GCC then VAT shall not be levied on such goods.)

For Services
Location of Service Provider shall be considered for applicability of VAT.

7) Import of Goods shall be charged VAT upon the purchase by the importer under reverse charge mechanism and can claim input tax credit if the goods are re-exported. (i.e. if the Goods are imported, the importer will have to pay the VAT on behalf of the supplier to the VAT authorities.)

Conditions for availing the input tax credit

a)     Recipient of Supply must be a taxable person (i.e. end consumer cannot claim VAT refund or credit)

b)    Tax should be charged correctly.

c)    The recipient of the supply must supply the documentary evidence (i.e. Purchase Invoice) of the VAT paid.

d)   The goods and services received are for making further taxable supplies (i.e. only business which make further sale shall be entitled to reclaim credit on VAT Paid)

e)    VAT input tax credit can be claimed only on the amount paid or intended to be paid in 6 months by the recipient.

9) It is unlikely that a VAT refund shall be made to Tourists purchasing goods in UAE.

10) Gold, Silver. Platinum etc (of 99% purity) as well as investments shall be subject to 0% VAT. (However Gold, SIlver or Platinum or Diamond in Jewellery form shall be subject to 5% VAT)

11) VAT applicability on freezones shall be clarified at a later date.

12) VAT on financial services and services provided by Banks shall be clarified at a later date.
13) VAT Returns shall be filed on a quarterly basis in UAE.

14) VAT returns shall be filed online and shall be filed in Arabic.

15) Record of VAT invoices shall be maintained for a period of 5 years.

Source:

Multiplier Event for awareness of VAT in UAE, held by MInistry of Finance on 21st March 2017.

Posted in: Taxation