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Value Added Tax training @HLB Hamt

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
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