Federal Tax Authority Announces Supplies Subject to VAT, Identifies Exempt Supplies

Abu Dhabi, December 5, 2017– The Federal Tax Authority (FTA) has announced the supplies that will be subject to Value Added Tax (VAT) as of January 1, 2018, revealing selected sectors that will be assigned zero-rated tax, such as education, healthcare, oil and gas, transportation and real estate.

Selected supplies in sectors such as transportation, real estate, financial services will be completely exempt from VAT, whereas certain government activities will be outside the scope of the tax system (and, therefore, not subject to tax). These include activities that are solely carried out by the government with no competition with the private sector, activities carried out by non-profit organisations.

The UAE Cabinet is expected to issue a Decision to identify the government bodies and non-profit organisations that are not subject to VAT.

The below table outlines all supplies that will be subject to the 5% Value Added Tax, as well as zero-rated supplies and exempt supplies:

VAT Treatment on Selected Industries

Education VAT rate VAT rate
Private and public school education (excluding higher education) and related goods and services provided by education institution 0%
Higher education provided by institution owned by government or 50% funded by government, and related goods and services 0%
Education provided by private higher educational institutions, and related goods and services 5%
Nursery education and pre-school education 0%
School uniforms 5%
Stationery 5%
Electronic equipment (tablets, laptops, etc.) 5%
Renting of school grounds for events 5%
After school activities for extra fee 5%
After school activities supplied by teachers and not for extra charge 0%
School trips where purpose is educational and within curriculum 0%
School trips for recreation or not within curriculum 5%
Healthcare VAT rate
Preventive healthcare services including vaccinations 0%
Healthcare services aimed at treatment of humans including medical services and dental services 0%
Other healthcare services that are not for treatment and are not preventive (e.g. elective, cosmetic, etc) 5%
Medicines and medical equipment as listed in Cabinet Decision 0%
Medicines and medical equipment not listed in Cabinet Decision 5%
Other medical supplies 5%
Oil and Gas VAT rate
Crude oil and natural gas 0%
Other oil and gas products including petrol at the pump 5%
Transportation VAT rate
Domestic passenger transportation (including flights within UAE) Exempt
International transportation of passengers and goods (including intra-GCC) 0%
Supply of a means of transport (air, sea and land) for the commercial transportation of goods and passengers (over 10 people) 0%
Supply of goods and services relating to these means of transport and to the transportation of goods and passengers 0%
Real estate VAT rate
Sale and rent of commercial buildings (not residential buildings) 5%
First sale/rent of residential building after completion of construction or conversion 0%
First sale of charitable building 0%
Sale/rent of residential buildings subsequent to first supply Exempt
Hotels, motels and serviced accommodation 5%
Bare land Exempt
Land (not bare land) 5%
UAE citizen building own home 5% (recoverable)
Financial services VAT rate
Margin based products (products not having an explicit fee, commission, rebate, discount or similar) Exempt
Products with an explicit fee, commission, rebate, discount or similar 5%
Interest on forms of lending (including loans, credit cards, finance leasing) Exempt
Issue, allotment or transfer of an equity or debt security Exempt
Investment gold, silver and platinum, jewellery VAT rate
≥99% pure and tradable in global markets 0%
<99% pure 5%
Jewellery 5%
Insurance and Reinsurance VAT rate
Insurance and reinsurance (including health, motor, property, etc) 5%
Life insurance and life reinsurance Exempt
Food & Beverages VAT rate
Food and beverages 5%
Telecommunications and electronic services VAT rate
Wired and wireless telecommunications and electronic services 5%
Government activities VAT rate
Sovereign activities which are not in competition with the private sector undertaken by designated government bodies Considered outside VAT system
Activities that are not sovereign or are in competition with the private sector VAT rate dependent on good/service ignoring provider
Not for Profit Organizations VAT rate
Activities of foreign governments, international organisations, diplomatic bodies and missions acting as such (if not in business in the UAE) Considered outside VAT system
Charitable activities undertaken by societies and associations of public welfare which are listed by Cabinet Decision Considered outside VAT system
Activities of other not for profit organizations (not listed in Cabinet Decision) which are not business activities Considered outside VAT system
Business activities undertaken by the above organizations VAT rate dependent on good/service ignoring provider
Free zones VAT rate
Supplies of goods between businesses in designated zones Considered outside VAT system
Supplies of services between businesses in designated zones VAT rate dependent on service ignoring location
Supplies of goods and services in non-designated zones VAT rate dependent on good/service ignoring location
Supplies of goods and services from mainland to designated zones or designated zones to mainland VAT rate dependent on good/service ignoring location
Other VAT rate
Export of goods and services to outside the GCC implementing states 0%
Activities undertaken by employees in the course of their employment, including salaries Considered outside VAT system
Supplies between members of a single tax group Considered outside VAT system
Any supplies of services or goods not mentioned above (includes any items sold in the UAE or service provided) 5%
Second hand goods (e.g. used cars sold by retailers), antiques and collectors’ items 5% of the profit margin

Federal Tax Authority Clarifies Registration Procedure for VAT

Abu Dhabi, November 29, 2017– The Federal Tax Authority (FTA) has called on natural and legal persons exercising business in the UAE to expedite their registration process for Value Added Tax (VAT) to avoid the risk of missing the January 1, 2018, deadline.

This applies to businesses whose taxable supplies and imports of goods and services exceed AED375,000 over the previous 12 months. Taxable supplies are identified as all supplies of goods and services made by a Person that are not exempt.

Registration is available on a 24/7 basis through the Federal Tax Authority’s website. Businesses are required to visit the website www.tax.gov.ae, select the e-Services portal, sign up and create an account. Once the email has been verified, they can log in and register.

The FTA has urged businesses to provide accurate information and make sure they enter it properly into the application form. To complete the registration process, scanned documents must be attached, including the business or trade licence, passport/Emirates ID (for UAE residents) of the manager or owner of the business, and the authorised signatory (if the signatory is not the manager him/herself), as well as proof of authorisation for the manager or signatory (e.g. articles of association, power of attorney attested by notary, etc.).

Issuing a Tax Registration Number (TRN) may require up to 20 working days or less. Therefore, and in order to ensure that the application is processed – and the TRN issued before January 1, 2018 – the FTA urges businesses to complete their registration to avoid the administrative penalty of AED20,000, as well as additional penalties related to late payment of tax , according to the Cabinet Decision No. (40) of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE

Two or more legal persons conducting business in partnership may apply for Tax Registration as a Tax Group if: each of them has a place of establishment or fixed establishment in the UAE; if the persons are related parties, i.e. they are not separated in economic, financial or regulatory aspects; or if one or more of the Persons in the group control the others.

Persons intending to register as a Tax Group need to nominate a representative member who shall apply to register them. The representative member applies first by completing a VAT registration application stating that the intention is to be part of a Tax Group.

After the representative member is issued with a Tax Identification Number (TIN), the additional members of the group may be added through Tax Group Registration. Members can be added whether they have registered separately or not. After the process is complete and the application to add members has been submitted, a TRN will be issued for the whole Group. More information can be found in the Legislation and Guides section, on the FTA website.

Ministry of Finance announces VP’s signing of VAT Executive Regulation

Abu Dhabi, November 27, 2017– The Ministry of Finance, MoF, Monday announced that the Vice President, Prime Minister and Ruler of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum, signed the Executive Regulation for the Federal Decree-Law No. (8) of 2017 on Value Added Tax, VAT. The Regulation defines VAT as the 5% tax imposed on the import and supply of goods and services at each stage of production and distribution, including what is a deemed supply, with the exception of specific supplies subject to the zero rate and what is exempted as specified in the Decree-Law.

The tax will go into force effective January 2018, and all business have to take all necessary measures to avoid the risk of non-registration by 1st January, 2018, which would entail fines as stipulated in Cabinet Decision No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.

Commenting on the milestone, Younis Haji Al Khoori, Undersecretary of MoF, said, “Today’s signing of the Executive Regulation by the Vice President, Prime Minister and Ruler of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum, marks a new milestone in the application of an efficient taxation system in line with best international standards with the ultimate objective of improving performance of primary sectors and enhancing social welfare.”

The first title of the Regulation includes the definitions of terms used, while the second title deals with supply, which includes articles regulating the supply of goods and services, as well as supplies that consist of more than one component and the exceptions related to deemed supplies.

The third title of the document tackles the subject of registration, such as mandatory and voluntary registration, related parties, conditions to be met to register tax groups and appointing a representative member, deregistration, exception from registration, registration on law coming into effect and obligations to be met before deregistration. Meanwhile, the fourth title looks into rules relating to supply, including articles on the date of supply, place of supply for goods, place of supply of services for real estate, transport services, telecommunications and electronic services, intra-GCC supplies, the market value, prices to be inclusive of tax, discounts, subsidies and vouchers.

Furthermore, title five discusses profit margins and explains how to calculate VAT based on profit margins, while title six addresses zero-rated goods and services, including telecommunications, international transportation of passengers or goods, investment grade precious metals, new and converted residential buildings, as well as healthcare, education and buildings earmarked for charity.

Title seven clarifies provisions relating to products and services exempt from value added tax, namely: the supply of certain financial services as specified in the Executive Regulation, the supply of residential (non-zero-rated) buildings either by sale or lease, the supply of bare land, and the supply of local passenger transport.

The eighth title of the Regulation then addresses accounting for tax on specific supplies and includes articles relating to supplies with more than one component, general provisions in relation to import of goods and applying the reverse charge on goods and services, as well as moving goods to implementing states and imports by non-registered persons.

In title nine, the Executive Regulation address Designated Zones in article (51), while title 10 provides further detail on calculating due tax, recovery of input tax relating to exempt supplies, input tax not recoverable, and special cases for input tax. The following titles 11 includes article (55) on apportioning input tax and article (56) on adjusting input tax after recovery, whereas title 12 addresses the capital asset scheme in article (57) and adjustments within the capital asset scheme in article (58).

Title 13 of the Regulation includes article (59) on tax invoices, article (60) on tax credit notes and article (61) on fractions of the fils. Then in title 14, the Executive Regulation discusses Tax Periods and Tax Returns, before title 15 goes into recovery of excess tax in article (65). Adding to that, title 16 tackles recovery in other cases and includes article (66) on new housing for nationals, article (67) on business visitors, article (68) on tourists and article (69) on foreign governments.

The 17th title includes article (70) on Transitional Rules, article (71) on record-keeping requirements and article (72) on keeping records of supplies made. Meanwhile, the 18th and final titles discusses closing provisions.

Federal Tax Authority Opens Registration for Tax Agents and Tax Accounting Software Vendors

Abu Dhabi, November 25, 2017– The Federal Tax Authority (FTA) has officially opened registration for individuals interested in working as Tax Agents and for Tax Accounting Software Vendors, in addition to providing the necessary technical support to help these vendors as they assist UAE-based businesses comply with tax regulations.

The Federal Tax Authority has defined standards and specifications that must be met by the Tax Agent, who is defined by Federal Law No. (7) of 2017 on Tax Procedures as (Any Person registered with the Authority in the Register, who is appointed on behalf of another Person to represent him before the Authority and assist him in the fulfilment of his Tax obligations and the exercise of his associated tax rights.).”

This step comes as part of the Authority’s commitment to providing the necessary technical support and implement a tax system that adheres to international best practices. It allows Taxable Persons to fully meet their tax obligations, while saving them time and effort, and reducing the margin of error in calculating Tax.

The Federal Tax Authority requested all vendors wishing to register with FTA for the Tax Accounting Software Accreditation to review the requirements and guidelines related to the accreditation on the FTA’s official website: www.tax.gov.ae and submit the required documents, which include: Software vendor’s name; name of Tax Accounting Software; version number of Tax Accounting Software to be registered; date and validity of the listing; other vendor information (like trade license number, address, etc.); contact details; and the required application form, which can be downloaded from www.tax.gov.ae duly completed.

The Tax Agent Register

Created to meet the requirements of compliance with value added tax, the Tax Agent’s post is a new profession to the local market and is expected to attract high demand from professionals working in accounting and legal services.

Who Can Be a Tax Agent?

The Tax Agent must be of good conduct and behaviour, never having been convicted of a crime or misdemeanour prejudicial to honour or honesty, irrespective of whether or not he may have been rehabilitated. He/she must hold a certified Bachelor or Master degree in tax, accounting or law from a recognised educational institution. If the applicant holds a Bachelor degree in any other field, he/she may submit a tax certification from an internationally recognised tax institute.

Applicants must also provide a certification of relevant and recent experience of at least three years in either tax, qualified accounting or law, and a certificate proving their verbal and written communication skills in both Arabic and English. Furthermore, they must pass the Authority’s Tax Agent exam, provide a medical fitness certificate, as well as a copy of the liability insurance contract against professional errors. Candidates are to carry out their activity through a legal person licensed by the competent authorities.

“At the Federal Tax Authority, we seek to set clear criteria for Tax Agents to help them carry out their mission of building strong relationships between the Authority and taxable persons in the country. Tax Agents will be the mediators between the FTA and Taxable Persons in the UAE; they will be directly responsible for all of their obligations and rights,” said FTA Director-General His Excellency Khalid Al Bustani.

“As a new profession in the local UAE labour market, the FTA’s conditions, qualifications and accreditation requirements for Tax Agents will set a benchmark for other businesses to follow while hiring for tax-related positions. These criteria will also work as a catalyst for the development of new job skills to meet the new employment opportunities that will result from implementing the tax system in the UAE,” H.E. Al Bustani added.

The Federal Tax Authority shall establish a special register for Tax Agents to file all matters pertaining to their job. No individual is permitted to practice the profession of Tax Agent without completing the registration and receiving accreditation from the FTA, as well as a license from the competent authorities .

Any individual may appoint a Tax Agent to act on their behalf before the Federal Tax Authority with regards to their tax matters. The Authority will not deal with any Tax Agent representing a Person, should said Person inform the FTA of the termination or dismissal of the Tax Agent. If and when requested by the FTA, the Tax Agent is required to provide the Authority with all information, documents, records and data required for any Person he/she represents. The Authority shall then have the right to inspect these records for taxation purposes with said Agent.

Conditions to Register as a Tax Agent

Individuals wishing to register as a Tax Agents must apply for registration with the Federal Tax Authority by filling an official application form. The Authority may request additional information from the applicant, request a personal interview or ask about the references mentioned in their application. Moreover, the FTA shall examine all applications submitted and make a decision within 15 working days from the date of submission. If the Authority requests additional information, the application will be decided on within 15 working days from the date such information is received.

Once the FTA approves an application, it will be registered within five working days from the date of approval – or any other date determined by the Authority – after all due fees are paid. The Authority may reject the application for registration in the following two cases: First, if the applicant does not meet the registration requirements, or if his/her registration adversely affects the integrity of the tax system in the country.

The Federal Tax Authority shall notify applicants of the approval or rejection of their application within 20 working days from the date of preliminary approval by the Authority. Successful candidate shall be added to the register for a period of three years, which can be renewed before expiry as per the mechanism determined by the Federal Tax Authority.

If the Authority finds a Tax Agent not qualified, or if his/her work adversely affects the integrity of the tax system, or if they commit any serious violation of the tax law, the Agent’s permit will be revoked. In this case, the Authority notifies said Agent of the decision – as well as the reasons behind it – within five working days.

Duties of the tax agent include assist the Person with their Tax obligations according to a contractual agreement between the Person and the Tax Agent, without prejudice to any obligations in the Law, maintain the confidentiality of any information obtained in the course of performing his/her duties as a Tax Agent, refuse to participate in any work or plan which may result in a breach of any law by any Person or may jeopardise the integrity of the tax system.

A Tax Agent’s duties include assisting the Taxable Person with their tax obligations according to a contractual agreement between the Person and the Tax Agent, in accordance with the Tax Agent’s duties as stated in the tax legislation; secondly, and without prejudice to any obligations in the Law, they must maintain the confidentiality of any information obtained in the course of performing his/her duties as a Tax Agent; and finally, a Tax Agent must refuse to participate in any work or plan which may result in a breach of any law by any Person or may jeopardise the integrity of the tax system.

Federal Tax Authority Clarifies Regulations Regarding VAT for the Real Estate Sector

Abu Dhabi, November 18, 2017– The Federal Tax Authority (FTA) has clarified regulations pertaining to Value Added Tax (VAT) when it comes to the real estate sector, stating that the supply of commercial real estate (selling or leasing) will be subject to the basic 5% tax rate, while residential units will remain generally exempt, except for the first supply of a new residential building within the first three years of it being constructed which will be 0% rated.

Residential and Commercial Buildings

The FTA defines the supply of real estate as activities that include, among other things, the sale, lease or giving of the right to any real estate.

A residential building is a building or part thereof that is intended and designed for occupation by individuals, and mainly includes buildings that can be occupied by any person as main place of residence. This does not include any place that is not a building fixed to the ground and that can be moved without being damaged; any building that is used as a hotel, motel, bed and breakfast establishment, hospital or the like; a serviced apartment for which services in addition to the supply of accommodation are provided; and any building constructed or converted without lawful authority.

Meanwhile, a commercial building is any building or part thereof that is not a residential building. Examples include offices, warehouses, hotels, shops, etc.

Supply of Residential and Commercial Buildings

The first supply of a new residential building within the first three years of it being constructed shall be zero-rated. All subsequent supplies shall be exempt, even if within the first three years.

All supplies of commercial properties are subject to VAT at 5%, including all buildings or parts thereof that are not residential buildings.

Registration for VAT Purposes

The owners of residential buildings do not register for VAT if they do not have any other business activities. However, owners who do have other business activities must check to see whether or not they are required to register.

The owner of any building that is not residential, will have to register if the value of the supplies over the preceding 12 months exceed AED375,000 in value, or if it is expected that they will exceed AED375,000 over the coming 30 days.

VAT Recovery

An owner of a residential building will not be able to recover VAT on expenses related to the supply of the exempt residential building. Meanwhile, an owner of a commercial building will generally be able to recover VAT on expenses related to the supply of the building.

Mixed-Use Buildings

The rent or sale of a residential part of the building shall be treated as zero-rated or exempt, depending on whether this is a first supply or a subsequent supply. The rent or sale of a commercial part of the building, however, shall be treated as subject to VAT at 5%.

The tax incurred by the owner on the building needs to be apportioned where there is an exempt supply, and the portion related to the taxable supply (at 0% and 5%) may be recovered.

Federal Tax Authority: 35 Business Days Left to Register for VAT

    • Value Added Tax is set to go into effect on January 1, 2018.
    • A 5% tax will be imposed on the import and supply of goods and services at each stage of production and distribution, and on deemed Supply.
    • Businesses can register for VAT through the FTA website 24 hours a day, seven days a week. The registration process is seamless and simple, taking no more than 20 minutes
    • VAT will provide additional financial resources for the Government to continue investing in the necessary infrastructure for a future-ready economy.

Dubai, November 8, 2017 – The countdown for implementing Value Added Tax in the UAE has already begun, reaffirmed the Federal Tax Authority (FTA) in a press conference held in Dubai today (Wednesday, November 8, 2017).

Value Added Tax (VAT) is set to go into effect across the UAE on January 1, 2018, with a standard rate of 5% on the import and supply of goods and services at each stage of production and distribution, as well as on deemed supply. This leaves less than 53 days – or 35 business days – before it affects all purchases of goods and services, except in some cases where zero-rate or exemptions are applicable, as stipulated in Federal Decree-Law No. (8) of 2017 on Value Added Tax, issued by His Highness Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE, as well as in the Executive Regulation of said Federal Decree-Law recently adopted by the Cabinet.

FTA Director-General His Excellency Khalid Ali Al Bustani said: “We are meeting here today to reaffirm that the countdown to full VAT implementation in the UAE, which is only 53 days away, has already begun. This means that businesses now have only 35 business days to complete their registration, ensure their financial and technical compliance with the tax system and avoid late registration fines.”

“The Federal Tax Authority is tasked with providing an outstanding tax system that adheres to international best practices,” he continued. “With that in mind, we have allowed businesses considerable time to fulfil their registration requirements, with free registration through our website 24 hours a day, seven days a week, as well as extensive awareness campaigns. The registration process is seamless and simple, taking no more than 20 minutes.”

H.E. Al Bustani added: “The cooperation from the business sector has been commendable, as businesses and institutions took advantage to meet their tax obligations and ensure full and perfect compliance with the VAT system. With the countdown to the introduction of the tax system, we call on businesses to expedite their registration and compliance procedures. They must make changes to their core operations, their financial management procedures, their accounting methods, and the technical means they use, in addition to changes in their human resources, including accountants and tax advisers.”

A business will be required to register if the total value of its taxable supplies made within the UAE exceeds the mandatory registration threshold of AED375,000 over the previous 12-month period. A business may choose to register for VAT voluntarily if their supplies and imports are below the mandatory registration threshold, but exceed the voluntary registration threshold of AED187,500.

How to register a business for VAT

Tax registration can be done through the Federal Tax Authority’s website, available 24 hours a day, 7 days a week. The website also provides guidance on how to complete various transactions seamlessly.

The Federal Tax Authority urged all businesses to seek to understand the implications of implementing the VAT regime, familiarise themselves with the relevant legislation that has been issued, and make every effort to align their work with the reporting and compliance requirements imposed by the Government.

For more details and registration requirements for VAT, please visit the Federal Tax Authority website: www.tax.gov.ae

Federal Tax Authority Calls On All Businesses to Register for VAT

    • Registration is encouraged to avoid the risk of missing the January 1, 2018, deadline, which would entail the Administrative Penalties stipulated in Cabinet Decision No. (40) of 2017.

Abu Dhabi, October 31, 2017 – The Federal Tax Authority (FTA) has invited all businesses to register for the Value-Added Tax (VAT) before January 1, 2018, following the completion of first phase of registration.

The Authority revealed that the VAT registration procedure is free of charge and can be completed online via the e-Services portal on the FTA website: eservices.tax.gov.ae. VAT is set to come into effect in January 1st 2018 as per Federal Decree-Law No (8) of 2017, issued by His Highness Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE.

To register, businesses must provide the following information: Applicant details, including entity and activity details, trade licenses and manager’s details. Contact information is also required, as well as the documents of the authorised signatory, including scanned copies of their Emirates ID and passport.

The FTA reemphasized that a business will be required to register if the total value of its taxable supplies made within the UAE exceeds the mandatory registration threshold of AED375,000 over the previous 12-month period.

Taxable supplies include all supplies that are made in the UAE, whether subject to 5% or zero-rated tax under Article (45) of Federal Decree Law No (8) of 2017, excluding supplies exempted under Article (46) of Federal Decree Law No (8) of 2017. Additionally, all goods or services imported from abroad are considered taxable supplies.

The law defines a “supply” as any supply of goods or services in the UAE for consideration by any person in the course of conducting business.

All businesses must submit an application for registration as soon as possible, the FTA cautioned, in order to avoid the risk of missing the January 1, 2018, deadline, which would entail the Administrative Penalties stipulated in Cabinet Decision No. (40) of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.

VAT in the UAE: 10 Things to Know for a Smooth Transition

Dubai, October 29, 2017 – The Federal Tax Authority (FTA) has announced a list of the top ten things businesses must know before registering for VAT, in order to raise awareness within the business community, as well as society at large.

This, in turn, facilitates a smooth and effective rollout of the VAT system – scheduled to go into effect on January 1, 2018 – in accordance with the highest international standards.

What is VAT?

Value Added Tax (or VAT) is an indirect tax imposed on the supply of most goods and services. It is one of the most common types of consumption taxes found around the world. More than 150 countries have implemented VAT (or its equivalent, Goods and Services Tax), including all 29 EU member states, as well as Canada, New Zealand, Australia, Singapore and Malaysia.

Why is the UAE implementing VAT?

The UAE provides its citizens and residents with various high-quality public services, including hospitals, roads, public schools, parks and civil services. These services are paid for by the government. Therefore, VAT will provide the country with a new source of income, which will ensure the continued provision of high-quality public services in the future. It will also help the government achieve its vision of reducing dependence on oil and building a sustainable knowledge economy for the future.

What is the VAT rate and which sectors are subject to VAT?

The VAT rate in the UAE is fixed at 5% and is levied on the supply of all goods and services, including food, commercial buildings and hotel services, if no explicit provision is made to impose a zero rate or an exemption.

The zero rate is imposed on some goods and services, including health and education services, the supply of investment gold, the first supply of residential buildings, and the supply of international transport of passengers and goods, and exports. Activities exempt from tax include bare land, local transportation of passengers, supply of residential buildings and the supply of some financial services.

What is the difference between exempt supplies and zero-rated supplies?

Businesses that supply goods or services that are subject to a zero rate are required to register for VAT, but can recover the VAT that they incurred on their purchases. Meanwhile, businesses that supply exempt goods or services cannot recover the VAT they incurred on their purchases.

The mandatory registration limit and the voluntary registration limit

A business must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED375,000. Furthermore, a business may choose to register for VAT voluntarily if their supplies and imports are below the mandatory registration threshold, but exceed the voluntary registration threshold of AED187,500.

Similarly, a business may register voluntarily if their expenses exceed the voluntary registration threshold. This particular opportunity to register voluntarily is designed to enable start-up businesses with no turnover yet to register for VAT.

Are there specific dates for businesses to register for VAT?

All businesses must submit an application for registration as soon as possible, in order to avoid the risk of non-registration by January 1, 2018, which would entail fines as stipulated in Cabinet Decision No. (40) of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.

How to register for VAT?

Tax registration can be done through the Federal Tax Authority’s website, which has been designed to meet the highest international standards. The registration portal is available 24 hours a day, 7 days a week.

Will there be Tax grouping?

Businesses that satisfy certain requirements covered under the Legislation (such as having a place of residence in the UAE and being related/associated parties) will be able to register as a Tax group. For some businesses, Tax grouping will be a useful tool that would simplify accounting for VAT.

Can businesses begin charging VAT before January 1, 2018?

Businesses are prohibited from imposing VAT on any goods or services before January 1, 2018.

Records to be retained

All businesses, registered and unregistered, must retain records such as Balance Sheet, Profit and Loss, and records pertaining to fixed assets, payroll, inventory and stock levels, as well as accounting records (payments, receipts, purchases, sales, revenues and expenses).

Businesses may be required to make changes to their core operations, financial management practices, the procedures they use to keep accounting books and records, and the technology they use in their accounting practices, in addition to changes in their human resources (accountants, tax advisers, etc.)

All communication with the Federal Tax Authority can be done online via the FTA website: www.tax.gov.ae

Federal Tax Authority clarifies price-setting mechanism for Excise Tax

Dubai 3rd October 2017: Following the introduction of Excise Tax in the UAE on October 1, the Federal Tax Authority (FTA) has clarified that the Excise Goods Price List that is downloadable from its website is a reference for tax calculation only, and not for setting retail prices.

The FTA also clarified that the retail price subject to tax (known as Excise Price) of each taxable item must be the highest of following two prices: the local market price specified in the Excise Goods Price List, available at https://www.tax.gov.ae/excise-price-list-and-process.aspx; or the designated retail sale price as calculated by the retailer as per the procedure specified in the Taxable Persons Guide for Excise Tax https://www.tax.gov.ae/help_guides.aspx.

The FTA said that some brands of excise goods that are not yet on the list will be still subject to Excise Tax. The Authority requests that producers or importers of goods likely to be subject to Excise Tax, including energy drinks, carbonated drinks and tobacco products, inform the FTA through its website of brands that should be added.

“The registration process for Excise Tax is well on track and we now have an extensive database of excise taxable persons” said His Excellency Khalid Al Bustani, Director-General of the Federal Tax Authority. “That said, the FTA continues to receive applications for registration through our website, and we have already started receiving import declarations. We encourage all institutions that are subject to Excise Tax as per the law to register through the website, where, in addition to conducting their transactions seamlessly, they can gain access to a wealth of information, learn their rights and obligations and ensure their organisations are protected from penalties.”

H.E. Al Bustani went on to explain that: “fixing the prices of products for retail is not within the jurisdiction of the FTA, it’s the duty of other departments to monitor the prices according to the mechanism set out in the Federal laws.”

The list of retail prices used as a basis for tax calculation was compiled with cooperation of the retailers.

According to Cabinet Decision No. (38) of 2017 on Excise Goods, Excise Tax Rates and the Method of Calculating the Excise Price, from October 1, carbonated beverages are taxed at 50% and tobacco products and energy drinks at 100%. Carbonated beverages include all aerated beverages with the exception of non-flavoured aerated water, as well as any concentrates, gels or extracts that can be processed into carbonated drinks.

Energy drinks, meanwhile, include beverages that may contain stimulants or substances that induce mental or physical stimulation, including but not limited to: caffeine, taurine, ginseng and guarana, as well as any substances with similar effects.

Source:https://www.tax.gov.ae/Federal-Tax-Authority-clarifies-price-setting.aspx

UAE Cabinet Approves Decisions No. (39) and (40) for 2017 on Federal Tax Authority’s Service Fees, Administrative Fines

UAE Cabinet Approves Decisions No. (39) and (40) for 2017 on Federal Tax Authority’s Service Fees, Administrative Fines

H.H. Sheikh Hamdan bin Rashid Al Maktoum:

  • These decisions bring an added layer of transparency to the Authority’s relationship with its customers, providing extra incentive for stakeholders and all concerned parties to abide by tax regulations.

Dubai, October 02, 2017 – The UAE Council of Ministers has adopted Cabinet Decision No. (39) of 2017 on Fees for Services Provided by the Federal Tax Authority and Cabinet Resolution No. (40) of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.

The Council’s meeting was chaired by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, Ruler of Dubai.

“These decisions bring an added layer of transparency to the Authority’s relationship with its customers,” said H.H. Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai and UAE Minister of Finance. “This, in turn, provides extra incentive for stakeholders and all concerned parties to abide by tax regulations.”

“All customers can refer to the official Directory of Services Fees to know what is required of them to be in compliance with tax procedures,” H.H. Sheikh Hamdan bin Rashid explained. “The Directory is based on thorough studies that seek to provide the highest-quality service for the lowest cost, which resonates with the FTA’s mission and vision.”

Federal Tax Authority’s Service Fees

Cabinet Decision No. (39) of 2017 on Fees for Services Provided by the Federal Tax Authority outlines the fees to be collected for the services provided by the FTA to its clients.

Tax registration services and the issuance of an electronic tax registration certificate will be free of charge. An attested paper registration certificate, however, will carry a AED500 fee, while registration – and renewal – fees for tax agents were set at AED3,000 for three years.

The registration and renewal fee for an accounting software provider will be AED10,000 for one year, whereas registering a Designated Zone will cost AED2,000 per year. While there are no service fees associated with registering a Warehouse Keeper or issuing an electronic Warehouse Keeper registration certificate, an official printed certificate will cost AED500.

Administrative Fines

Cabinet Resolution No. (40) of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE applies to all violations of Federal Law No. (7) of 2017 on Tax Procedures, Federal Decree-Law No. (7) of 2017 on Excise Tax, and Federal Decree-Law No. (8) of 2017 on Value-Added Tax (VAT). The Decision states that a fine must be no less than AED500 and no more than triple the value of the tax on the transaction in question.

Settling a fine in accordance with this decision does not exempt the taxable person from paying the due tax in accordance with the federal law no. (7) on tax procedures & the tax laws. The decision does, nonetheless, give said Person the right to appeal any Administrative penalties they’ve incurred according to the procedures in the Federal law no. (7) on Tax procedures.

Directory of Federal Tax Authority’s Service Fees

# Description of Service Fee (AED)
1 Issuing of an attested paper tax registration certificate. (500) for each certificate
2 Listing of a Tax Agent in the Tax Agent Register. (3,000) for three years
3 Renew Listing of a Tax Agent in the Tax Agent Register. (3,000) for three years
4 Registration of Software provider with the Federal Tax Authority. (10,000) for one year
5 Renew registration of Software provider with the Federal Tax Authority. (10,000) for one year
6 Registration of Designated Zone, in accordance with the provisions of Federal Decree-Law No. (7) of 2017 on Excise Tax. (2,000) for one year
7 Issuing of an attested paper Warehouse Keeper registration certificate (500) for each certificate

Directory of violations and the Corresponding Administrative penalties

Violations and Administrative Penalties related to the Implementation of the Federal Law No. (7) of 2017 on Tax Procedures
Description of Violation Administrative Penalty (AED)
1 The failure of the person conducting Business to keep the required records and other information specified in Tax Procedures Law and the Tax Law
  • (10,000) for the first time.
  • (50,000) in case of repetition.
2 The failure of the person conducting Business to submit the data, records and documents related to Tax in Arabic to the Authority when requested. (20,000)
3 The failure of the Taxable Person to submit a registration application within the timeframe specified in the Tax Law (20,000)
4 The failure of the Registrant to submit a deregistration application within the timeframe specified in the Tax Law (10,000)
5 The failure of the Registrant to inform the Authority of any circumstance that requires the amendment of the information pertaining to his tax record kept by Authority.
  • (5,000) for the first time.
  • (15,000) in case of repetition
6 The failure of the person appointed as a Legal Representative for the Taxable Person to inform the Authority of his appointment within the specified timeframe. The penalties will be due from the Legal Representative’s own funds. (20,000)
7 The failure of the person appointed as a Legal Representative for the Taxable Person to file a Tax Return within the specified timeframe. The penalties will be due from the Legal Representative’s own funds.
  • (1,000) for the first time.
  • (2,000) in case of repetition within (24) months.
8 The failure of the Registrant to submit the Tax Return within the timeframe specified in the Tax Law.
  • (1,000) for the first time.
  • (2,000) in case of repetition within (24) months.
9 The failure of the Taxable Person to settle the Payable Tax stated in the submitted Tax Return or Tax Assessment he was notified of, within the timeframe specified in the Tax Law. The Taxable Person shall be obligated to pay a late payment penalty consisting of:

  • (2%) of the unpaid tax is due immediately once the payment of Payable Tax is late;
  • (4%) is due on the seventh day following the deadline for payment, on the amount of tax which is still unpaid.
  • (1%) daily penalty charged on any amount that is still unpaid one calendar month following the deadline for payment with upper ceiling of (300%).
10 The submittal of an incorrect Tax Return by the Registrant. Two penalties are applied:

  • 1. Fixed penalty of:
    • (3,000) for the first time.
    • (5,000) in case of repetition
  • 2. Percentage based penalty shall be applied on the amount unpaid to the Authority due to the error and resulting in a tax benefit as follows:
    • (50%) if the Registrant does not make a voluntary disclosure or he made the voluntary disclosure after being notified of the tax audit and the Authority has started the tax audit process, or after being asked for information relating to the tax audit, whichever takes place first.
    • (30%) if the Registrant makes the voluntary disclosure after being notified of the tax audit and before the Authority starts the tax audit.
    • (5%) if the Registrant makes a voluntary disclosure before being notified of the tax audit by the Authority.
11 The Voluntary Disclosure by the Person/Taxpayer of errors in the Tax Return, Tax Assessment or Refund Application pursuant to Article 10 (1) and (2) of the Tax Procedures Law. Two penalties are applied:

  • 1. Fixed penalty of:
    • (3,000) for the first time.
    • (5,000) in case of repetition
  • 2. Percentage based penalty shall be applied on the amount unpaid to the Authority due to the error and resulting in a tax benefit as follows:
    • 50%) if the Person/Taxpayer makes a voluntary disclosure after being notified of the tax audit and the Authority starting the tax audit or after being asked for information relating to the tax audit, whichever takes place first.
    • (30%) if the Person/Taxpayer makes the voluntary disclosure after being notified of the tax audit but before the start of the tax audit.
    • (5%) if the Person/Taxpayer makes voluntary disclosure before being notified of the tax audit by the Authority.
12 The failure of the Taxable Person to voluntarily disclose errors in the Tax Return, Tax Assessment or Refund Application pursuant to Article 10 (1) and (2) of this the Tax Procedures Law before being notified that he will be subject to a Tax Audit. Two penalties are applied:

  • 1. Fixed penalty of:
    • (3,000) for the first time
    • (5,000) in case of repetition
  • 2. (50%) of the amount unpaid to the Authority due to the error resulting in a tax benefit for the Person/Taxpayer.
13 The failure of the Person conducting Business to facilitate the work of the Tax Auditor in violation of the provisions of Article (21) of the Tax Procedures Law. (20,000)
14 The failure of the Registrant to calculate Tax on behalf of another Person when the registered Taxable Person is obligated to do so under the Tax Law. The Registrant shall be obligated to pay a late payment penalty consisting of:

  • (2%) of the unpaid tax is due immediately once the payment of Payable Tax is late;
  • 4%) is due on the seventh day following the deadline for payment, on the amount of tax which is still unpaid.
  • 1%) daily penalty charged on any amount that is still unpaid one calendar month following the deadline for payment with upper ceiling of (300%).
15 A Person not accounting for any tax that may be due on import of goods as required under the Tax Law. (50%) of unpaid or undeclared tax.
Violations and Administrative Penalties related to the Implementation of the Federal Decree-Law No. (7) of 2017 on Excise Tax
Description of Violation Administrative Penalty (AED)
Failure by the Taxable Person to display prices inclusive of Tax. (15,000).
Failure to comply with the conditions and procedures related to transfer the Excise Goods from a Designated Zone to another Designated Zone, and the mechanism of processing and storing of such Excise Goods. The penalty shall be the higher of AED (50,000) or (50%) of the tax, if any, chargeable in respect of the goods as the result of the violation.
Failure by the Taxable Person to provide the Authority with price lists for the Excise Goods produced, imported or sold thereby.
  • (50,000) for the first time.
  • (20,000) in case of repetition
Violations and Administrative Penalties related to the Implementation of the Federal Decree-Law No. (8) of 2017 on Value Added Tax
Description of Violation Administrative Penalty (AED)
Failure by the Taxable Person to display prices inclusive of Tax. (15,000)
Failure by the Taxable Person to notify the Authority of applying Tax based on the margin. (2,500)
Failure to comply with conditions and procedures related to keeping the Goods in a Designated Zone or moving them to another Designated Zone. The penalty shall be the higher of AED (50,000) or (50%) of the tax, if any, chargeable in respect of the goods as the result of the violation.
Failure by the Taxable Person to issue the Tax invoice or an alternative document when making any supply. (5,000) for each tax invoice or alternative document.
Failure by the Taxable Person to issue a Tax Credit Note or an alternative document (5,000) for each tax credit note or alternative document.
Failure by the Taxable Person to comply with the conditions and procedures regarding the issuance of electronic Tax Invoices and electronic Tax Credit Notes (5,000) for each incorrect document