The Finance Ministry (MoF) presented a value added tax (VAT) briefing session for advisors on 21st March 2017. The session expected to send a message to the market that VAT is approaching and businesses must start to prepare immediately. The following new information was confirmed:

  1. Some unnamed other Gulf Cooperation Council (GCC) Member States and the UAE is still on way to VAT implementation from 1st January 2018 and it assumes to release its domestic VAT Law before the end of the first half of 2017, with detailed Executive Regulations to follow shortly after. In accordance with the GCC VAT Framework Agreement, Member States who do not inaugurate on 1st January 2018 will have up to one year for introducing VAT
  2. Despite no yet approved by the GCC, medicine lists and medical equipment will also be zero per cent
  3. A zero per cent VAT will be applied to both healthcare and education services
  4. Fee-based financial services will generally be subject to the standard VAT rate
  5. Supplies of plain land will be exempt from VAT
  6. Supplies of commercial property (sales and leases) will be subject to standard VAT rate, whereas supplies of residential property (sales and leases) will be exempt from VAT, with the exception of the first sale of new residential property
  7. Though VAT is a federal tax, taxpayers will be need to report sales and purchases on an Emirate level basis on their UAE VAT returns.
  8. Investment gold, silver and platinum will be zero per cent rate and Supplies of local transport, such as taxis, buses, trains, etc. will be exempt from VAT
  9. Businesses will not have to physically pay VAT at the point of import into UAE
  10. At a GCC level, a list of basic food items have been settled to be subject to the zero per cent VAT rate
  11. The standard VAT rate across the GCC will be 5%.
  12. Records, including tax invoices, must be retained for 5 years and there will be a three-tier appeal process.
  13. Imports of goods into other GCC Member States, transshipped through the UAE will not be appropriate for the reverse charge.
  14. Businesses will not have to actually pay VAT at the point of import into UAE.
  15. The VAT treatment of supplies made within free zones and by free zone entities is still under final consideration and be will confirmed within the UAE VAT law and the Executive Regulations
  16. Supplies to the government and government bodies will be subject to standard VAT rate.
  17. The compulsory registration threshold will be US$100,000 and the voluntary threshold will be US$50,000. Registration will open towards the end of Q3 2017. There will be quarterly returns with filing and payments due within a month after the quarter.
  18. Tax invoices will be required to be issued within 14 days and up to 12 items will be specified as required on a Tax invoice. Tax invoices will need to be issued within 14 days and up to 12 items will be listed as required on a tax invoice
  19. The VAT treatment of supplies made within free zones and by free zone entities is still under final consideration and be will confirmed within the UAE VAT law and the Executive Regulations.
  20. Registration, filing and payments will all be conducted electronically, with detailed specifications to follow later in the year.
  21. Audits will generally be done only after 5 days advance notice, except where fraud is suspected. Where fraud is suspected a business may be closed down for 72 hours and penalties of up to 500% may be applied on top of the primary VAT owing.