The Finance Ministry of the United Arab Emirates (UAE) on 10th of May 2017 arranged a briefing session in respect of the new Excise Tax Law. Implementation of the UAE Excise Tax Law follows the Gulf Cooperation Council (GCC) Ministers of Finance approval in principle, of a unified agreement, in June 2016. In accordance with agreement, excise duty will be introduced in the UAE by the fourth quarter of 2017. The other GCC Member States also have a plan to implement the excise tax by the end of 2017. The 5 per cent excise tax is to be implemented across the GCC countries by 2018. The UAE government has proposed a 50 per cent excise tax on carbonated drinks, and a 100 per cent tax on energy drinks, tobacco and tobacco products. The importer will need to pay the accurate amount of excise tax to the tax authority before discharging the goods from the designated storage area. The final excise tax law is expected to be published before the end of June.
The Double Tax Agreement (DTA) between United Arab Emirates and Slovak Republic was signed in 2015 and was come into force on 1st of April 2017. This treaty will be applicable from 1st of January 2018.
On 20 April 2017, the general council of Andorra approved the Double Taxation Agreement (DTA) with United Arab Emirates for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.
On 19 April 2017, Dr Liam Fox, the International Trade Secretary of UK opened the UK-GCC Public Private Partnership (PPP) conference to show how UK expertise can maximize the innovation of both public and private sectors to transform their societies.
The conference will bring together ministers and senior representatives from Gulf Cooperation Council (GCC) member states, led by H.E Dr Abdulatif bin Rashid Al Zayani, Secretary-General of the GCC, to look at how PPPs can be used to inform national diversification plans.
From the Qatar National Vision to Saudi Vision 2030, the Gulf is looking for opportunities to diversify and shape their economies to face the challenges of the future, from infrastructure to healthcare and education.
The UK has considerable experience in the area of public private partnerships, which enable the public sector to access the discipline, skills and expertise of the private sector and for many years has been home to one of the world’s largest and most experienced PPP markets. UK companies with a proven track record across a range of sectors will share their expertise at the conference.
The conference also presents the national transformation programs, and the economic diversification plans adopted by the GCC. It also presents the laws enacted by the GCC countries to increase opportunities for foreign investors in the sectors of infrastructure, health, telecommunications, energy, information technology and other sectors. This is in pursuit of strengthening their economies and diversifying their resources.
The conference will also provide a further opportunity to expand and deepen the trading relationship between the UK and the GCC. UK companies export over £30 billion worth of goods and services to the GCC nations every year and thousands of British companies are active across the Gulf, creating jobs and helping to deliver projects from energy expansion, to helping Qatar prepare to host the 2022 World Cup.
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:
- 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
- Despite no yet approved by the GCC, medicine lists and medical equipment will also be zero per cent
- A zero per cent VAT will be applied to both healthcare and education services
- Fee-based financial services will generally be subject to the standard VAT rate
- Supplies of plain land will be exempt from VAT
- 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
- 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.
- 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
- Businesses will not have to physically pay VAT at the point of import into UAE
- At a GCC level, a list of basic food items have been settled to be subject to the zero per cent VAT rate
- The standard VAT rate across the GCC will be 5%.
- Records, including tax invoices, must be retained for 5 years and there will be a three-tier appeal process.
- Imports of goods into other GCC Member States, transshipped through the UAE will not be appropriate for the reverse charge.
- Businesses will not have to actually pay VAT at the point of import into UAE.
- 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
- Supplies to the government and government bodies will be subject to standard VAT rate.
- 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.
- 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
- 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.
- Registration, filing and payments will all be conducted electronically, with detailed specifications to follow later in the year.
- 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.
The Exchange of Information Agreement regarding tax matters (TIEA) between Norway and the United Arab Emirates that was signed in 2015 entered into force on 15th February 2017. This treaty generally applies from 15th February 2017 for criminal tax matters and from 1st January 2018 for other tax matters. The agreement was ratified by the United Arab Emirates on 15th January 2017.
During the World Government Summit Ministry of Finance officials from the United Arab Emirates (UAE) announced they are to implement VAT by 1st January 2018. Also, the Finance Undersecretary has reiterated the Gulf Cooperation Council (GCC) Member States’ intention to apply VAT across the GCC by 1st January, 2018. Businesses should therefore begin adopting VAT and Excise Tax compliant policies to ensure a smooth transition by the starting date. A 5% VAT rate will be used on most goods and services, with certain areas potentially benefiting from special VAT treatment. Businesses should note that special VAT treatment may apply to healthcare, education, transport and technology. Also a new excise tax is planned to be introduced during this year in UAE, with specific goods considered injurious to the human health to be subject to the tax including soft drinks, energy drinks and tobacco products.