Legislative bodies of the United Arab Emirates have approved draft law that integrates VAT into national tax system and regulates different aspects of application of the new tax.
Draft law was approved within the frameworks of Gulf Cooperation Council’s (GCC) initiative to implement VAT in all member states during 2018. Federal Decree-Law No. (8) of 2017 (the Law as in following) was approved by President of UAE on 27th of August 2017 and will have effect starting from 1st of January 2018.
This tax will apply to all manufacturers and suppliers of goods and services except from specific ones listed by Law. The tax rate will be set as 5%. Every resident of UAE will be obliged to register for VAT purposes if his business activity is taxable and to present VAT returns to tax authorities.
The Law states types of activity that are subject to zero rate: export of goods and services outside of GCC member states; international transport of passengers; air passenger transport; supply of air, sea and land means of transport; supply of goods and services related to the supply of the means of transport; supply of aircrafts or vessels designated for rescue and assistance by air or sea; supply of goods and services consumed by any means of transport; supply or import of investment precious metals; first supply of residential buildings within 3 years of its completion; the first supply of buildings specifically designed to be used by charities; the first supply of buildings converted from non-residential to residential; the supply of crude oil and natural gas; supply of educational services; supply of preventive and basic healthcare services.
Also, the Law establishes types of activity that are not VAT taxable: specific financial services; supply of residential buildings through sale or lease; supply of bare land; supply of local passenger transport. The Executive Regulation of this Decree-Law shall specify the conditions and controls for exempting the supplies mentioned above, as well as it shall establish the minimal value of goods and services that makes them VAT taxable.
The purpose for implementing VAT is creating a new source of revenue that will allow to increase the quantity and improve the quality of public services provided by UAE to its citizens.