New Federal Decree Clarifies Value Added Tax in UAE

Similarly, the supply is Deemed if implemented through a transfer by a Taxable Person of Goods forming part of his business assets from the UAE to another VAT-implementing GCC state, or from the Taxable Person’s business in a VAT implementing GCC state to his business in the implementing state, unless, in either case, that transfer: is treated as temporary under the Customs Legislation; or is made as part of another Taxable Supply of these Goods.

The same applies to the supply of goods or services for which Input Tax may be recovered but was used, in part or whole, for purposes other than Business, but only to the extent of non-Business use, as well as for Goods in the ownership of the Taxable Person as at the date of Tax Deregistration.

Every person who has a place of residence in the UAE or in a VAT implementing GCC state must register for VAT according to the Decree-Law, if at the end of any month his taxable supplies for the previous 12 months exceeded the mandatory registration threshold or he expects to exceed the mandatory registration threshold in the next 30 days.

The Decree-Law stipulates that two or more Persons conducting business may apply for tax registration as a tax group if all of the following conditions are met: Each Person has a place of establishment or fixed establishment in the UAE; the relevant Persons are related parties; and one or more Persons are conducting business in a partnership that controls the others.

The legislation also includes provisions prohibiting any Person conducting business from having more than one tax registration number,TRN, unless otherwise decided by the Executive Regulation. If related parties do not apply for Tax Registration as a Tax Group, the Authority may assess their association based on their economic, financial and regulatory practices in business and register them as a Tax Group if the association has been proved according to the controls and conditions specified by the Executive Regulation. The Authority has the right to make changes to the Persons registered as a Tax Group by removing or adding Persons based on the instances mentioned in the Executive Regulation or as requested by the Taxable Person.

Any Person who is not obligated to apply for Tax Registration may apply if, at the end of any given month, the total value of taxable supplies or expenses which were subject to Tax incurred during the previous ’12’ month-period exceeded the Voluntary Registration Threshold. The same applies in the event where it is anticipated that the total value of taxable supplies to be made or expenses which were subject to Tax to be incurred will exceed the Voluntary Registration Threshold during the coming ’30’ day period.

A non-resident Person may not take the value of goods and services imported into the UAE for the purpose of calculating whether they are entitled to apply for tax registration if the charging of tax for such goods or services is the duty of the Importer, as defined in the Decree-Law.

To determine whether a Person has exceeded the mandatory registration threshold and the voluntary registration threshold, the total sum of the following is calculated: The value of Taxable Supplies made by the Person; the value of concerned goods and concerned services received by the Person; the value of the taxable supplies made by the acquired whole or part of the business, if a Person acquires a whole or part of another business; and the value of taxable supplies made by related parties.

A registrant must apply to the Authority for tax deregistration if he no longer makes taxable supplies; or if the value of the taxable supplies made over a period of 12 consecutive months is less than the voluntary registration threshold. They may also apply for tax deregistration if the value of taxable supplies during the past 12 months was less than the mandatory registration threshold.

Zero-rating applies when goods and services are being exported to outside a VAT-implementing GCC state, as well as to international transportation of passengers or goods including a transfer starting or ending in the UAE or passing through its territory. Air transfer of passengers in in the UAE also incurs zero rates if it is considered an “international carriage” as per article (1) of the Warsaw International Convention for the Unification of Certain Rules Relating to International Carriage by Air 1929.

Zero rating also applies to the supply of air, sea and land means of transport used to transport passengers and goods, as well as the supply of goods and services related to the supply of the means of transport, which are for operating, repairing, maintaining or converting them; the supply of aircrafts or vessels designated for use in the assistance or rescue by air or sea; the supply of goods and services related to the transfer of goods or passengers aboard land, air or sea means of transport, designated for consumption on board; or anything consumed by means of transportation, any installations or addition thereto or any other uses during transportation.