New Federal Decree Clarifies Value Added Tax in UAE

The supply or import of investment-precious metals, as well as the first supply of residential buildings within (3) years of its completion, either through sale or lease in whole or in part, is equally subject to a zero-rate. The first supply of buildings specifically designed to be used by charities and buildings converted from non-residential to residential shall also be taxable at the rate of zero.

Also subject to the zero rate is the supply of educational services and related goods and services for nurseries, preschool, elementary education, as well as higher educational institutions owned or funded by the Federal or local government, as specified in the Executive Regulation; and, finally, the supply of preventive and basic healthcare services and related goods and services, as specified in the Executive Regulation.

The Decree-Law outlines that certain supplies shall be exempt from 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.

As per the Decree-Law, Payable Tax for any Tax period is calculated as the total Output Tax (i.e. the tax that the taxable person has charged on his supplies) during the said period less the total Input Tax recoverable by that Taxable Person over the same Tax Period (i.e. the tax that he has paid on supplies to him or imports by him).

The Taxable Person must submit a Tax Return to the Authority at the end of each Tax Period in accordance with the timeframes and procedures specified in the Executive Regulation of the Decree-Law declaring all supplies made and received which during that Tax Period.

The Executive Regulation of the Decree-Law shall specify the timeframes and procedures of payment of tax declared in the Tax Return as payable.

If a Taxable Person acquires or imports a Capital Asset, the Taxable Person must assess the period of use of that asset and make the necessary adjustments to the Input Tax paid pursuant to the Capital Assets Scheme.

Taxable Persons are mandated by the law to retain the records relating to Capital Assets for at least ten years. A registrant making a taxable or deemed supply shall issue an original tax invoice and deliver it to a recipient of goods or services or keep it in his records in the event of a lack of recipient. Any Person who receives an amount as Tax pursuant to any document issued by the Person must pay this amount to the Authority. A registrant shall issue a tax invoice within 14 days of the date of supply.

The Decree-Law specifies that the Executive Regulation shall include the information to be included in the Tax Invoice; conditions and procedures required to issue an electronic Tax Invoice; instances where the Registrant is not required to issue a Tax Invoice to the Recipient of Goods or Services; instances where other documents may be issued in place of the Tax Invoice, as well as their specifications and the information to be included therein; and instances where another Person may issue a Tax Invoice on behalf of the Registrant supplier.

Federal Decree-Law No. (8) of 2017 for Value-Added Tax (VAT) is available in full on: www.mof.gov.ae and www.tax.gov.ae.