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29 March 2017
A series of ongoing workshops being carried out by the Ministry of Finance of the United Arab Emirates (UAE) has revealed some more insights into plan for the introduction of value-added tax (VAT) next year, such as what goods and services will or will not be included, registration procedures, paperwork involved and the punishments in store for those to try evade payment.
The six members of the Gulf Cooperation Council (GCC), which includes the UAE, agreed in 2016 to introduce VAT as a mean to diversify government revenue sources and reduce reliance on crude oil exports after oil prices took a sharp drop starting mid-2014.
A 5 percent VAT rate is expected to be implemented simultaneously across the GCC starting January 1, 2018, Younis Al Khouri, under-secretary at the finance ministry, told Zawya in an interview last month.
According to a report by global consultancy firm EY, the finance ministry workshop session revealed new details related to the application of the new tax on real estate, financial services and insurance sector that included the following key points:
Sales and leases of residential properties will be exempt from VAT, with the exception of the first sale of new units, which will be subject to a zero percent VAT.
The main difference between zero-rated and exempt supplies is that suppliers of zero-rated goods and services can reclaim their input VAT on their own costs and services, but suppliers of exempt goods will be either not registered for VAT or, if they are, they will not be able to reclaim their input VAT.
Life insurance will be exempt, but all other non-life insurance will be subject to VAT. Health and motor insurance account for 70 percent of the insurance market in the GCC, while motor insurance constitutes nearly 40 percent of the UAE’s total non-life insurance market. Click here to read Zawya’s Special Coverage on the insurance sector in the GCC.
Investments in precious metals, such as gold, will be subject to zero percent VAT, as will local transport such as taxis, buses, trains.
VAT implementation on free zone entities/ tourists is still being reviewed.
Goods and services supplied to government bodies could be subject to VAT.
Registration, filing and payments for VAT will all be conducted electronically and more details on the process will be announced later this year.
While all VAT-related matters are currently being handled by the Ministry of Finance, employees of the UAE’s Federal Tax Authority, a new body expected to be formed this year, will assume judiciary powers.
Companies which try to evade paying VAT could be closed down for 72 hours or fined up to 500 percent of the total amount of VAT outstanding.
UAE companies with a turnover of over $100,000 are required to register for VAT, while those with turnover of below $50,000 can do so voluntarily. Registration will open towards the end of the third quarter of this year.
When doing VAT returns, companies must file on a quarterly basis and make payments within a month.
Tax invoices will be required to be issued within 14 days and companies must keep all records for up to five years.
Further reading on VAT:
© Express 2017
A series of ongoing workshops being carried out by the Ministry of Finance of the United Arab Emirates (UAE) has revealed some more insights into plan for the introduction of value-added tax (VAT) next year, such as what goods and services will or will not be included, registration procedures, paperwork involved and the punishments in store for those to try evade payment.
The six members of the Gulf Cooperation Council (GCC), which includes the UAE, agreed in 2016 to introduce VAT as a mean to diversify government revenue sources and reduce reliance on crude oil exports after oil prices took a sharp drop starting mid-2014.
A 5 percent VAT rate is expected to be implemented simultaneously across the GCC starting January 1, 2018, Younis Al Khouri, under-secretary at the finance ministry, told Zawya in an interview last month.
According to a report by global consultancy firm EY, the finance ministry workshop session revealed new details related to the application of the new tax on real estate, financial services and insurance sector that included the following key points:
Sales and leases of residential properties will be exempt from VAT, with the exception of the first sale of new units, which will be subject to a zero percent VAT.
The main difference between zero-rated and exempt supplies is that suppliers of zero-rated goods and services can reclaim their input VAT on their own costs and services, but suppliers of exempt goods will be either not registered for VAT or, if they are, they will not be able to reclaim their input VAT.
Life insurance will be exempt, but all other non-life insurance will be subject to VAT. Health and motor insurance account for 70 percent of the insurance market in the GCC, while motor insurance constitutes nearly 40 percent of the UAE’s total non-life insurance market. Click here to read Zawya’s Special Coverage on the insurance sector in the GCC.
Investments in precious metals, such as gold, will be subject to zero percent VAT, as will local transport such as taxis, buses, trains.
VAT implementation on free zone entities/ tourists is still being reviewed.
Goods and services supplied to government bodies could be subject to VAT.
Registration, filing and payments for VAT will all be conducted electronically and more details on the process will be announced later this year.
While all VAT-related matters are currently being handled by the Ministry of Finance, employees of the UAE’s Federal Tax Authority, a new body expected to be formed this year, will assume judiciary powers.
Companies which try to evade paying VAT could be closed down for 72 hours or fined up to 500 percent of the total amount of VAT outstanding.
UAE companies with a turnover of over $100,000 are required to register for VAT, while those with turnover of below $50,000 can do so voluntarily. Registration will open towards the end of the third quarter of this year.
When doing VAT returns, companies must file on a quarterly basis and make payments within a month.
Tax invoices will be required to be issued within 14 days and companies must keep all records for up to five years.
Further reading on VAT:
- Zawya's Special Coverage on the introduction of VAT in the GCC
- All six GCC states to implement VAT together
- UAE president to issue VAT law within 2-4 months: source
- UAE to host VAT sessions for businesses starting March
© Express 2017
