His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, signed the Executive Regulation for the Federal Decree-Law No. (8) of 2017 on Value Added Tax (VAT), as announced by the Ministry of Finance.
The tax will be effective from January 2018 and all businesses have to be registered before January 1st. The Regulation defines VAT as the 5% tax imposed on the import and supply of goods and services at each stage of production and distribution, including what is a deemed supply, with the exception of specific supplies subject to the zero rate and what is exempted as specified in the Decree-Law.
Younis Haji Al Khoori, Undersecretary of MoF, said that the signing of the Executive Regulation marks a new milestone in the application of an efficient taxation system in line with the best international standards. The ultimate objective of the same is improving the performance of primary sectors and enhancing social welfare, according to Al Khoori.
The first title of the Regulation includes the definitions of terms used, while the second title deals with supply. The third title is about registration, including details of mandatory and voluntary registration, related parties, conditions to be met to register tax groups and appointing a representative member, deregistration, exception from registration, registration on law coming into effect and obligations to be met before deregistration. Rules relating to supply, including articles on the date of supply, place of supply for goods, place of supply of services for real estate, transport services, telecommunications and electronic services, intra-GCC supplies, the market value, prices to be inclusive of tax, discounts, subsidies and vouchers are under the fourth title.
The fifth title explains the profit margins and explains how to calculate VAT based on profit margins. Title six addresses zero-rated goods and services, including telecommunications, international transportation of passengers or goods, investment grade precious metals, new and converted residential buildings, as well as healthcare, education and buildings earmarked for charity.
Provisions relating to products and services exempt from value added 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 are clarified in the seventh title.
The eighth title of the Regulation addresses accounting for tax on specific supplies. The Executive Regulation address Designated Zones in article (51), while title 10 gives a detailed account of calculating due tax, recovery of input tax relating to exempt supplies, input tax not recoverable, and special cases for input tax. Title 11 talks about apportioning input tax and adjusting input tax after recovery.
The capital asset scheme and adjustments within the capital asset scheme in the article are addressed in the 12th title. Title 13 of the Regulation includes tax invoices, tax credit notes, and fractions of the fils. The Executive Regulation discusses Tax Periods and Tax Returns before title 15 goes into the recovery of excess tax, title 16 tackles recovery in other cases and new housing for nationals, business visitors, tourists, and foreign governments.
Transitional Rules on record-keeping requirements and keeping records of supplies made are discussed in the 17th title. Closing provisions are also explained in the 18th title of the Regulation.