Gulf nations have long been known for low-taxes, a situation that makes the region more attractive than many other places in the world to live and work. The UAE is no different, but has already introduced several tax measures in a bid to increase government income and help diversify the economy away from oil.
In 2018, the UAE Ministry of Finance introduced Value Added Tax (VAT) of 5 percent, which is a tax imposed on most goods and services.
However, late last month, the Ministry announced it would be making some amendments to VAT, all of which will be coming into effect on January 1, 2023. No changes were announced to the VAT rate, which remains unchanged at 5 percent.
According to the Arabic version of Decree-Law No.18 2022 on VAT – which was published in the official gazette (issue no. 736 of September 28, 2022) – a total of 24 amendments were made.
The changes are as follows:
- Those persons who are registered and make taxable supplies are permitted to apply for an exception from VAT registration. However, all of their supplies must be zero-rated and/or if they no longer make any supplies other than zero-rated supplies.
- A 14-day period to issue a tax credit note will be set to settle output tax, in line with the time frame set for issuing tax invoices.
- The Federal Tax Authority can forcibly deregister registered persons in certain cases, if necessary.
These changes are aligned with the international best practice in the GCC unified VAT agreement and are based on a variety of challenges and experiences faced across business sectors, and also recommendations received from relevant parties, the Emirates News Agency (WAM) reported earlier.
For businesses in the UAE, the rules are as follows:
- If the taxable supplies and imports of a business exceed the mandatory registration limit of AED 375,000, the business must register for VAT.
- Businesses can also choose to register for VAT voluntarily if their supplies and imports exceed AED 187,500.
- Similarly, a business may register voluntarily if its expenses exceed the voluntary registration threshold. This is designed to enable start-up businesses with no turnover to register for VAT.
- Businesses in the UAE are required to record their financial transactions and maintain up-to-date records.
Among the changes made to Federal Decree-Law No.8 of 2017 on VAT is the provision that registered persons are allowed to apply for an exception from VAT registration if all of their supplies are zero-rated or if they no longer make any supplies other than zero-rated supplies.
Zero-rated supplies are supplies of property and services that are taxable at the rate of 0 percent. Some examples of zero-rated items include certain foods and beverages, exported goods, donated goods sold by charity shops, equipment for the disabled and prescription medications and is determined by the taxing authority.
Other changes include setting a 14-day period to issue a tax credit note to settle output tax, in line with the time frame for issuing tax invoices.
Aside from these changes, the UAE will also introduce a 9 percent federal corporate tax on business profits from the financial year starting on or after June 1, 2 percent, according to the Ministry of Finance.
Residential properties, bare land, public transport and the supply of certain financial services are exempt from VAT in the UAE. Supplies from government entities are typically subject to VAT; however, this ensures that government entities are not unfairly advantaged as compared to private businesses.
The ministry added that the Federal Tax Authority (FTA) may forcibly deregister persons in specific cases if necessary.
EmaraTax will seamlessly guide taxpayers to pay tax and obtain refunds
The FTA will also launch a new platform called EmaraTax on December 5 to “significantly” enhance taxpayer access to the FTA’s services, payment of taxes and obtaining refunds.
“The new online platform also dramatically enhances the ability of the FTA to administer taxes in the UAE and enables better, faster decision-making and earlier engagement with taxpayers that need support,” WAM said.
Once live, taxpayers will benefit from the improved and online platform designed to change how they manage their taxes. The FTA will continue until the first quarter of next year to launch additional services and features in phases, including an EmaraTax application for mobile phones.
The authority is also planning to host daily webinars so that every taxpayer has an opportunity to learn more about the new platform.
EmaraTax, which is built in line with the UAE’s Digital Government Strategy 2025 and led by Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister and Ruler of Dubai, will also see a dedicated microsite educating users about using EmaraTax, followed by instructional videos, Frequently Asked Questions, and details on how to join the free webinars.
The new platform’s launch is planned to coincide with the UAE’s National Day Holiday, state news agency WAM reported.
Follow us on
