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FAQs – Frequently Asked Questions about Taxes | Federal Tax Authority
What is VAT?

What is VAT?

Value Added Tax (or VAT) is an indirect tax. Occasionally you might also see it referred to as a type of general consumption tax. In a country which has a VAT, it is imposed on most supplies of goods and services that are bought and sold.

VAT is one of the most common types of consumption tax found around the world. Over 150 countries have implemented VAT (or its equivalent, Goods and Services Tax), including all 29 European Union members, Canada, New Zealand, Australia, Singapore and Malaysia.

VAT is charged at each step of the ‘supply chain’. Ultimate consumers generally bear the VAT cost while businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government.

A business pays the government the tax that it collects from the customers while it may also receive a refund from the government on tax that it has paid to its suppliers. The net result is that tax receipts to government reflect the ‘value add’ throughout the supply chain.

What is the difference between VAT and Sales Tax?

What is the difference between VAT and Sales Tax?

A sales tax is also a consumption tax, just like VAT. For the general public there may be no observable difference between how the two types of taxes work, but there are some key differences. In many countries, sales taxes are only imposed on transactions involving goods. In addition, sales tax is only imposed on the final sale to the consumer. This contrasts with VAT which is imposed on goods and services and is charged throughout the supply chain, including on the final sale. VAT is also imposed on imports of goods and services so as to ensure that a level playing field is maintained for domestic providers of those same goods and services.

Many countries prefer a VAT over sales taxes for a range of reasons. Importantly, VAT is considered a more sophisticated approach to taxation as it makes businesses serve as tax collectors on behalf of the government and cuts down on misreporting and tax evasion.

Why is the UAE implementing VAT?

Why is the UAE implementing VAT?

The UAE Federal and Emirate governments provide citizens and residents with many different public services – including hospitals, roads, public schools, parks, waste control, and police services. These services are paid for from the government budgets. VAT will provide the UAE with a new source of income which will contribute to the continued provision of high quality public services into the future. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.

Why does the UAE need to coordinate VAT implementation with other GCC countries?

Why does the UAE need to coordinate VAT implementation with other GCC countries?

The UAE is part of a group of countries which are closely connected through “The Economic Agreement Between the GCC States” and “The GCC Customs Union”. The GCC group of nations have historically worked together in designing and implementing new public policies as such a collaborative approach is best for the region.

What is the standard rate of VAT in the UAE?

What is the standard rate of VAT in the UAE?

The standard rate of VAT in the UAE is 5%.

How does the government collect VAT?

How does the government collect VAT?

Businesses are responsible for carefully documenting their business income and costs and associated VAT charges. Registered businesses and traders charge VAT to all of their customers at the prevailing rate and incur VAT on goods / services that they buy from suppliers. The difference between these sums is reclaimed or paid to the government.

Does VAT apply to all goods and services?

Does VAT apply to all goods and services?

VAT, as a general consumption tax, is applied at 5% to all transactions of goods and services unless specifically exempt in Article 46 of the Federal Decree-Law No. (8) of 2017 on Value Added Tax or subject to a rate of 0% as per Article 45 of the Federal Decree-Law.

What measures does the government take to ensure that businesses do not use the VAT implementation as an excuse to increase prices?

What measures does the government take to ensure that businesses do not use the VAT implementation as an excuse to increase prices?

VAT is intended to help improve the economic base of the country. Therefore, there are rules that require businesses to be clear about how much VAT you are paying for each transaction. Consumers should have the required information to decide whether to buy something or not.

How can one object to the decisions of the Authority?

How can one object to the decisions of the Authority?

Any person is able to object to a decision of the Federal Tax Authority.

As a first step, the person shall request the FTA to reconsider its decision. Such request of reconsideration has to be made within 20 business days from the date the person was notified of the original decision of the FTA, and the FTA will have 20 business days from receipt of such application to provide its revised decision.

If the person is not satisfied with the revised decision of the FTA, it will be able to object to the Tax Disputes Resolution Committee which will be set up for these purposes. Objections to the Committee will need to be submitted within 20 business days from the date the person was notified of the FTA’s revised decision, and the person must pay all taxes and penalties subject of objection before

objecting to the Committee. The Committee will typically be required to give its decision regarding the objection within 20 business days from its receipt.

As a final step, if the person is not satisfied with the decision of the Committee, the person may challenge its decision before the competent court. The appeal must be made within 20 business days from the date of the appellant being notified of the Committee’s decision

How do I include my Customs Registration in my records at the FTA?

How do I include my Customs Registration in my records at the FTA?

Log into the FTA e-Services portal via E-SERVICES, and go to EDIT on the VAT section and enter your Customs Registration Number. This will automatically update your records.

I am not able to download or print my Tax Registration Certificate…

I am not able to download or print my Tax Registration Certificate…

If you have been allocated a “Provisional TRN” and this has been communicated to you by email, you will receive the Tax Registration Certificate after the FTA has fully reviewed your application.

What is a residential building for VAT purposes?

What is a residential building for VAT purposes?

A residential building is a building or part thereof that is intended and designed for occupation by individuals, and mainly includes buildings which can be occupied by any person as main place of residence. It does not include:

  • Any place that is not a building fixed to the ground and can be moved without being damaged.
  • Any building that is used as a hotel, motel, bed and breakfast establishment, or hospital or the like.
  • A serviced apartment for which services in addition to the supply of accommodation are provided.
  • Any building constructed or converted without lawful authority.

 

What is a commercial building for VAT purposes?

What is a commercial building for VAT purposes?

A commercial building is any building or part thereof that is not a residential building. Examples would be offices, warehouses, hotels, shops, etc.

What is a supply in relation to real estate?

What is a supply in relation to real estate?

A supply of real estate may include the sale, lease or giving the right in any real estate.

Is a residential building subject to VAT?

Is a residential building subject to VAT?

The first supply of a new residential building within the first three years of it being constructed is zero-rated. All subsequent supplies are exempt, even if within the first three years.

Is commercial real estate subject to VAT?

Is commercial real estate subject to VAT?

All supplies of commercial properties are subject to VAT at 5%, and this includes all buildings or parts thereof that are not residential buildings.

Does the owner of real estate have to register for VAT?

Does the owner of real estate have to register for VAT?

The owners of residential buildings who only make exempt supplies do not have to register for VAT if they do not have any taxable business activities. Where owners have taxable business activities, they should consider their obligations further.

The owner of any building that is not residential, will have to register if the value of the supplies over the preceding 12 months exceeds AED 375,000 or it is expected that they will exceed AED 375,000 over the coming 30 days.

Can a real estate owner recover VAT paid in relation to real estate?

Can a real estate owner recover VAT paid in relation to real estate?

An owner of a residential building is not able to recover VAT in respect of expenses related to the exempt supply of the residential building.

An owner of a commercial building is generally able to recover VAT in respect of expenses related to the supply of the commercial building.

How is a mixed-use building (residential and commercial) treated for VAT purposes?

How is a mixed-use building (residential and commercial) treated for VAT purposes?

The rent or sale of a residential part of the building shall be treated as zero-rated or exempt, depending on whether this is a first supply within the first three years of completion of construction or a subsequent supply.

The rent or sale of a commercial part of the building shall be treated as subject to VAT at 5%.

Tax that cannot be directly attributed to exempt supplies or taxable supplies should be apportioned, and only the portion relating to the taxable supplies (at 0% and 5%) may be recovered.

Will VAT be charged on the property I am renting?

Will VAT be charged on the property I am renting?

The rent of a residential building will generally be exempt from VAT.

The rent of a commercial building will be subject to VAT at 5%

Since when was excise tax implemented in the UAE?

Since when was excise tax implemented in the UAE?

Excise Tax came into effect on 1 October 2017 based on Federal Decree-Law No. (7) of 2017 on Excise Tax. 

Which goods are subject to excise tax in the UAE?

Which goods are subject to excise tax in the UAE?

The following goods are subject to excise tax in the UAE at the following rates of tax:

  • Carbonated drinks – 50%
  • Energy drinks – 100%
  • Tobacco – 100%

 

What value does excise tax apply to?

What value does excise tax apply to?

Excise Tax is calculated based on the excise price. The excise price is the higher of the price published by the FTA in a standard price list if available and the designated retail sales price for the excise good less the tax included therein. 

Who is required to register for Excise Tax and what are the associated compliance obligations?

Who is required to register for Excise Tax and what are the associated compliance obligations?

The following groups are required to register for excise tax:

  • Producers of excise goods.
  • Importers of excise goods.
  • Stockpilers of excise goods.
  • Warehouse keepers supervising designated zones for Excise Tax purposes (where applicable).

Businesses that are required to pay excise tax should do the following:

  • Register with the FTA;
  • Submit excise tax returns on a monthly basis; and
  • Pay the excise tax due on the same date as submitting a tax return.

 

What is a stockpiler?

What is a stockpiler?

A stockpiler is a person that owns excise goods and cannot prove that excise tax has previously been paid on those goods.

When is Excise Tax due?

When is Excise Tax due?

Excise Tax is due when goods are ‘released for consumption’ i.e. when they enter free circulation in the UAE. Excise tax is due when:

  • Excise goods are imported into the UAE;
  • Excise goods are released for consumption in the UAE (e.g. manufactured and released from a designated zone/excise warehouse etc); or
  • Excise goods are acquired by a stockpiler, where tax has not previously been paid on these goods.

Excise tax is not a transaction-based tax, which means that goods do not need to be sold in order for the tax to be due.

What is a designated zone for Excise Tax purposes?

What is a designated zone for Excise Tax purposes?

A designated zone is the term used in the UAE to describe a specified area that is considered outside the UAE for excise tax purposes.

For an area to be treated as a designated zone, it must be officially registered and approved by the FTA and a warehouse keeper must be appointed as responsible over the designated zone. 

A designated zone should be a fenced area intended to be a free zone that cannot be entered or exited except through a designated road and any area designated by the FTA as being subject to the supervision of a warehouse keeper. 

Which areas can be registered as a designated zone for Excise Tax purposes?

Which areas can be registered as a designated zone for Excise Tax purposes?

A designated zone should be a fenced area intended to be a free zone that cannot be entered or exited except through a designated road and any area designated by the FTA as being subject to the supervision of a warehouse keeper. 

Are refunds of Excise Tax available?

Are refunds of Excise Tax available?

Unlike VAT, excise tax is paid once in the supply chain and businesses that have purchased excise goods cannot obtain a refund of the excise tax paid on those goods.

There are a limited number of cases where a refund of excise tax will be available. Those cases are:

  • When excise tax has been paid on an excise good, which is then produced in to a ‘new’ excise good, on which excise tax is again due;
  • When excise tax has been paid on an excise good that is then exported outside the UAE; or
  • When amounts have been paid to the FTA in error.

In the above cases, a business registered for excise tax will be entitled to a refund of the excise tax paid. The refund will be granted by allowing a deduction of the refundable amount from the tax due in the next excise tax return period.

There are also a limited number of cases where refunds will be available to people who are not registered for excise tax. Those cases are:

  • Where excise tax has been paid by certain international governments, diplomatic missions and international organisations in the course of their official activities, where a reciprocal agreement is in place between the UAE and the entity’s home country; and
  • Where excise tax has been paid in the UAE by a person who is registered for excise tax in another GCC country that is implementing excise tax and who has then exported the excise goods out of the UAE and paid excise tax in that other GCC country. 
  • A refund request form will be available on the FTA website that can be used to request refunds.

Is Excise Tax payable by travellers entering the UAE

Is Excise Tax payable by travellers entering the UAE

Travellers entering the UAE with excise goods for non-business purposes will not be required to register as an importer of excise goods.

Travellers may need to pay the excise tax due on the goods depending on the value of the goods being imported. Where the value of the goods is below the threshold for exemption from Customs Duty as per the Customs Laws, no excise tax is due.

Where the value of excise goods exceeds the value of the exemption for Customs Duty purposes, then excise tax will be due on the total value of the goods.

Physical payment of excise tax will be required before or at the time of import. Further details on the obligations of travellers or non-registered persons bringing excise goods into the UAE can be found in the Excise Tax Importers User Guide available on the FTA's website. 

Will there be bad debt relief for excise goods?

Will there be bad debt relief for excise goods?

Excise is not a transaction based tax so no relief will be available for suppliers that have sold excise goods to a customer and have not received payment from that customer. Excise tax is due based on the date the goods are released for consumption (i.e. enter free circulation) in the UAE, regardless of whether they are subject to an onward sale.

Will excise tax apply to goods released for consumption in a freezone?

Will excise tax apply to goods released for consumption in a freezone?

Goods released for consumption in a freezone will be subject to excise tax. This includes any freezone that may also be registered as a designated zone. If goods are held out for retail sale, or intended for consumption within a freezone, excise tax will need to be paid by the importer or producer that ‘released’ the goods.

Will samples be subject to excise tax?

Will samples be subject to excise tax?

Samples of excise goods that are given away for free will also be subject to excise tax. Excise tax is not a transaction based tax so tax is due on the goods when they are released for consumption (i.e. enter free circulation) in the UAE, regardless of whether or not they are intended for sale.

What is DTS?

What is DTS?

The DTS is a newly introduced compliance programme applicable to manufacturers and importers of tobacco and tobacco products. The DTS will deliver unique pack marks to allow product tracking and traceability from the point of manufacture through to final Emirate of distribution, and to support the enforcement activity targeting the reduction in illicit tobacco trading. For the time being, DTS will apply to cigarettes.
The DTS Solution will require the manufacturers to apply specific high security control markers (stamps) and digital codes to all packs, with the principle aims of the DTS System being:
To enhance the FTAs ability to control  excise taxes on cigarettes sold in the UAE, following importation or local manufacture.
To enhance the control of Excise Tax collection and give the relevant Authorities the ability to analyze and audit the supply chain to better identify the trade in illicit tobacco products.
To meet the compliance standards laid down by the WHO’s Framework Convention on Tobacco Control (FCTC) through the enabling of tracking and traceability of compliant tobacco products.
 
Why Is the UAE implementing a digital tax stamp (DTS) scheme?

Why Is the UAE implementing a digital tax stamp (DTS) scheme?

To support the Excise tax initiative for the tobacco products, a Digital Tax Stamp (DTS) control solution is being introduced, the purpose of which is to enable the FTA to raise compliance standards for tobacco products produced or imported into the UAE, focus enforcement activity on the illicit trade market, and also ensure that the income generated from the legal and compliant manufacture or importation is successfully distributed to the appropriate Emirate.
What products will fall under the DTS?

What products will fall under the DTS?

The scheme will initially focus on cigarettes from 2019, and will extend in time to include all tobacco-based products.
Communication of the timelines for non-cigarette based tobacco products will follow in the future. 
Information relating to any further products and categories to be added to the scheme will be communicated  in the future. 
 
Who will be required to register for DTS?

Who will be required to register for DTS?

Manufacturers - Any UAE-based or Overseas/International Cigarette Manufacturer that sells its products via importation into the UAE for EITHER domestic sales or sales via UAE Duty free outlets (airports and ports).
Importers – ANY officially licensed IMPORTER of RECORD who purchases Cigarettes in bulk from domestic or international manufacturers and undertakes to on-sell and distribute within the UAE mainland or UAE Duty Free markets.

Distributors / Supply Chain Agents/ Warehouse keepers – ANY official distributor that will be the recipient of formally imported goods for sales in domestic market or sales via UAE Duty free outlets (airports and ports).

 
When will the scheme go live? And what are the key milestones?

When will the scheme go live? And what are the key milestones?

1st Jan 2019
Importers and UAE-based Manufacturers will be able to order stamps to be sent to the Manufacturers for application to the pack of cigarette products.
 
1 May 2019.
No cigarette products without a digital tax stamp will be permitted to be imported into the UAE. 

1st August 2019
No cigarettes will be allowed to be held out for sale, imported or produced anywhere in the UAE unless they carry a Digital Tax Stamp.
All cigarettes produced or imported into the UAE after this date must have a Digital Tax Stamp with end-to-end traceability.
All cigarettes manufactured or legitimately imported with a digital tax stamp (without end-to-end traceability) between May 1st and August 1st may remain in market beyond this date.

 

Timelines for other tobacco products to be added to the scheme will be communicated in due course. 

 

 

 
Q6. What Global legislation and standards are behind the DTS scheme

Q6. What Global legislation and standards are behind the DTS scheme

Tobacco companies are already used to applying track and trace technology for their products. The solution we are applying in the UAE
Is compliant with the Global standard for tobacco supply and distribution – the United Nations World Health Organisation’s Framework Convention on Tobacco Control (FCTC) protocol.
Is delivered in partnership with De La Rue, the world’s leading anti-counterfeit company. 
The stamp itself contains world leading anti-counterfeit secure features – both visible and invisible. 
 
What actions will be taken against importers, manufacturers and distributors who fail to comply with the scheme

What actions will be taken against importers, manufacturers and distributors who fail to comply with the scheme

We expect all cigarettes in the UAE to carry a tax stamp. There will be penalties for non-compliance with the scheme. 
How will the scheme actually work in practice?

How will the scheme actually work in practice?

The FTA will licence all manufacturers, importers and distributors to trade in the UAE. 
With this licence in place, the importers/ local manufacturers will be able to order tax stamps. 
Unique tax stamps will be allocated and despatched to the manufacturers, with each stamp having a digital ‘twin’ (a unique code) with the stamp, and the coding being applied on-line to individual packs during the cigarette manufacturing process.
Manufacturers will submit the details of stamps and codes used to the central database and retain this information for reporting usage and intended export shipment data to the FTA. 
The FTA will be informed when batches have cleared customs.
Law enforcement will check throughout the supply chain that the tax stamps are in use 
 
When will affected businesses be able to register for DTS/Where can I find registration forms?

When will affected businesses be able to register for DTS/Where can I find registration forms?

In order to register for DTS, excise registered businesses need to complete a form (visit URL) and send it to the customer care team mailbox to ask for access(ftadtscustomercare@delarue.com).
The Customer Care team will then process the request and provide the importer/manufacturer with relevant and tailored access to the Certify system.  The DTS system for ordering Tax Stamps will go live on 1st Jan 2019.
 
What is the process of ordering the stamp?

What is the process of ordering the stamp?

Stamps will be ordered in the DTS system via a simple login and order management process which will be menu driven. When placed an order will be ratified by the FTA to ensure its veracity and completeness, and this will then trigger direct engagement with the intended recipient of the stamps (the Manufacturer).
For an importer to create an order, they need to:
Log on to the DLR Certify System
Enter their User Name and Password
Go to the ‘Manage Orders’ Section where they will be able to record key information relating to the order, including the market the order is for (for UAE or Duty Free, the product type (cigarettes initially) and the Product Code.
A step by step training manual will be shared in the training session. 
For any further questions, please contact the Customer Care team at ftadtscustomercare@delarue.com.
 
What is the validity period for the stamps?

What is the validity period for the stamps?

The validity period for stamps as decreed in the legislation is 12 months.
Are there any limitation of number of stamps that can be ordered?

Are there any limitation of number of stamps that can be ordered?

There are no limitations in place, however it will be worth noting that stamps are to be delivered in specific Minimum Order Quantities (MOQs) dependent upon the format of supply required: Reels, Sheets, Bundles. The MOQ requirements for each of these formats are as below:

Reel 30,000 Stamps (per single reel)
Sheets 240 Stamps (per single sheet
Bundles 70,000 (per box of bundled stamps

 
How do key manufacturers/distributors raise concerns or issues relating to the scheme, or have key questions addressed?

How do key manufacturers/distributors raise concerns or issues relating to the scheme, or have key questions addressed?

The FTA and its partner De La Rue are on hand to deal with any on-going issues and questions.
A Customer Care team is being established to handle all queries and can be reached at ftadtscustomercare@delarue.com. 
 
What help will retailers get from Manufacturers, Distributors and the FTA

What help will retailers get from Manufacturers, Distributors and the FTA

It is the responsibility of importers and manufacturers to ensure that the only products supplied into the UAE will be ones that carry tax stamps along with the approved encoding requirement at this time.
Law enforcement officers will be checking throughout the supply chain that this is the case.
 
What will happen to retailers who sell tobacco without a tax stamp?

What will happen to retailers who sell tobacco without a tax stamp?

We expect all cigarettes sold in the UAE from August 1st 2019 to carry a digital tax stamp.
There will be a penalty put in place for non-compliance, the details of which will be communicated in due course. 
 
How will consumers know what to look out for?

How will consumers know what to look out for?

Consumers should look for both the presence of physical stamps and digital codes on the products purchased in within the UAE. 
What consumers should do in case they find cigarettes pack without codes?

What consumers should do in case they find cigarettes pack without codes?

Consumers should look for both the presence of physical stamps and digital codes on the products purchased. 
If a consumer believes that a pack of cigarettes is without mark and code, then they should notify the FTA where they purchased the pack from, so the appropriate action can be taken. This is likely to involve action against the retailer, importer and manufacturer but will not impact the consumer. 
For any Consumer queries, please contact the Customer Care team on  ftadtscustomercare@delarue.com
 
Who can or will be able to register for VAT?

Who can or will be able to register for VAT?

A business must register for VAT if its taxable supplies and imports exceed the mandatory registration threshold of AED 375,000.

Furthermore, a business may choose to register for VAT voluntarily if its supplies and imports are less than the mandatory registration threshold, but exceed the voluntary registration threshold of AED 187,500.

Similarly, a business may register voluntarily if its expenses exceed the voluntary registration threshold. This latter opportunity to register voluntarily is designed to enable start-up businesses with no turnover to register for VAT.

What are the VAT-related responsibilities of businesses?

What are the VAT-related responsibilities of businesses?

VAT-registered businesses generally:

  • must charge VAT on taxable goods or services they supply;
  • may reclaim any VAT they have paid on business-related goods or services;
  • keep a range of VAT related business records (e.g. Tax invoices);
  • report their taxable supplies and purchases in periodic VAT returns.  
What does a business need to do to prepare for VAT?

What does a business need to do to prepare for VAT?

Businesses will need to meet certain requirements to fulfil their tax obligations. To fully comply with VAT, businesses will need to consider the VAT impact on their core operations, financial management and book-keeping, technology, and perhaps even their human resource mix (e.g., accountants and tax advisors). It is essential that businesses try to understand the implications of VAT and make every effort to align their business model to government reporting and compliance requirements. 

When are businesses supposed to start registering for VAT?

When are businesses supposed to start registering for VAT?

A Person required to register for VAT needs to submit a registration application to the FTA within 30 days of being required to register. 

Registration applications shall be submitted via the e-Services Portal on the FTA website

www.tax.gov.ae

When are registered businesses required to file VAT returns?

When are registered businesses required to file VAT returns?

Taxable Persons must file VAT returns with the FTA on a regular basis, within 28 days of the end of the Tax Period.

The Tax returns shall be filed online using e-Services.

What kind of records are businesses required to maintain, and for how long?

What kind of records are businesses required to maintain, and for how long?

Businesses are required to keep records which will enable the Federal Tax Authority to identify the details of the business activities and review transactions. The documents which are required and the time period for keeping them are prescribed in Federal Law no. (7) of 2017 on Federal Tax procedures and the Cabinet Decision No. (36) of 2017 on the Executive Regulation of the Federal Law No. (7) of 2017 on Tax Procedures.

How long must a taxable person retain VAT invoices for?

How long must a taxable person retain VAT invoices for?

Any taxable person must retain VAT invoices issued and received for a minimum of 5 years.

How should a business determine the place of supply?

How should a business determine the place of supply?

The place of supply will determine whether a supply is made within the UAE (in which case the UAE VAT legislation will apply), or outside the UAE for VAT purposes.

For a supply of goods, the place of supply should be the location of goods when the supply takes place with special rules for certain categories of supplies (e.g. water and energy, cross border supplies).

For the supply of services, the place of supply should generally be where the supplier is established with special rules for certain categories of supplies (e.g. for the supply of catering services, the place of supply shall be where the services are actually performed).

Can businesses offset customs duty against VAT payments?

Can businesses offset customs duty against VAT payments?

No. VAT is payable in addition to applicable customs duties. VAT is computed on the value that includes the customs duties.

How will real estate be treated?

How will real estate be treated?

The VAT treatment of real estate will depend on whether it is a commercial or residential property.

Supplies (including sales or leases) of commercial properties will be taxable at the standard VAT rate (i.e 5%).

On the other hand, supplies of residential properties will generally be exempt from VAT. This will ensure that VAT would not constitute an irrecoverable cost to persons who buy their own properties. In order to ensure that real estate developers can recover VAT on construction of residential properties, the first supply of residential properties (through sale or lease) within 3 years from their completion will be zero-rated.
What sectors will be zero rated?

What sectors will be zero rated?

VAT will be charged at 0% in respect of the following main categories of supplies:

  • Exports of goods and services to outside the GCC;
  • International transportation, and related supplies;
  • Supplies of certain sea, air and land means of transport (such as aircraft and ships);
  • Certain investment grade precious metals (e.g. gold, silver, of 99% purity);
  • Newly constructed residential properties, that are supplied for the first time within 3 years of their construction;
  • Supply of certain education services, and supply of relevant goods and services;
  • Supply of certain healthcare services, and supply of relevant goods and services.

 

What are the categories of exempt supplies?

What are the categories of exempt supplies?

The following categories of supplies will be exempt from VAT:

  • The supply of some financial services;
  • Residential properties (excluding the first supply of newly constructed residential property which qualifies for the zero-rating treatment);
  • Bare land; and
  • Local passenger transport.

 

Will there be VAT grouping?

Will there be VAT grouping?

Businesses that satisfy certain requirements covered under the Legislation (such as being resident in the UAE and being related/associated parties) will be able to register as a VAT group. VAT grouping would generally simplify accounting for VAT. 

Will there be bad debt relief?

Will there be bad debt relief?

VAT registered businesses will be able to reduce their output tax liability by the amount of VAT that relates to bad debt which has been written off by the VAT registered business. The legislation includes the conditions and limitations concerning the use of this relief.

Will there be a profit margin scheme?

Will there be a profit margin scheme?

To avoid double taxation where second hand goods are acquired by a registered person from an unregistered person for the purpose of resale, the VAT-registered person will be able to account for VAT on sales of second hand goods with reference to the difference between the purchase price of the goods and the sale price of the goods (that is, the profit margin). The VAT which must be accounted for by the registered person will be included in the profit margin. Further details of the conditions to be met in order to apply this mechanism can be found in the Executive Regulations of the Federal Decree-Law No.(8) of 2017 on Value Added Tax.

How will partial exemption work?

How will partial exemption work?

Where a VAT registered person incurs input tax on its business expenses, this input tax can be recovered in full if it relates to a taxable supply made, or intended to be made, by the registered person. In contrast, where the expense relates to a non-taxable supply (e.g. exempt supplies), the registered person may not recover the input tax paid.

In certain situations, an expense may relate to both taxable and non-taxable supplies made by the registered person (such as activities of the banking sector). In these circumstances, the registered person would need to apportion input tax between the taxable and non-taxable supplies.

Businesses will be expected to use input tax (ratio of recoverable input tax to total input tax incurred) as a basis for apportionment in the first instance although there will be the facility to use other methods where they are fair and agreed with the Federal Tax Authority.

What are the cases that would lead to the imposition of penalties?

What are the cases that would lead to the imposition of penalties?

Penalties will be imposed in cases of non-compliance with tax legislation.

Examples of actions and omissions that may trigger penalties include:

  • A person failing to register when required to do so;
  • A person failing to submit a tax return or to make a payment within the required period;
  • A person failing to keep the records required under the issued tax legislation;
  • Tax evasion offences where a person performs a deliberate act or omission with the intention of violating the provisions of the issued tax legislation.

 

Will there be any special schemes for SMEs?

Will there be any special schemes for SMEs?

No special rules are planned for small or medium sized enterprises. However, the FTA is providing through its website material and resources for these entities to assist them with their enquiries.

What are transitional rules?

What are transitional rules?

There are special rules that deal with various situations that may arise in respect of supplies that span the introduction of VAT. For example:

  • Where a payment is received in respect of a supply of goods before the introduction of VAT but the goods are actually delivered after the introduction of VAT, this means that VAT will have to be charged on such supplies. Likewise, special rules apply with regards to supplies of services spanning the introduction of VAT.
  • Where a contract is concluded prior to the introduction of VAT in respect of a supply which is wholly or partly made after the introduction of VAT, and the contract does not contain clauses relating to the VAT treatment of the supply, then consideration for the supply is treated as inclusive of VAT. There are, however, special provisions that allow suppliers to charge VAT in situations where the recipient is able to recover the VAT even if there is no VAT clause in the contract.

 

How will insurance be treated?

How will insurance be treated?

Generally, insurance (vehicle, medical, etc) is taxable. Life insurance, however, is an exempt service.

How will financial services be treated?

How will financial services be treated?

Fee based financial services are subject to VAT while margin based products are exempt.

How will Islamic finance be treated?

How will Islamic finance be treated?

Islamic finance products are consistent with the principles of sharia and therefore often operate differently from financial products that are common internationally.

To ensure that there are no inconsistencies between the VAT treatment of standard financial services and Islamic finance products, the treatment of Islamic finance products is aligned with the treatment of similar standard financial services.

Can UAE nationals claim VAT incurred on building new residences?

Can UAE nationals claim VAT incurred on building new residences?

A scheme has been introduced to allow UAE nationals to reclaim VAT paid on goods and services relating to constructing new residences which will be privately used by the person and his family. This will allow the recovery of VAT incurred on such expenses including contractor’s services and building material.

How quickly will refunds be released?

How quickly will refunds be released?

Refunds will be made after the receipt of the application and subject to verification checks, with a particular focus on avoiding fraud.

Will FTA issue rulings or provide tax advice?

Will FTA issue rulings or provide tax advice?

In the course of its interaction with taxpayers, the FTA may provide its views on various matters in the law. Taxpayers may choose to challenge these views. It should be noted that penalties may be imposed on taxpayers who are found to violate any tax laws and regulations.

Will it be possible to issue cash receipts instead of VAT invoices?

Will it be possible to issue cash receipts instead of VAT invoices?

A registered taxable person must issue a valid VAT invoice for its taxable supplies. To be considered as a valid VAT invoice, the document must include certain particulars as mentioned in the legislation. In certain situations the supplier may be able to issue a simplified VAT invoice. The conditions for the VAT invoice and the simplified VAT invoice are mentioned in the legislation.

Under which conditions will businesses be allowed to claim VAT incurred on expenses?

Under which conditions will businesses be allowed to claim VAT incurred on expenses?

VAT on expenses that were incurred by a business can be deducted in the following circumstances:

  • The business must be a taxable person.
  • VAT should have been charged correctly (i.e. unduly charged VAT is not recoverable).
  • The business must hold documentation showing the VAT paid (e.g. valid tax invoice).
  • The goods or services acquired are used or intended to be used for making taxable supplies.
  • VAT input tax refund can be claimed only on the amount paid or intended to be paid before the expiration of 6 months after the agreed date for the payment of the supply.

 

Will non-residents be required to register for VAT?

Will non-residents be required to register for VAT?

Non-residents that make taxable supplies in the UAE will be required to register for VAT unless there is any other UAE resident person who is responsible for accounting for VAT on these supplies.

Will VAT be paid on imports?

Will VAT be paid on imports?

VAT is due on the goods and services purchased from abroad.

In case the recipient in the State is a registered person with the Federal Tax Authority for VAT purposes, VAT would be due on that import using a reverse charge mechanism.

In case the recipient in the State is a non-registered person for VAT purposes, VAT would need to be paid before the goods are released to the person.

How will Government Entities be treated for VAT purposes?

How will Government Entities be treated for VAT purposes?

Supplies made by government entities will typically be subject to VAT. This will ensure that government entities are not unfairly advantaged as compared to private businesses.

Certain supplies made by government entities will, however, be excluded from the scope of VAT if they are not in competition with the private sector or where the entity is the sole provider of such supplies. It is likely that certain government entities will be entitled to VAT refunds.

For the supplies provided for government entities, the treatment of such supplies shall depend on the same supply and not on the recipient of the supply. Therefore, if the supply is subject to the standard rate, the treatment would remain the same even if it is provided to a government entity.

Will businesses have to report their business activities in respect of each Emirate?

Will businesses have to report their business activities in respect of each Emirate?

Businesses will need to complete additional information on their VAT returns to report revenues earned in each Emirate.

Further detail on this can be found in the Executive Regulation of the Federal Decree-Law No. (8) of 2017 on Value Added Tax.

Will the goods exempt from customs duties also be exempt from VAT?

Will the goods exempt from customs duties also be exempt from VAT?

No. Imported goods may be exempt from customs duties but still be subject to VAT.

Will tourists also pay VAT?

Will tourists also pay VAT?

Purchase of goods and services by tourists in the UAE will be subject to VAT. However, tourists will be eligible to reclaim the VAT incurred on their purchase of goods under the Tax Refunds for Tourists Scheme subject too meeting certain conditions. 

Is there a special refund for business visitors?

Is there a special refund for business visitors?

Yes. Further details are available in the VAT refund for business visitors user guide. 

How can someone access UAE Tax legislation?

How can someone access UAE Tax legislation?

All Federal Tax Laws, Executive Regulations and Cabinet Decisions are published under the “Legislation” section on the FTA website.

What other taxes is the UAE considering?

What other taxes is the UAE considering?

As per global best practice, the UAE is exploring other tax options as well. However, these are still being analysed and it is unlikely that they will be introduced in the near future. The UAE is not currently considering personal income taxes, however.

Can Tourist Refund Scheme claims be validated 24/7 at all locations?

Can Tourist Refund Scheme claims be validated 24/7 at all locations?

Validation will be available 24/7 and refund desks will be open at major airports 24/7. 
Who will provide the refund under the Tourist Refund Scheme at the airport?

Who will provide the refund under the Tourist Refund Scheme at the airport?

You can find a list of cash refund points on planetpayment.ae. Planet will process credit or debit card refunds.
Tax Refunds for Tourists Scheme: Can someone other than the tourist validate the Tax Free Tag and collect the refund?

Tax Refunds for Tourists Scheme: Can someone other than the tourist validate the Tax Free Tag and collect the refund?

No. Only the owner of the passport/GCC ID under which the Tax Free Tag is registered is entitled to validate them and collect the refund.
Tax Refunds for Tourists Scheme: Do goods have to be exported in original packaging?

Tax Refunds for Tourists Scheme: Do goods have to be exported in original packaging?

No, but goods and original packaging will have to be available for inspection to confirm that the goods are newly purchased. 
Tax Refunds for Tourists Scheme: Does a tourist require the physical Tax Free Tag or can he save the image of the Tax Free Tag and invoice on the mobile phone?

Tax Refunds for Tourists Scheme: Does a tourist require the physical Tax Free Tag or can he save the image of the Tax Free Tag and invoice on the mobile phone?

The physical Tax Free Tag must be attached to the invoice at the point of exit (validation).
Tax Refunds for Tourist Scheme: What does a tourist need to do to have the refund paid to the credit or debit card?

Tax Refunds for Tourist Scheme: What does a tourist need to do to have the refund paid to the credit or debit card?

During validation the tourist will be asked to enter their card details. Refunds can be made to Visa, MasterCard, Amex and Union Pay.
Tax Refunds for Tourists Scheme: How can the tourist collect their refund?

Tax Refunds for Tourists Scheme: How can the tourist collect their refund?

The tourist can have the refund paid to their credit or debit card or where available collect the refund in cash from a Planet cash refund agent. A tourist may also be able to claim the refund via e-vouchers at exit points where cash is not available. When validating a Tax Free Tag the tourist will choose their preferred refund method. A list of cash refund points can be found on the Planet website.
Tax Refunds for Tourists Scheme: How can the tourist track their refund?

Tax Refunds for Tourists Scheme: How can the tourist track their refund?

The tourist can track their refund by scanning the QR code on the Tax Free Tag using their smartphone, and this will take them to a unique website link that will show the refund status.
Tax Refunds for Tourist Scheme: How does the tourist know which shops offer Tax Free shopping?

Tax Refunds for Tourist Scheme: How does the tourist know which shops offer Tax Free shopping?

Look for stores displaying the Planet Tax Free and FTA logo, or ask in store.
Tax Refunds for Tourists Scheme: How early can the tourist get their Tax Free Tag validated at the airport or port?

Tax Refunds for Tourists Scheme: How early can the tourist get their Tax Free Tag validated at the airport or port?

The validation point will begin accepting Tax Free Tags from 6 hours before the tourist's scheduled departure time.
Tax Refunds for Tourist Scheme: How much does a tourist have to spend to qualify for Tax Free shopping?

Tax Refunds for Tourist Scheme: How much does a tourist have to spend to qualify for Tax Free shopping?

The minimum purchase amount is AED 250 per Tax Free Tag. This can be made up of more than one purchase within the same store group on the same day.
Tax Refunds for Tourists Scheme: How much is the refund?

Tax Refunds for Tourists Scheme: How much is the refund?

The refund is 85% of the VAT minus 4.80 AED per Tax Free Tag.
Tax Refunds for Tourists Scheme: How much time does the tourist have to export the goods and have the Tax Free Tag validated?

Tax Refunds for Tourists Scheme: How much time does the tourist have to export the goods and have the Tax Free Tag validated?

The tourist must export the goods and have the Tax Free Tag validated within 3 months of purchase otherwise a tax free refund is not possible.
Tax Refunds for Tourists Scheme: If the tourist fails to obtain validation on exit, is there anything they can do?

Tax Refunds for Tourists Scheme: If the tourist fails to obtain validation on exit, is there anything they can do?

The tourist can return to the UAE with the goods and obtain validation on their departure within 3 months from the date of purchase. Goods must not be consumed or partly consumed when requesting validation, and must be available for inspection.
Tax Refunds for Tourist Scheme: Is there a limit on the number of items that a tourist can claim refund on? (e.g. 10 mobile phones)

Tax Refunds for Tourist Scheme: Is there a limit on the number of items that a tourist can claim refund on? (e.g. 10 mobile phones)

No, however they should be for personal use or gifts. Purchases may be subject to increased checks if it is suspected that these goods are not for personal use.
Tax Refunds for Tourist Scheme: Is there a maximum amount the tourist can spend?

Tax Refunds for Tourist Scheme: Is there a maximum amount the tourist can spend?

No.

 

Tax Refunds for Tourists Scheme: Should goods be available for inspection at the exit points?

Tax Refunds for Tourists Scheme: Should goods be available for inspection at the exit points?

Yes.
Tax Refunds for Tourists Scheme: The tourist has obtained the Tax Free Tag. What are the next steps?

Tax Refunds for Tourists Scheme: The tourist has obtained the Tax Free Tag. What are the next steps?

The tourist must keep the Tax Free Tag attached to the invoice until their day of departure. On departure, the tourist must present their Tax Free Tag to a member of Planet staff or go to a Planet self-serve kiosk to have the Tax Free Tag digitally validated before checking in their luggage and going through security. At the end of the process, the tourist can choose whether they want a credit/debit card or cash refund.
Tax Refunds for Tourists Scheme: What currency will the refund appear in on the tourist's card statement?

Tax Refunds for Tourists Scheme: What currency will the refund appear in on the tourist's card statement?

The refund will appear in the currency of the card.
Tax Refunds for Tourists Scheme: What does a tourist need to do to collect their refund in cash?

Tax Refunds for Tourists Scheme: What does a tourist need to do to collect their refund in cash?

After validation, the tourist presents their passport/ GCC ID and Tax Free Tags to a Cash Refund Agent. Planet staff will be able to direct the tourist to the nearest cash agent.
Tax Refunds for Tourists Scheme: What happens if some goods are too large to carry and have to be shipped?

Tax Refunds for Tourists Scheme: What happens if some goods are too large to carry and have to be shipped?

Goods must be available for inspection at the validation point. The validation point will be before check in, luggage drop-off and security. The goods must be accompanied by the tourist when leaving the UAE so if they are shipped via courier they are not eligible goods under this scheme.
Tax Refunds for Tourists Scheme: What happens if the refund cannot be collected at the point of departure because there is no time or there is a long queue?

Tax Refunds for Tourists Scheme: What happens if the refund cannot be collected at the point of departure because there is no time or there is a long queue?

The Tax Free Tag must be validated at departure or no refund can be made. However, a tourist can provide card details later to obtain the refund once goods have been validated if they didn't have time to get a refund.
Tax Refunds for Tourist Scheme: What is validation or digital validation?

Tax Refunds for Tourist Scheme: What is validation or digital validation?

Validation is the confirmation that the goods have been exported and the VAT can be reclaimed for these purchases. This is done by Planet at the point of exit (either by the staff, or by self-serve kiosks) before the tourist checks in their luggage and goes through security. There may also be additional checks required after security.
Tax Refunds for Tourists Scheme: Where are the export validation points?

Tax Refunds for Tourists Scheme: Where are the export validation points?

Planet Validation points will be before check in and are branded Planet Tax Free. Initially these will be in Abu Dhabi, Dubai and Sharjah International Airports. The validation points will be open 24/7. 
These will be followed by other validation points including Dubai Al Maktoum airport, Al Ain airport, Ras Al Khaimah airport, Port Zayed, Port Rashid, Al Ghuwaifat land border, Al Ain land border and Hatta land border.
Tax Refunds for Tourists Scheme: Will the tourist be able to claim a refund on things like restaurant meals or taxis?

Tax Refunds for Tourists Scheme: Will the tourist be able to claim a refund on things like restaurant meals or taxis?

No, only eligible goods can receive a Tax Free Tag for refund.
Tax Refunds for Tourists Scheme: Can a resident who has cancelled his resident visa and is on the grace period for one month claim VAT on items purchased after the visa is cancelled?

Tax Refunds for Tourists Scheme: Can a resident who has cancelled his resident visa and is on the grace period for one month claim VAT on items purchased after the visa is cancelled?

No.
Tax Refunds for Tourist Scheme: Who is eligible?

Tax Refunds for Tourist Scheme: Who is eligible?

Overseas Tourists are eligible for this type of refund. In the law, a tourist is defined as any natural person who is not resident in any of the Implementing States and who is not a crew member on a flight or aircraft leaving an Implementing State. Please note that currently, all GCC countries are considered as Non-Implementing States of the GCC VAT Treaty and therefore visitors from the other GCC states will be able to claim VAT refunds on their UAE shopping. This is subject to change in the future. Please note the tourist should be 18 years old or over to be eligible to claim a refund.
Tax Refunds for Tourists Scheme: Does the tourist have to present Tax Free Tags at the time of refund when leaving the UAE?

Tax Refunds for Tourists Scheme: Does the tourist have to present Tax Free Tags at the time of refund when leaving the UAE?

The invoice must be attached to the Tax Free Tag and presented at the airport as part of the refund process. If not, the tourist will not receive their tax free refund at the exit point. Invoice wallets will be handed to tourists at the stores to keep their Tax Free Tag purchases organised.
Tax Refunds for Tourists Scheme: What happens if the tourist claims their VAT refund and a relative then tries to refund or exchange the goods?

Tax Refunds for Tourists Scheme: What happens if the tourist claims their VAT refund and a relative then tries to refund or exchange the goods?

The person requesting the refund must be the person whose name and passport number is recorded in the Tax Free Tag transaction. The return of goods is allowed before the Tax Free Tag has been validated at the point of exit (the merchant will have to void the Tax Free Tag following Planet's procedures). Returns are not allowed after the tourist has validated the Tax Free Tag at the point of exit from the UAE.
Tax Refunds for Tourists Scheme: What happens when a tourist buys goods in the UAE and returns the goods in participating stores in the UAE or abroad (if allowed by the merchant)?

Tax Refunds for Tourists Scheme: What happens when a tourist buys goods in the UAE and returns the goods in participating stores in the UAE or abroad (if allowed by the merchant)?

Returns are allowed before the Tax Free Tag has been validated at the point of exit (the merchant will have to void the Tax Free Tag following Planet's procedures). Returns are not allowed after the tourist has validated the Tax Free Tag at the point of exit from the UAE.
Tax Refunds for Tourists Scheme: Can I claim a refund if the payment is made by my friend or relative using cash or credit card?

Tax Refunds for Tourists Scheme: Can I claim a refund if the payment is made by my friend or relative using cash or credit card?

Yes, as long as the tourist exporting the goods is present during the purchase, and it is the exporter's information that is completed for the VAT refund.
Tax Refunds for Tourists Scheme: Can one claim the refund before getting to the point of exit from UAE?

Tax Refunds for Tourists Scheme: Can one claim the refund before getting to the point of exit from UAE?

No.
Tax Refunds for Tourists Scheme: If the refund is above AED 10,000, can the tourist claim a cash refund at the airport?

Tax Refunds for Tourists Scheme: If the refund is above AED 10,000, can the tourist claim a cash refund at the airport?

The tourist can get a refund in cash up to AED 10,000, for all the Tax Free Tags that add up to that amount (or less). Once they pass that amount, the remaining tags must be refunded by credit or debit card only.
Tax Refunds for Tourists Scheme: How many days will it take for a credit card refund?

Tax Refunds for Tourists Scheme: How many days will it take for a credit card refund?

Card refunds are typically processed by Planet within 10 days, excluding the bank's or credit card company's own processing times.
Tax Refunds for Tourists Scheme: Is a cash refund available on both the airside and landside at airports?

Tax Refunds for Tourists Scheme: Is a cash refund available on both the airside and landside at airports?

Where available, a cash refund will only be given at the airside.
Tax Refunds for Tourists Scheme: Is there any additional cost to get a refund on a credit card by Planet or my bank?

Tax Refunds for Tourists Scheme: Is there any additional cost to get a refund on a credit card by Planet or my bank?

There would be a standard currency exchange rate that would be applied to convert funds into the cardholder's currency (where currency is not AED).
Tax Refunds for Tourist Scheme: Is there any charge for a refund in cash?

Tax Refunds for Tourist Scheme: Is there any charge for a refund in cash?

There is no charge for a refund in cash. However, if a tourist wishes to exchange the refund from AED into another currency, the Cash Refund Agent's advertised exchange rates would be applied.
Tax Refunds for Tourists Scheme: What happens if there is no cash refund counter at the border point?

Tax Refunds for Tourists Scheme: What happens if there is no cash refund counter at the border point?

The refund will be made by credit card, debit card or e-voucher where applicable.
Tax Refunds for Tourists Scheme: Who does the tourist need to contact if there is a delay in the refund?

Tax Refunds for Tourists Scheme: Who does the tourist need to contact if there is a delay in the refund?

Tourists are advised to track their refund by scanning the QR code on the Tax Free Tag using a smartphone, and that will take them to a unique tracking page to see further details. If further assistance is required, the tourist can contact the Planet Customer Services team.
Is a refund under the Tax Refunds for Tourists Scheme permissible on partially consumed goods? (Dates, chocolates, perfume)

Is a refund under the Tax Refunds for Tourists Scheme permissible on partially consumed goods? (Dates, chocolates, perfume)

No.
Is a refund under the Tax Refunds for Tourists Scheme permissible on partially used goods? For example, I start using my iPhone or have used perfume.

Is a refund under the Tax Refunds for Tourists Scheme permissible on partially used goods? For example, I start using my iPhone or have used perfume.

Yes (e.g. smartphones) as long as they are accompanied by the original packaging when validating their export at the exit point. A perfume that has been opened however is not eligible for a refund.
Tax Refunds for Tourists Scheme: What happens if 5 boxes are on the Tax Free Tag, one box is consumed and 4 other boxes are exported?

Tax Refunds for Tourists Scheme: What happens if 5 boxes are on the Tax Free Tag, one box is consumed and 4 other boxes are exported?

The refund may only be claimed on the 4 boxes that are being exported.
Tax Refunds for Tourists Scheme: Can one reclaim VAT if ordering on an e-commerce website? If yes, what will be the procedure?

Tax Refunds for Tourists Scheme: Can one reclaim VAT if ordering on an e-commerce website? If yes, what will be the procedure?

Yes, the invoice should be issued on the date the goods are collected in person by the tourist at a physical store, and the Tax Free Tag issued and attached to it on the same day. If the tourist pays online, the invoice must clearly state that it is an advance / deposit / booking fee and when collectiing the goods the actual sales invoice is issued on the day. Otherwise it is not possible to purchase online and claim tax free refunds.
Tax Refunds for Tourists Scheme: What are the timings of the merchant support help line?

Tax Refunds for Tourists Scheme: What are the timings of the merchant support help line?

The merchant support help line will be available 7 days a week from 10am to midnight (and 2am for holidays when extended store hours are in place). Emails can be sent at any time.
Tax Refunds for Tourists Scheme: Can restaurants register?

Tax Refunds for Tourists Scheme: Can restaurants register?

Yes, if a restaurant sells goods that are eligible under this scheme, they can register.
Tax Refunds for Tourists Scheme: If the tourist does not have their passport details on them at the time of purchase, can the tax refund form be issued?

Tax Refunds for Tourists Scheme: If the tourist does not have their passport details on them at the time of purchase, can the tax refund form be issued?

No, as a minimum, the original or copy of the passport or GCC ID details are needed.
Tax Refunds for Tourists Scheme: If the tourist has purchased goods and lost the invoice, can they come back to the merchant to issue a new Tax Free Tag?

Tax Refunds for Tourists Scheme: If the tourist has purchased goods and lost the invoice, can they come back to the merchant to issue a new Tax Free Tag?

No, as the purchase invoice is required (the Tax Free Tag is attached to the purchase invoice).
Tax Refunds for Tourists Scheme: Is it necessary to issue a Tax Free Tag for a tourist to get a refund?

Tax Refunds for Tourists Scheme: Is it necessary to issue a Tax Free Tag for a tourist to get a refund?

Yes, a Tax Free Tag must be attached to each invoice to obtain a tax refund.
Tax Refunds for Tourists Scheme: Is the tourist expected to have the original passport?

Tax Refunds for Tourists Scheme: Is the tourist expected to have the original passport?

The preference (for better customer & merchant experience) is that the tourist presents their original passport / GCC ID at point of purchase. However, a clear copy would suffice of the passport / GCC ID number and tourist details. For validation at the point of exit, the original passport or GCC ID must be presented.
Tax Refunds for Tourists Scheme: Is there any refund for services i.e. watch repair etc.? What if a part has to be purchased for repair?

Tax Refunds for Tourists Scheme: Is there any refund for services i.e. watch repair etc.? What if a part has to be purchased for repair?

No.
Tax Refunds for Tourists Scheme: What goods are eligible?

Tax Refunds for Tourists Scheme: What goods are eligible?

All taxable goods are eligible except for:
Goods that have been consumed, in full or in part, in the UAE;
Goods that are not accompanied by the overseas tourist at the time of leaving the UAE;
Motor vehicles, boats and aircraft.
Tax Refunds for Tourist Scheme: What if the tourist purchases the goods and then asks for the purchase to be added to an existing Tax Free Tag? What if he asks on the following day?

Tax Refunds for Tourist Scheme: What if the tourist purchases the goods and then asks for the purchase to be added to an existing Tax Free Tag? What if he asks on the following day?

The tourist can consolidate up to 8 receipts on the same day of purchase from the same store group.  
What is a residential building for VAT purposes?

What is a residential building for VAT purposes?

A residential building is a building or part thereof that is intended and designed for occupation by individuals, and mainly includes buildings which can be occupied by any person as main place of residence. It does not include:

  • Any place that is not a building fixed to the ground and can be moved without being damaged.
  • Any building that is used as a hotel, motel, bed and breakfast establishment, or hospital or the like.
  • A serviced apartment for which services in addition to the supply of accommodation are provided.
  • Any building constructed or converted without lawful authority.

 

What is a commercial building for VAT purposes?

What is a commercial building for VAT purposes?

A commercial building is any building or part thereof that is not a residential building. Examples would be offices, warehouses, hotels, shops, etc.

What is a supply in relation to real estate?

What is a supply in relation to real estate?

A supply of real estate may include the sale, lease or giving the right in any real estate.

Is a residential building subject to VAT?

Is a residential building subject to VAT?

The first supply of a new residential building within the first three years of it being constructed shall be zero-rated. All subsequent supplies shall be exempt, even if within the first three years.

Is commercial real estate subject to VAT?

Is commercial real estate subject to VAT?

All supplies of commercial properties or parts thereof, are subject to VAT at 5%.

 

Does the owner of real estate have to register for VAT?

Does the owner of real estate have to register for VAT?

The owners of residential buildings do not have to register for VAT if they do not have any other business activities. Where owners have other business activities, they should consider their obligations further.

The owner of any building that is not residential, will have to register if the value of the supplies over the preceding 12 months exceeds AED 375,000 or it is expected that they will exceed AED 375,000 over coming 30 days. 

Can a real estate owner recover VAT paid in relation to real estate?

Can a real estate owner recover VAT paid in relation to real estate?

An owner of residential building will not be able to recover VAT in respect of expenses relating to the exempt supply of the residential buildings.

An owner of a commercial building will generally be able to recover VAT in respect of expenses relating to the supply of the building.

How is a mixed-use building (residential and commercial) treated for VAT?

How is a mixed-use building (residential and commercial) treated for VAT?

The rent or sale of a residential part of the building shall be treated as zero-rated or exempt, depending on whether this is a first supply or a subsequent supply.

The rent or sale of a commercial part of the building shall be treated as subject to VAT at 5%.

The tax incurred by the owner on the building needs to be apportioned where there is an exempt supply, and the portion related to the taxable supply (at 0% and 5%) may be recovered.

Will VAT be charged on the property I am renting?

Will VAT be charged on the property I am renting?

The rent of residential building will generally be exempt from VAT.

The rent of commercial building will be subject to VAT at 5%

What is Tax?

What is Tax?

Tax is the means by which governments raise revenue to pay for public services. Government revenues from taxation are generally used to pay for things such public hospitals, schools and universities, defence and other important aspects of daily life.

  • A direct tax is collected by a government from the person on whom it is imposed (e.g., income tax, corporate tax).
  • An indirect tax is collected for a government by an intermediary (e.g. a retail store) from the person that ultimately pays the tax (e.g., VAT, Sales Tax).

 

What other taxes are the UAE considering?

What other taxes are the UAE considering?

As per global best practice, the UAE is exploring other tax options as well. However, these are still being analysed and it is unlikely that they will be introduced in the near future. The UAE is not currently considering personal income taxes, however.

Will the introduction of taxes impact economic growth of the UAE?

Will the introduction of taxes impact economic growth of the UAE?

Our analysis suggests that it will help the country strengthen its economy by diversifying revenues away from oil and will allow us to fund many public services. This is a sign of a maturing economy.

Where can I learn more about the UAE VAT?

Where can I learn more about the UAE VAT?

The FTA website includes guides, public clarifications and other references that aim at assisting persons with a better understanding of UAE tax legislation. 

A telephone hotline has been set up so that you can call and speak to one of our employees directly on 600599994.

Changing my business systems for VAT reporting will cost money. Can the government help?

Changing my business systems for VAT reporting will cost money. Can the government help?

The FTA provides information and education to businesses to help them with their tax implementation. The government will not pay for businesses to buy new technologies or hire tax specialists and accountants. That is the responsibility of each business.

What are the penalties for not complying with a business’s VAT obligations?

What are the penalties for not complying with a business’s VAT obligations?

Everyone is urged to fully comply with their VAT obligations.

Administrative penalties for violations have been issued by Cabinet Decision No. (40) of 2017 and can be found under the Legislation section on the FTA website.

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Page last updated on: 17 October 2021 - 04:18:32 PM

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