DMCC VAT Registration Certificate has been issued.
Entities having a taxable supply exceeding AED 375,000 are required to register for VAT.
You will need to be registered in order to claim back any VAT you pay as a business.
DMCC VAT Registration Certificate has been issued. Check now.
You can find additional information on VAT below. For any VAT-related queries, kindly contact firstname.lastname@example.org.
Hosted by DMCC and facilitated by KPMG exclusively for DMCC member companies on 10 December 2017.
This is the full recording of the seminar.
Hosted by DMCC and facilitated by KPMG exclusively for the commodities sector on 13 December 2017.
This is the full recording of the seminar.
VAT is an indirect tax. It is one of the most common types of consumption tax found around the world with over 167 countries having implemented a VAT (or its equivalent). VAT is charged at each step of the ‘supply chain’. Ultimate consumers generally bear the VAT cost while VAT registered 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 its customers after offsetting against the tax collected the tax that it has paid to its suppliers on eligible acquisitions. The net result is that tax receipts to government reflect the ‘value add’ throughout the supply chain.
The UAE Government provides various facilities and services to its residents. Such services include public schools, parks, hospitals, etc. and these are paid for from the government budgets. VAT will provide UAE with a new source of income. This will enable the continued provision of high quality public services in future. It will also help the UAE government in reducing dependence on oil and other hydrocarbons as a source of revenue.
VAT is likely to be effective across the UAE from 1 January 2018. In most cases, VAT registered businesses may need to file their first VAT return with the Federal Tax Authority by the 28th of April 2018, assuming quarterly filing.
The UAE VAT Law, namely Federal Decree Law No. (8) of 2017 on Value Added Tax is accessible through the Ministry of Finance website along with the associated Regulations to the UAE VAT Law. The link to access the VAT Law is https://www.mof.gov.ae/en/lawsandpolitics/govlaws/pages/vat-law.aspx
There are several steps that businesses may consider for VAT readiness and these include:
VAT, as a general consumption tax, is expected to apply to a majority of transactions in goods and services consumed in the UAE. However, a limited number of exemptions may be granted by the UAE government. This could take the form of applying a ‘zero rate’ of tax or treating the supply as ‘exempt’. See below for further explanation.
The standard rate of VAT in the UAE (and across the GCC) is expected to be 5% which will be applied to most goods and services. Certain goods and services will be exempt (e.g. financial services involving a margin, such as borrowing and lending, leasing of most residential property, local passenger transport such as metro, taxis and bus services) and zero-rated i.e. subject to VAT at the rate of 0% (e.g. exports of goods and services, certain medicines and medical equipment, certain healthcare and educational services, intra-GCC and international transport).
Zero rated supply is a taxable supply which is charged at the rate of 0% VAT while exempt supply is a non-taxable supply (i.e. VAT cannot be charged). The difference between exempt and zero rated goods/ services is that input tax credit (the VAT paid on your business inputs) can be recovered where such business inputs are used in making 0% supplies whereas no such recovery is allowed if you use your business acquisitions to make an exempt supply. Businesses making exempt supplies will incur a real VAT cost, impacting on their existing cost structure and putting upward pressure on their pricing.
The average rate is 16.9%, the lowest rate is 5% (UAE and other GCC states) and the highest rate is 27% (Hungary).
No, all businesses need not register for VAT. Only those businesses with past annual sales of taxable supplies, or future sales in next 30 days, exceeds the prescribed threshold of USD 100,000 (AED 375,000), are mandatorily required to be registered for VAT. However, those below the prescribed threshold may apply to be voluntarily registered if their turnover ranges between USD 50,000 and USD 100,000 or their annual taxable expenditure exceeds USD 50,000 .
Subject to certain eligibility criteria a number of individual businesses may be eligible to for a Tax Group. A Tax Group is then treated as a single registration for VAT purposes and can bring some administrative and cash flow savings.
The Federal Tax Authority (FTA) has invited business to register for VAT from 1 October 2017 so as to ready for VAT from 1 January 2018.
Businesses will only be able to register online using e-Services. Registration is via the FTA portal http://eservices.tax.gov.ae/en-us/
DMCC Authority has partnered with KPMG to assist with conducting free training and education sessions in order to assist its member companies prepare for VAT.
Registered businesses will be expected to submit VAT returns on a regular basis. The default period for filing VAT returns will be quarterly for the majority of businesses. Some business may be required to file monthly. Returns will need to be filed by the 28th of the month following the end of a tax period.
The VAT law has made provision for special treatment for what it calls are ‘Designated Zones’. What will be included as a designated zone will be determined by Cabinet decision, no such decision has yet been publicized.
However, the Executive Regulations appear to make it clear that a designated zone will need to meet a series of criteria amongst which are:
Businesses operating within a Designated Zone will, for the most part, be treated as being outside of the UAE. In such cases, supplies of goods between Designated Zones and into Designated Zones from outside of the GCC will be treated as outside the purview of the VAT. Supplies of goods from the UAE mainland into the Designated Zone will be chargeable to VAT at standard rate of 5%. Please note, any supply of services to or from the Designated Zone, would be subject to VAT at standard rate of 5%.However, some supplies in the Designated Zone will be treated under the normal VAT rules, such as sale/purchase of goods for consumption into Designated Zone.
It is expected that most of the services other than specifically exempted or zero rated would be subject to VAT. Whilst DMCC and its members are operating in a free zone, the VAT law has not provided for any special treatment for businesses operating in what can be termed an “unfenced” free zone.However, the VAT law does provide for the Cabinet to prescribe both Government entities and certain supplies by those entities to be free from VAT. At this stage no further details are available if this may cover some of DMCC’s services.
A registered business will be required to keep records of the following:
In order to ensure that UAE exports remain internationally competitive, VAT on exports, while taxable, will be taxed at 0% and the exporter can recover all the input tax incurred in the course of his business.
VAT will be imposed on imports of goods and services at the same VAT rate had the supply taken place in the UAE so as to ensure that a level playing field is maintained for domestic providers of those same goods and services. However, in order to ensure no adverse cash flow impact upon the payment of VAT at time of importation both goods and services imported for use in the UAE will be by way of the reverse charge mechanism (or self-accounting for the VAT). However, VAT on imported goods that are to be transshipped through the UAE to another GCC state will have to account for VAT at the time of importation and cannot adopt the reverse charge mechanism.
VAT is essentially a tax on consumption taking place in the UAE. If you acquire goods or services from an entity located outside the GCC and those goods and services are provided to a customer outside the GCC then that supply takes place wholly outside the UAE and VAT will not be applicable.
There are special place of supply rules for goods being transported from one GCC State to another. The rules varying depending upon whether the other State is an “implementing State” or not, in other words whether it has or is about to implement VAT in that state pursuant to issued legislation.
The place of supply where the customer is located in an implementing State shall be the destination state if the customer is subject to VAT (i.e. registered for VAT) in the destination State. In case the customer is not subject to VAT but the supplier is registered in the destination state, then also the place of supply shall be the destination state. Otherwise the place of supply shall be the location where goods are located at the start of transport or dispatch.
In this case, assuming the customers are registered in the destination States, the place of supply shall be the destination state and no VAT may be charged on the intra-GCC supply of goods. VAT shall be payable by the recipient under reverse charge mechanism in the destination State.However, if the supplies of goods are to unregistered customers in an implementing State and such supplies exceed or are likely to exceed USD 100,000 in a 12 month period, the UAE supplier will need to register for VAT in that GCC State and account for VAT on such supplies in that State.
Zero rated supplies:
With regards to paper trading companies, since the supplies of paper trading companies do not involve physical movement of goods from/ to the UAE and the movement of goods are outside UAE, the place of supply will be outside UAE. Accordingly, the same would not fall within the purview of UAE VAT. Notwithstanding, to the extent that such supplies would have been taxable had they taken place in the UAE, the business may still be eligible to recover the VAT on its operating costs if registered for VAT.
The need to apply a partial exemption approach arises where a registered business acquires goods or services which are used in their business for making both taxable and exempt supplies. To the extent that your acquisitions can be directly traced to one activity or another then VAT recovery should be assessed on this direct attribution approach. For example, if you purchase two desks and one is used in that part of the business making taxable supplies then the VAT paid on acquiring that desk is fully recoverable, where the other desk is used in that part making only exempt supplies the VAT cannot be recovered. However, were the desk to go to the Finance function which provides services to both your taxable and exempt business functions then direct attribution is not possible and you are required to assess your VAT recovery proportion based on the formula outlined by the VAT law.
Presently you will be required to apportion using an input VAT approach by calculating the percentage of Recoverable Tax calculated to the sum of Recoverable Tax and non-Recoverable Tax for the Tax Period and apply this percentage to the VAT which relates to both the taxable and exempt activities.
Certain financial services will be treated as exempt whilst others will be subject to VAT at 5%.
Where financial supplies, such as provision of any loan, advance or credit, are not conducted in return for an explicit fee, discount, commission, rebate or similar, they will be exempt. Where an explicit fee or commission is charged for a financial supply, such as annual credit card fee, this will be subject to VAT at 5%.If you earn interest, buy and sell securities or engage in futures trading then you will be making an exempt financial supply.