First 100 days of VAT implementation
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The United Arab Emirates' Federal Tax Authority (FTA) reported nearly
275,000 VAT registered businesses since the go-live date with compliance percentages as high as 98.8% for the first VAT return, which was due on 29 April 2018.
The FTA have successfully registered 47 tax agents who are authorised to be the prime link between businesses and the FTA for clarifications, representations, and filing of VAT returns.
Businesses can now seek clarifications from the FTA
The FTA has made available a procedure for businesses to seek clarifications in the
form of written guidance or advice about the FTA's interpretation and position on
specific tax matters. This system is similar to advance rulings in various VAT jurisdictions.
An application for clarification can be made by the applicant, that is, the business, by an
individual, or through appointed tax agents or legal representatives.
Cabinet decision outlining government entities still under process
The UAE VAT law states that services provided by government entities that are in the nature of a sovereign capacity and that are not in competition with the private sector would not be considered subject to VAT. However, the Cabinet decision outlining the list of such government entities has not yet been issued by the FTA.
Refund scheme for tourists approved
The FTA has approved a refund scheme for tourists under which outlets and points of
sales across the UAE would be able to directly issue refunds to tourists when they are buyinggoods in the UAE.
The refund system is likely to be implemented soon and could be a mix of what is currently prevalent in Europe and Asia.
Real estate guidance
The FTA issued detailed guidance on various practical issues faced by the real estate
industry, such as retentions, benefits of zero-rating, transitional provisions, and so on.
The guidance provided welcome relief to the real estate sector, as ambiguity in the UAE
VAT provisions related to implementation created several roadblocks for the industry.
Unfortunately, some uncertainties still remain.
VAT relief for gold B2B trade
The UAE has rolled back VAT on the gold and diamond sectors at the wholesale level by
introducing a reverse charge mechanism for business-to-business (B2B) trade. However,
amendment of the legislation is still pending. The rollback only provides relief to the
wholesale gold trade; retailers will continue to levy VAT on all jewellery transactions taking place in shops.
The rest of the GCC – Bahrain, Kuwait, Oman, and Qatar
All of the other GCC countries are expected to implement VAT by 1 January 2019. To date,
only the UAE and Saudi Arabia have done so. Bahrain has unofficially announced its
target date would be early 2019. Kuwait, on the other hand, announced it would likely
push the implementation to 2021, citing the unreadiness of processes and systems to
support VAT implementation.
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