VAT News

UAE-Further details announced on VAT introduction

As the 1 January 2018 VAT implementation date rapidly approaches, the UAE authorities have released further details on how the VAT system will operate. Whilst the VAT legislation remains unpublished, the latest information release provides businesses with useful guidance to assess how the implementation will affect their business.

Some of the key points are as follows:

-Taxpayers will be able to appeal tax authority decisions within a 20 day period. Further appeals can be made following the tax authority's revised decision

-A mandatory registration threshold of AED 375,000 will be in place, but businesses whose turnover exceeds AED 175,00 may register voluntarily. Also, businesses whose expenses exceed AED 175,00 may voluntarily register. A measure especially important for start-ups to recover VAT incurred

-VAT invoices issued and received must be retained for a 5 year period

-Sales of commercial property will be taxable, but residential property will be exempt. The first sale of residential property sold in the first 3 years following construction will be zero rated allowing VAT recovery for developers

-Most educational and healthcare services will be zero rated, rather than exempt

-Most financial services and local passenger transport will be exempt

-VAT grouping will be possible

-Bad debt relief will be possible

-A second hand margin scheme will apply where relevant

-Partial exemption will apply

-A DIY housebuilder scheme (similar to the UK) will apply

-Simplified invoices will be permitted for certain transactions

-VAT incurred on entertainment (including employees) will be irrecoverable

-A reverse charge will apply to certain supplies made between non-established suppliers and local customers

-Turnover for each Emirate will need to be declared seperately

The VAT legislation is expected to be released shortly by the UAE tax authorities, and this will provide the full detail of how the new system will operate, however the above provides businesses with a number of important factors to consider in their impact assessments.

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