The UAE will implement five per cent value-added tax (VAT) from 7am on January 1, 2018, with a few goods and services zero-rated and exempted as part of the GCC-wide agreement.
Being an indirect tax on consumers, VAT will be applicable on most daily usage goods and services that residents consume, helping the government to boost its coffers to further improve infrastructure and offer better facilities.
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 transportation (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 three 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 sectors will be exempt?
The following categories of supplies will be exempt from VAT:
. The supply of some financial services (clarified in legislation)
. Residential properties
. Bare land
. Local passenger transport
What are the cases that would lead to penalties?
Penalties will be imposed for non-compliance. Examples of actions and omissions that may give raise to penalties include:
. A person failing to register when required to do so
. A person failing to submit a tax return or 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
Source: Ministry of Finance, Federal Tax Authority