Value Added Tax (VAT) is due to be introduced in the UAE and wider-GCC on January 1st 2018; you can read about the general context & drivers in a previous blog, here. Please see below for the latest news and information that we’ve gleaned on the subject this month (August 2017):
- The UAE has issued the landmark Federal Law No. 7 of 2017 for Tax Procedures, which sets the foundations for the planned UAE tax system, regulating the administration and collection of taxes and clearly defining the role of the Federal Tax Authority, FTA. Link to the unofficial translated version : http://bit.ly/2w1zjQO
- 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 will be aligned with the treatment of similar standard financial services.
According to the latest official guidance:
- General Insurance (vehicle, medical, etc) will be taxable. Life insurance, however, will be treated as an exempt financial service.
- Pre-school and school education and basic and preventative health care will be zero rated, that is, a rate of 0 per cent. That also means businesses can reclaim any tax they pay suppliers, which is not the case when a sector is exempt from VAT.
- Government-owned or government-funded higher education is zero rated.
- Goods and services being exported outside of the GCC are zero rated.
- International air passenger transfers through the UAE will be zero rated, as will international flights from the UAE.
- Gold and other precious metals for investment will be subject to the zero rate.
- Residential property – rented or for sale – is entirely exempt from VAT.
- Local passenger transport services – such as taxis and the metro – are also exempt.
This is a fast moving area and whilst the BCB will seek to highlight news & relevant developments that we’re aware of, we are not tax advisors and we strongly recommend that professional advice is taken as the legislation becomes more clear. We can help you find qualified providers in this field.