VAT in UAE: What is exempt and what is not
Selected supplies in sectors like transportation, financial services, real estate will be completely exempt from VAT.
The Federal Tax Authority (FTA) has declared the supplies that will be subject to Value Added Tax (VAT) as of January 1, 2018, disclosing selected sectors that will be assigned zero-rated tax, such as healthcare, education, oil and gas, real estate and transportation.
On the other hand certain government activities will be outside the scope of the tax system (and, hence will not be subjected to tax). These include activities that are exclusively carried out by the government with no competition with the private sector, activities carried out by non-profit organisations.
The UAE Cabinet is estimated to issue a Decision to identify the government bodies and non-profit organizations that are not subject to VAT. The below table provides the list of all supplies that will be subject to the 5% Value Added Tax, as well as zero-rated supplies and exempt supplies for the ease of citizens.
His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of UAE and Ruler of Dubai, approved Executive Regulations for VAT a few days back, which would come into effect starting from January 1, 2018. As per the auditing professionals, most of SMEs – especially groceries – are not yet ready for this change and will be struggling to meet the deadline. However, consumers’ spending trends will not see a major impact.
According to Naveen Sharma, chairman of the Institute of Chartered Accountants of India (ICAI), Dubai Chapter, nearly all sectors have been taken cared of under the Executive Regulations and there are no surprises for the common man.
Another crucial clarification came with regards to real estate, where companies have to keep their record books for 15 years compared to five years for other sectors.
In an interview Sharma said – “The Executive Regulations have made life easier for the businesses and individuals. You can see people appreciating the regulations. It will be an easy and smooth implementation of VAT.”