Ministry of Finance announces Executive Regulation for Federal Decree

The UAE Ministry of Finance has announced the Executive Regulation for the Federal Decree-Law No. 8 of 2017 on Value Added Tax following a Cabinet meeting on 7th November, 2017, headed by UAE Vice President, Prime Minister and Ruler of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum.

The regulation defines VAT as the 5-percent tax imposed on the import and supply of goods and services at each stage of production and distribution, including what is deemed supply, with the exception of specific supplies subject to the zero rate and what is exempted as specified in the Decree-Law.

H.H. Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai and UAE Minister of Finance, said, "The release of the Executive Regulation of Federal Law No., 8, of 2017 on Value Added Tax is a new stage in the implementation of an effective tax system in the UAE, one that measures up to the highest international standards. We extend our hand in partnership to all concerned parties, inviting them to work together for the advancement, progress and prosperity of the UAE."

Title one of the regulation includes the definitions of terms used, while Title two deals with supply, which includes articles regulating the supply of goods and services, as well as supplies that consist of more than one component and the exceptions related to deemed supplies.

Title three of the document tackles the subject of registration, such as mandatory and voluntary registration, related parties, conditions to be met to register tax groups and appointing a representative member, deregistration, exception from registration, registration on law coming into effect and obligations to be met before deregistration. Meanwhile, Title four looks into rules relating to supply, including articles on the date of supply, place of supply for goods, place of supply of services for real estate, transport services, telecommunications and electronic services, intra-GCC supplies, the market value, prices to be inclusive of tax, discounts, subsidies and vouchers.

Furthermore, Title five discusses profit margins and explains how to calculate VAT based on profit margins, while Title six addresses zero-rated goods and services, including telecommunications, international transportation of passengers or goods, investment grade precious metals, new and converted residential buildings, as well as healthcare, education and buildings earmarked for charity.

Title seven clarifies provisions relating to products and services exempt from VAT, namely the supply of certain financial services as specified in the Executive Regulation, the supply of residential (non-zero-rated) buildings either by sale or lease, the supply of bare land, and the supply of local passenger transport.

Title eight addresses accounting for tax on specific supplies and includes articles relating to supplies with more than one component, general provisions in relation to import of goods and applying the reverse charge on goods and services, as well as moving goods to implementing states and imports by non-registered persons.

In Title nine, the Executive Regulation addresses Designated Zones in article, 51, while Title 10 provides further detail on calculating due tax, recovery of input tax relating to exempt supplies, input tax not recoverable, and special cases for input tax. Title 11 includes article, 55, on apportioning input tax and article, 56, on adjusting input tax after recovery, whereas Title 12 addresses the capital asset scheme in article, 57, and adjustments within the capital asset scheme in article, 58.

Title 13 includes article, 59, on tax invoices, article, 60, on tax credit notes and article, 61, on fractions of the fils. Then in Title 14, the Executive Regulation discusses Tax Periods and Tax Returns, before Title 15 goes into the recovery of excess tax in article, 65. Adding to that, Title 16 tackles recovery in other cases and includes article, 66, on new housing for nationals, article (67) on business visitors, article (68) on tourists and article (69) on foreign governments.

Title 17 includes article (70) on Transitional Rules, article (71) on record-keeping requirements and article, 72, on keeping records of supplies made. Meanwhile, the last and final Title 18 discusses closing provisions.

The draft text of the Executive Regulation for Federal Decree-Law No. (8) of 2017 on Value Added Tax, will be published next week on the UAE Ministry of Finance’s website www.mof.gov.ae and the Federal Tax Authority’s website www.tax.gov.ae.