The UAE government has now issued the Law required for the local implementation of Value Added Tax (VAT) in the United Arab Emirates. The Federal Decree-Law No. 8 of 2017 on VAT was published on 23 August 2017, and has an effective date of 1 January 2018.

Clyde & Co has produced a briefing which looks at the key aspects of the long awaited law ahead of the January 2018 implementation, bringing clarification on zero rated and exempt business activities, what this will mean when contracting with government entities, and how free zones will be affected.

Exempt or zero rated?

As explained in our previous briefing, suppliers of zero rated goods and services usually recover the input VAT they pay to enable those supplies. VAT exempt goods and services mean that no output VAT is recorded at all, and the supplier is generally not permitted to recover the associated input VAT.

Zero rated supplies will include:

  • Transportation - international transportation of goods and passengers and the means of transportation; and related services.
  • Residential property – for the first supply by lease or sale after construction or conversion for residential use.
  • Education – nursery, pre-school and "basic education"; state funded higher education; related goods and services. The status of secondary school education is unclear.
  • Preventive and basic healthcare services and related goods and services – the scope of this concession is still to be defined.
  • Precious metals for investment
  • Crude oil and natural gas

Exempt supplies will include:

  • Financial services – although the scope of this exemption is still to be defined
  • Residential property – if the zero rating concession is not available, for example on a secondary sale of a residential home
  • Bare land
  • Local passenger transport

With only 4 months until implementation, the briefing provides a useful resource in assessing the impact of VAT on your business.