Legislation Details
- Full Title: Federal Decree by Law on Concerning Value-Added Tax (VAT)
- Law Type: Federal Decree-Law
- Law Number: [8] of 2017
- Issued Date: 23 Aug 2017
- Effective Date: 01 Jan 2018
- Official Gazette: No. 621
- Sector: Tax
- Status: Active
- Number of Articles: 209
- Chapters/Parts: 0
- Amendments: 3
Summary
This Federal Decree-Law regulates the implementation of Value-Added Tax (VAT) in the United Arab Emirates. The law defines the scope of VAT, including the supply of goods and services, the registration and deregistration requirements for taxable persons, and the rules for calculating, invoicing, and paying the tax. It also outlines the rights and obligations of taxpayers, the penalties for non-compliance, and the authorities responsible for enforcement. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Arts. 1-85) The VAT law is a significant piece of legislation that impacts businesses and individuals across the UAE. It introduces a new tax system that affects the pricing and costs of a wide range of goods and services. Compliance with the law's requirements is crucial, as non-compliance can result in substantial administrative fines and penalties. The law also grants certain rights and protections to taxpayers, such as the ability to claim refunds of input tax. Understanding and adhering to the VAT law is essential for any entity operating in the UAE. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Arts. 1-85)
What is the scope and purpose of this law?
The purpose of this Federal Decree-Law is to establish a value-added tax (VAT) system in the United Arab Emirates. The law defines the scope of VAT as applying to the importation and supply of goods and services at every stage of production and distribution, including deemed supplies. The law applies throughout the UAE, with some exceptions for designated areas. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 2)
What are the key definitions under this law?
The law provides the following key definitions:
- State: The United Arab Emirates
- Minister: The Minister of Finance
- Authority: The Federal Tax Authority
- Value-Added Tax (VAT): A tax levied on the importation and supply of goods and services at every stage of production and distribution, including the deemed supply
- Goods: Tangible properties which can be supplied, including real property, water, and all types of energy
- Services: Anything, other than Goods, which can be supplied
- Taxable Person: Each Person that is, or ought to be, registered for the tax purposes under this Decree-Law
- Taxpayer: Any Person that is obligated to pay the Tax in the State, pursuant to this Decree-Law
- Taxable Supply: The supply of Goods or Services for a Consideration during the practice of the Business by any Person within the State, not including the Exempted Supply
- Deemed Supply: All that is regarded as a supply and treated as a Taxable Supply, in accordance with the cases set forth in this Decree-Law
(Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 1)
What are the main obligations and requirements?
The main obligations and requirements under this law include: 1. Registering for VAT if the value of taxable supplies exceeds or is expected to exceed the mandatory registration threshold. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 13) 2. Charging VAT on taxable supplies of goods and services and remitting the collected VAT to the tax authority. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Arts. 4, 53) 3. Maintaining proper records and issuing tax invoices that comply with the law's requirements. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Arts. 65-69) 4. Submitting VAT returns and making timely payments of the VAT due. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Arts. 72-73) 5. Notifying the tax authority of any changes that affect the VAT registration, such as deregistration or changes in the business. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Arts. 21-23)
What licensing, registration, or approval requirements exist?
The law establishes the following key registration and licensing requirements: 1. Mandatory VAT registration for persons whose value of taxable supplies exceeds or is expected to exceed the mandatory registration threshold. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 13) 2. Voluntary VAT registration for persons whose value of taxable supplies or taxable expenses exceeds or is expected to exceed the voluntary registration threshold. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 17) 3. VAT registration for non-resident persons who make supplies in the UAE. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 18) 4. VAT registration for government agencies. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 16) 5. The law also provides for the formation of VAT groups and the deregistration of taxable persons. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Arts. 14, 21-23)
What rights and protections does this law provide?
The law grants the following rights and protections to taxpayers: 1. The right to claim refunds of input tax paid, subject to certain conditions. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Arts. 54-57) 2. The right to adjust output tax in certain cases, such as when the consideration for a supply is altered. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Arts. 61-63) 3. The right to carry forward any excess refundable tax to subsequent tax periods. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 74) 4. The right to request a tax refund in special cases, such as for foreign businesses and tourists. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 75)
Which authorities or bodies are responsible for enforcement?
The key authorities responsible for the enforcement of this law are: 1. The Minister of Finance, who is responsible for overseeing the implementation of the VAT system. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 1) 2. The Federal Tax Authority (FTA), which is responsible for the administration, collection, and enforcement of VAT. The FTA's powers include registering taxable persons, issuing tax invoices, and imposing penalties for non-compliance. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 1)
What are the penalties for non-compliance?
The law imposes the following penalties for non-compliance: 1. Administrative fines for failure to register for VAT, failure to submit tax returns, and other violations, ranging from AED 500 to AED 50,000. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 76) 2. A penalty of up to three times the amount of tax evaded for tax evasion. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 77) 3. Potential criminal penalties, including imprisonment, for serious tax evasion offenses. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 77)
What fees, charges, or financial provisions are specified?
The law specifies the following financial provisions: 1. A VAT rate of 5% on the supply of goods and services, unless a zero-rate or exemption applies. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 3) 2. The mandatory VAT registration threshold is set at an amount specified in the Executive Regulations. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 19) 3. The voluntary VAT registration threshold is also set at an amount specified in the Executive Regulations. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 19)
What exemptions or exceptions apply?
The law provides the following exemptions and exceptions: 1. Certain supplies of goods and services are zero-rated, meaning they are taxed at a rate of 0%. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 45) 2. Some supplies of goods and services are exempt from VAT, meaning no VAT is charged, and input tax related to these supplies cannot be recovered. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 46) 3. Specific exceptions are made for designated areas, where different VAT rules may apply. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Arts. 50-52) 4. Government agencies and charities may be eligible for certain VAT refunds. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 57)
How are disputes resolved under this law?
The law does not specify any dispute resolution mechanisms. The legislation is silent on how disputes related to VAT are to be resolved.
What are the key deadlines and time limits?
The law establishes the following key deadlines and time limits: 1. Taxable persons must apply for VAT registration within 30 days of becoming liable for registration. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 13) 2. Taxable persons must submit their VAT returns and make payment of the VAT due within the time period specified in the Executive Regulations. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 72) 3. Taxable persons must keep records for a minimum of 5 years. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 78)
How does this law interact with other UAE legislation?
This Federal Decree-Law on VAT interacts with several other UAE federal laws, including: 1. Federal Law No. (1) of 1972 Regarding the Competences of Ministries and the Powers of Ministers 2. Federal Law No. (11) of 1981 on the Levy of a Federal Customs Tax on Imports of Tobacco and its Derivatives 3. Federal Law No. (5) of 1985 Issuing the Civil Transactions Law 4. Federal Law No. (3) of 1987 Issuing the Penal Code 5. Federal Law No. (1) of 2006 On Electronic Commerce and Transactions 6. Federal Law No. (1) of 2011 Concerning the Public Revenues of the State 7. Federal Law No. (7) of 2017 on Tax Procedures (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Preamble)
When did this law come into effect?
This Federal Decree-Law on VAT came into effect on 1 January 2018, as specified in the law. (Federal Decree by Law on Concerning Value-Added Tax (VAT), 2017, Art. 85)
Source Documents
This article analyses Federal Decree by Law on Concerning Value-Added Tax (VAT) for legal research and educational purposes. For the purpose of interpretation and application, reference must be made to the original Arabic text. In case of conflict, the Arabic text prevails. This does not constitute legal advice.