In 2017, the United Arab Emirates introduced Federal Decree-Law No. (8) to establish a framework for Value Added Tax (VAT). This legislation outlines the scope, rates, and responsibilities related to VAT, a consumption tax that is imposed at each stage of the supply chain. Let’s delve into the key aspects of this decree-law.

Tax Scope and Rate

1. Scope of Tax : The tax, as per this decree-law, is levied on every Taxable Supply and Deemed Supply made by a Taxable Person. Additionally, it encompasses the Import of Concerned Goods, with specific exceptions outlined in the Executive Regulation of the Decree-Law.
2. Tax Rate : The standard rate of 5% is applied to any supply or import, as detailed in Article (2) of the Decree-Law. However, it is essential to note that Title Six of the Decree-Law may introduce specific provisions affecting the tax rate.
3. Responsibility for Tax : The responsibility for the imposed tax falls on several entities, including the Taxable Person making a supply, the Importer of Concerned Goods, and the Registrant acquiring Goods, as stated in Article (48) of the Decree-Law.

Supply

Supply of Goods and Services

1. Supply of Goods : The transfer of ownership of goods or the right to use them to another person, and the entry into a contract entailing the transfer of goods at a later time, are considered supplies of goods. The specific conditions governing these transactions are detailed in the Executive Regulation.
2. Supply of Services : Any supply that does not fall under the category of goods is considered a supply of services. The Executive Regulation further specifies the types of services covered.

Supply in Special Cases

1. Exceptions to Supply : Certain transactions, such as the sale or issuance of vouchers and the transfer of a business or its independent part, are exceptions to the standard definition of supply. These exceptions are elucidated in the Executive Regulation.
2. Supply of More Than One Component: The Executive Regulation also lays down conditions for treating a supply made up of more than one component for a single price, whether these components are goods, services, or a combination of both.

Supply via Agent

The supply of goods and services through an agent acting on behalf of a principal is considered a supply by the principal. In contrast, if the agent acts in his own name, the supply is deemed a direct supply by the agent.

Supply by Government Entities

Government entities are considered suppliers in certain cases, such as when their activities are conducted in a non-sovereign capacity or in competition with the private sector. A Cabinet Decision, based on the Minister’s suggestion, identifies government entities and their activities falling within these categories.

Conclusion

Federal Decree-Law No. (8) of 2017 on Value Added Tax provides a comprehensive framework for the application of VAT in the United Arab Emirates, defining the scope, rates, and responsibilities associated with this consumption tax. It is crucial for businesses and individuals to familiarize themselves with the intricacies of this legislation to ensure compliance and smooth operations within the UAE’s tax framework.

Summary

In 2017, the United Arab Emirates introduced Federal Decree-Law No. (8) to establish a VAT framework. This law imposes a 5% standard tax rate on every taxable supply, deemed supply, and import of concerned goods. The responsibility for tax lies with taxable persons, importers, and registrants acquiring goods. The legislation defines the supply of goods, services, and special cases, outlining exceptions and conditions for multi-component supplies.

It also addresses supply through agents and designates government entities as suppliers under specific circumstances. Federal Decree-Law No. (8) provides a comprehensive VAT framework, emphasizing the importance of compliance for businesses and individuals operating in the UAE.

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