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The UAE Federal Tax Procedures Law was released in the UAE and governs the
general rules and procedures relating to VAT and other taxes in the UAE.
The UAE released its VAT law in August 2017 and the executive regulations are expected
to be released soon.
The UAE’s Federal Tax Authority (FTA) website went live in August 2017.
Businesses in the UAE can register online for VAT now with set dates by which registration needs
to occur, failing which penalties apply.
The Ministry of Finance in the UAE is organising events tailored to different audiences and
industry sectors to discuss the VAT legislation.
KSA has released a final VAT law and final VAT executive regulations.
Businesses now have access to the laws, so they can better understand the potential
impacts VAT will have on their business processes and reporting obligations.
All these updates indicate the UAE and KSA are committed to the VAT ‘go-live’ date
of 1 January 2018.
©2017 Deloitte Touche Tohmatsu.
The UAE Federal Tax Authority
The FTA is the federal tax body in the UAE that was established to oversee and manage VAT
and excise tax.
You will need to register for both VAT (and where applicable, excise tax), and pay tax and file
tax returns to the FTA.
Businesses with an annual turnover of taxable supplies exceeding AED 150 million should
register before 31 October 2017. Businesses with an annual turnover of taxable supplies
exceeding AED 10 million should register before 30 November 2017.
Businesses with an annual turnover of taxable supplies of AED 375,000 that are made within
the UAE should also register before 4 December 2017 to avoid any delays in obtaining a VAT
number prior to 1 January.
The FTA will conduct tax audits to ensure taxable persons are paying tax, filing tax returns and
keeping appropriate records. Penalties may be applied in a variety of instances, based upon the
nature of the breach that has occurred.
Over time, the FTA will issue guidance and decisions around complex VAT and excise tax
matters.
You can get guidance and assistance from the FTA on its website or helpline, or on the Ministry
of Finance website in regards to general matters around how VAT will be applied and
administered in the UAE.
How well-informed do you feel about the introduction of VAT in the UAE and/or
KSA? (Please select only one answer)
Health Qualifying medicines and medical goods The supply of preventive and basic
dispensed to an individual for own use on healthcare services and related goods and
prescription at a pharmacy, hospital or services: zero-rate
health care center: zero-rate
Oil and gas Standard rate Crude oil and natural gas: zero-rate
Refunds may be granted on VAT paid on Refunds may be granted to certain specified
supplies if not conducting a commercial entities
business
Unregistered entities Supplies to these entities will be taxed under Supplies to these entities will be taxed under
the normal rules and VAT will be due the normal VAT rules and VAT will be due
Refunds may be granted to selected entities Refunds may be granted to selected entities
(e.g. foreign governments and international (e.g. foreign governments and international
organisations), taxable persons in another organisations), taxable persons in another
GCC member state and taxable persons GCC member state and taxable persons
outside the GCC outside the GCC
Financial services Fee based services: standard rate Fee based services: standard rate
Margin based services: exempt Margin based services: exempt
Life insurance contract by regulated
provider: exempt
Investment metals Gold, silver and platinum at purity level no Gold, silver and platinum at purity level no
less than 99%: zero-rate less than 99%: zero-rate
Tobacco products = 100% of the tax Energy drinks = 100% of the tax Soft drinks = 50% of the tax
base base base
Registration for excise tax began on 17 September 2017 and the law came into effect on 1
October 2017.
All businesses, including retailers, hoteliers, restaurants, importers and manufactures, that have
excise goods were required to complete a stock take of those goods by 1 October 2017 by a
third party.
There is a liability to account for excess stock, i.e. more than two months worth of stock, or
more stock than is normally held by the businesses. If businesses have excess stock, they are
required to register and account for excise tax.
Other businesses in the supply chain, such as retailers, that simply sell excisable goods should
not need to register (unless they are also stockpilers) and should not have tax obligations under
the law.
If a business should have registered but has not, it will be subject to penalties for late
registration and late payment of tax and will receive an assessment for the excise tax unpaid.
Once a business has cleared its excess or stockpiled stock and does not intend to keep
stockpiling, it can apply for de-registration. The FTA will review the claim and ensure all the
tax has been paid before making a decision.
The GCC VAT Framework Treaty sets out obligations taxable persons have to register for VAT.
Every person who resides in the UAE or KSA is required to register where their total value of all
taxable supplies exceeds SAR or AED 375,000 over the previous 12 month period.
The person needs to establish that they are conducting business in making a taxable supply.
A taxable person who makes only zero-rated supplies may request to be excluded from the
mandatory registration requirement.
Considerations for
Voluntary registration
not registering:
= SAR or AED
Making zero-rated
187,500
supplies, and
Mandatory
compliance
registration = SAR or
responsibility upon
AED 375,000
registration
.
Registration:
Requirements and
what to expect
Group registration:
Entities have a place of
Deregistration:
establishment in a GCC
Ceases to make
member state, are
taxable supplies and
related parties, and
taxable supplies fall
one person or a
below voluntary
The tax authorities will partnership controls
registration threshold
issue taxable persons the other entities
with a tax
registration or
identification
number
3. Certificate of incorporation
The UAE and KSA VAT laws set out the conditions around tax registration and the tax registration
threshold.
* In KSA, an entity that breaches the mandatory threshold but does not breach SAR 1 million, may defer
registration to no later than 1 January 2019.
What are the main VAT issues facing your organisation in the GCC? (Please select
all that apply)
The penalties for non-compliance and tax evasion differ significantly between the
UAE and KSA.
The UAE • Will not exceed more than three times the amount of tax in
respect for each of the violations on which the penalty was levied.
• Prison and/or fine not exceeding five times the amount of evaded
tax.
KSA • Minimum SAR 1,000 for failure to pay tax when due.
• SAR 1,000 – SAR 20,000 for failure to file returns and maintain books
and records.
• SAR 1,000 or double the amount of VAT for recipient failure to provide
correct information to supplier.
IT systems configuration
• Appropriate programmes for procurement, recording supplies and issuing VAT invoices
need to be in place.
• This will require the combination of a BRD, the transaction mapping, and IT
configuration design.
Pricing considerations
• Suppliers making standard rated supplies need to consider whether to pass on the full
VAT amount or absorb some costs.
• There are a number of considerations to take into account during the transition period.
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Member of Deloitte Touche Tohmatsu Limited
©2017 Deloitte Touche Tohmatsu.
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