Important features of the UAE VAT Law

One of the reasons for introduction of VAT in GCC is that, to add a new source of income to Government. Now they are mainly dependent on sale of Crude, Natural Gas, and other products of hydrocarbons to generate revenue for spending on public welfare.

  1. It is a tax on supply of goods or services and on deemed supply transactions:

The term “supply of service” is broad enough to cover all such transactions which do not constitute supply of goods.

  1. Forward Charge and Reverse Charge:

The tax is to be paid by the supplier making taxable supplies of goods or services. In some cases, the liability has been cast on the recipient of goods or service also.

  1. Separate Provision for Place of Supply for the supply of “goods” and for “services”.

Goods: The place of supply of goods would generally be within the States.

Services: The place of supply of services would generally be the residence of the supplier.

Separate provisions to determine place of supply in case of exports and imports.

  1. Time of supply (Date of Supply) :

Normally it is the date of supply of goods or services or the date of receiving the advances, whichever is earlier.

  1. Registration:

Voluntary: if the value of supply or expenses exceeds AED 187,500.

Compulsory: Each person making supply who has a place of residence in the State is required to obtain registration if the value of aggregate supplies made by him exceeds the threshold of AED 375,000/- during the preceding 12 months.

  1. Valuation:

The value has to be determined based on the transaction value.

  1. Tax Rates:

Exempted: Mainly financial Services, Supply of Land, Health care and Local passenger transport are exempted. No right to recover input tax.

Zero Rated:  Mainly priority Sectors i.e. Exports, International transportation of passengers or goods, means of transportation, residential buildings, precious metals, crude oil, natural gases, etc. Input tax credit is available.

Taxable: All other taxable goods and services. Input tax credit is available.

  1. Tax Invoice:

It is to be issued in a specified format.

  1. Maintenance of Accounts:

All taxpayers are required to maintain the accounts.

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