United Arab Emirates

VAT becomes the primary source of tax revenue The UAE implemented VAT at 5% in January 2018 in accordance with the GCC (Gulf Cooperation Council) VAT framework.  The total revenue collected from VAT has reached more than Dh 95.4 billion ($26 billion) as of October 2021.   “Now that we have passed the five-year mark since the introduction of VAT, it is fair to conclude that the tax has been a success and a true testament to the UAE’s ability to adapt to the new economic realities,” Nimish Goel, Partner at WTS Dhruva Consultants, spoke at the fifth anniversary of VAT. Additionally, reports have revealed that VAT will continue to be the primary source of tax revenues for a few more years in the country.  

New E-Commerce VAT Reporting Rules in the United Arab Emirates Currently, VAT registered taxpayers in the UAE are required to report taxable supplies in the emirate where the fixed establishment is located for resident taxpayers, or in the emirate where the supply is received for non-resident taxpayers. The UAE is made up of seven emirates: Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah, and Umm Al Quwain. As of 1^st July 2023, the reporting rule will change for resident taxpayers that engage in e-commerce supplies. Change of reporting rule for resident taxpayers from 1^st July 2023:

• Resident taxpayers must report taxable supplies made through e-commerce in the emirate in which the supply is received, when the total value of supplies made through e-commerce exceeds 100 million UAE dirham ($27 million) per calendar year.

By adopting this new reporting requirement, the VAT revenue distribution between each emirate should be more equitable, and this requirement is in line with the global trend of taxing e-commerce supplies at the place of consumption.

Amendments to the VAT Decree from January 2023 Federal Decree-Law No. 18 of 2022 has been issued by the UAE Ministry of Finance amending certain provisions of the Federal Decree-Law No. 8 of 2017 on Value Added Tax (the VAT Decree-Law). The amendments will take effect on 1st January 2023. The following are a summary of the major changes to the VAT Law:

• Registered persons who make taxable supplies are allowed to apply for an exemption from VAT registration if all their supplies are zero-rated and/or they no longer make any supplies other than zero-rated supplies. (article 15)
• Additional zero-rated goods and services have been added, e.g healthcare related goods and services, importation of gas, etc. (article 45)
• Tax Credit Notes must be issued within 14 days from the date of issuing tax invoices. (article 62)

Aside from these amendments, business in the UAE will be subject to a 9% Corporate Tax from 1 June 2023, this will align UAE with other Gulf Cooperation Council states.

United Arab Emirates implements VAT

In February 2016 the Gulf Cooperation Council (GCC) announced that Value-Added Tax (VAT) would be rolled out throughout the Gulf States, starting in January 2018.