The UAE has amended its VAT laws to introduced certain exemptions for few entities to boost its investment and support economic growth,
To being with, the investment fund management services are not exempted from VAT. This significant change will help UAE to remain the top destination for investment. In addition to that, the ministry of finance also exempted selected services related to virtual assets reassuring UAE’s commitment to fostering innovation and financial technology. However, further clarifications are required in terms of which virtual assets are included.
In kind donations between Charitable organization and Government entities will be exempted from VAT for the amount up to AED 5 million ($1.36 million) over a 12-month period. With this exemption, the donor will be able to recover VAT on donations and this will encourage them to enhance their contributions toward society.
The Undersecretary of Ministry of Finance, Younis Al Khoori reaffirm government’s commitment to refine regulations with working both public and private stakeholders, aiming to create a more business friendly environment in the UAE. He stated
“These changes are designed to reduce misunderstandings and simplify VAT compliance, in line with international best practices, which will ultimately improve the quality of life for everyone.”
The amendments to Federal Decree-Law No. 8 of 2017 on VAT also include provisions to strengthen tax compliance. The Federal Tax Authority now has the power to deregister taxpayers in specific cases, improving the tax system’s integrity and administrative efficiency.
Also read: VAT Fines and Penalties in UAE
Since its introduction in 2018, the UAE’s 5% VAT has applied to most goods and services as part of the nation’s broader strategy to diversify its economy away from oil dependency. Some of the categories remain exempted from VAT including residential properties, financial services, bar land and local passenger transport. In addition to that, education and healthcare services, exports outside GCC are subject to 0% VAT. Also, tourist can claim 85% VAT refund paid on goods purchased in the UAE.
These changes come as part of the UAE’s efforts to diversify its revenue sources. Government revenue for the fourth quarter of 2023 saw an 8% year-on-year increase, reaching AED 155.9 billion ($42.45 billion), further emphasizing the country’s shift toward a more sustainable, diversified economy.
The Ministry of Finance stated that these VAT amendments are drafted in accordance with International best practices keep in account the GCC Unified VAT agreement.
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