FAQs

Federal Decree-Law No. (7) of 2017 on Excise Tax has been issued and states that it comes into effect on 1 October 2017.

Businesses required to register for excise tax will need to apply to the FTA via an online system. Registrations for excise tax will open mid-September 2017.

The following goods will be subject to excise tax in the UAE at the following rates of tax:

  • Carbonated drinks – 50%
  • Energy drinks – 100%
  • Tobacco – 100%

Excise tax will be applied to the retail selling price of the goods, at the rate applicable to the excise good in question e.g. excise tax will apply at a rate of 100% to the retail selling price of tobacco products.

Details on identification of retail selling price will be issued in due course.

The following groups will be required to register for excise tax:

  • Producers of excise goods.
  • Importers of excise goods.
  • Stockpilers of excise goods.
  • Warehouse keepers responsible for excise goods.

Businesses that are required to pay excise tax will need to do the following:

  • Register with the FTA;
  • Submit excise tax returns on a monthly basis; and
  • Pay the excise tax due on the same date as submitting a tax return.

A stockpiler is a person or business that holds a stock of excise goods for business purposes and cannot prove that excise tax has previously been paid on those goods.

If a business is not considered to be a stockpiler, it will not need to account for excise tax on goods owned after the introduction of the tax that were purchased before the introduction of excise tax.

Excise tax is a tax on certain goods that are intended for consumption in the UAE. Tax is due when goods are ‘released for consumption’ i.e. when they enter free circulation in the UAE.

Excise tax is due when:

  • Excise goods are imported into the UAE
  • Excise goods are released for consumption in the UAE (e.g. manufactured and released from a designated zone/excise warehouse etc)
  • Excise goods are acquired by a stockpiler, where tax has not previously been paid on those goods
  • Excise tax is not a transaction-based tax, which means that goods do not need to be sold in order for the tax to be due

For an area to be treated as a designated zone it must be officially registered and approved by the FTA.

In theory, any area may be approved as a designated zone. The approval process will involve specifying the location and boundaries of the designated zone. The FTA may also specify that a certain level of security should be imposed, or that certain conditions should be maintained to protect the integrity of the excise goods stored in the zone.

A warehouse keeper must also register for tax and be appointed as being responsible for the designated zone. A producer, importer or stockpiler is able to register its own warehouse as a designated zone. A producer, importer or stockpiler can also be appointed as warehouse keeper for that designated zone. A warehouse keeper is responsible for maintaining any conditions imposed by the FTA on the operation of the designated zone.

A warehouse keeper is also jointly and severally liable for the tax liability of the excise goods stored in its designated zone. If a producer, importer or stockpiler does not account for excise tax on removal of the goods from a designated zone, then the warehouse keeper will be jointly responsible for payment of the tax due.

Unlike VAT, excise tax is paid once in the supply chain and businesses that have purchased excise goods cannot obtain a refund of the excise tax paid on those goods. There are a limited number of cases where a refund of excise tax will be available. Those cases are:

  • When excise tax has been paid on an excise good, which is then produced in to a ‘new’ excise good, on which excise tax is again due
  • When excise tax has been paid on an excise good that is then exported outside the UAE, or
  • When amounts have been paid to the FTA in error.
  • Excise tax is not a transaction-based tax, which means that goods do not need to be sold in order for the tax to be due

In the above cases, a business registered for excise tax will be entitled to a refund of the excise tax paid. The refund will be granted by allowing a deduction of the refundable amount from the tax due in the next excise tax return period. There are also a limited number of cases where refunds will be available to people who are not registered for excise tax. Those cases are:

  • Where excise tax has been paid by certain international governments, diplomatic missions and international organisations in the course of their official activities, where a reciprocal agreement is in place between the UAE and the entity’s home country, and
  • Where excise tax has been paid in the UAE by a person who is registered for excise tax in another GCC country that is implementing excise tax and who has then exported the excise goods out of the UAE and paid excise tax in that other GCC country

A refund request form will be available on the FTA website that can be used to request refunds.

Travellers entering the UAE with excise goods for non-business purposes will not be required to register as an importer of excise goods.

Travellers may need to pay the excise tax due on the goods depending on the value of the goods being imported. Where the value of the goods is below the threshold for exemption from Customs Duty as per the Customs Laws, no excise tax is due.

Where the value of excise goods exceeds the value of the exemption for Customs Duty purposes, then excise tax will be due on the total value of the goods.

Physical payment of excise tax will be required before or at the time of import. Further details on the channels that will be available for travellers or non-registered persons to pay the excise tax liability will be released in due course.

Generally, retailers are not expected to register for excise tax because they are not expected to be importers or producers of excise goods.
Retailers will only need to register for excise tax if they are: a) Producers of Excise Goods in the State; where that production is in the course of doing business. b)
Importers of Excise Goods. c) Warehouse Keepers of a Designated Zone. d) Stockpilers of Excise Goods in the State, where that Stockpiling is in the course of doing business.
After the law comes in to effect, it is expected that in most cases, retailers will purchase excise goods that are already in free circulation. These goods will already have had excise tax applied and paid.

Excise is not a transaction based tax; it is due at the point the goods are released for consumption in the UAE, regardless of whether they will remain unsold.

Excise is not a transaction based tax so no relief will be available for suppliers that have sold excise goods to a customer and have not received payment from that customer. Excise tax is due based on the date the goods are released for consumption (i.e. enter free circulation) in the UAE, regardless of whether they are subject to an onward sale.

Goods released for consumption in a freezone will be subject to excise tax. This includes any freezone that may also be registered as a designated zone. If goods are held out for retail sale, or intended for consumption within a freezone, excise tax will need to be paid by the importer or producer that ‘released’ the goods.

Samples of excise goods that are given away for free will also be subject to excise tax. Excise tax is not a transaction based tax so tax is due on the goods when they are released for consumption (i.e. enter free circulation) in the UAE, regardless of whether or not they are intended for sale.

Value Added Tax (or VAT) is an indirect tax. Occasionally you might also see it referred to as a type of general consumption tax. In a country which has a VAT, it is imposed on most supplies of goods and services that are bought and sold.
VAT is one of the most common types of consumption tax found around the world. Over 150 countries have implemented VAT (or its equivalent, Goods and Services Tax), including all 29 European Union (EU) members, Canada, New Zealand, Australia, Singapore and Malaysia.
VAT is charged at each step of the ‘supply chain’. Ultimate consumers generally bear the VAT cost while Businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government.
A business pays the government the tax that it collects from the customers while it may also receive a refund from the government on tax that it has paid to its suppliers. The net result is that tax receipts to government reflect the ‘value add’ throughout the supply chain.
To explain how VAT works we have provided a simple, illustrative example below (based on a VAT rate of 5%).

A sales tax is also a consumption tax, just like VAT. For the general public there may be no observable difference between how the two types of taxes work, but there are some key differences. In many countries, sales taxes are only imposed on transactions involving goods.
In addition, sales tax is only imposed on the final sale to the consumer. This contrasts with VAT which is imposed on goods and services and is charged throughout the supply chain, including on the final sale. VAT is also imposed on imports of goods and services so as to ensure that a level playing field is maintained for domestic providers of those same goods and services.
Many countries prefer a VAT over sales taxes for a range of reasons. Importantly, VAT is considered a more sophisticated approach to taxation as it makes businesses serve as tax collectors on behalf of the government and cuts down on misreporting and tax evasion.

The UAE Federal and Emirate governments provide citizens and residents with many different public services – including hospitals, roads, public schools, parks, waste control, and police services. These services are paid for from the government budgets.
VAT will provide our country with a new source of income which will contribute to the continued provision of high quality public services into the future. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.

The UAE is part of a group of countries which are closely connected through “The Economic Agreement Between the GCC States” and “The GCC Customs Union”. The GCC group of nations have historically worked together in designing and implementing new public policies as we recognize that such a collaborative approach is best for the region.

VAT will be introduced across the UAE on 1 January 2018 at a standard rate of 5%.

Businesses will be responsible for carefully documenting their business income and costs and associated VAT charges. Registered businesses and traders will charge VAT to all of their customers at the prevailing rate and incur VAT on goods / services that they buy from suppliers. The difference between these sums is reclaimed or paid to the government.

VAT, as a general consumption tax, will apply at 5% to all transactions of goods and services unless specifically exempted in Article (46) of the Federal Decree-Law No. (8) of 2017 on Value Added Tax or subject to a rate of Zero as per Article (45) of the Federal Decree-Law.

The cost of living is likely to increase slightly, but this will vary depending on the individual’s lifestyle and spending behavior. If your spending is mainly on those things which are relieved from VAT, you are unlikely to see any significant increase.

VAT is intended to help improve the economic base of the country. Therefore, we will include rules that require businesses to be clear about how much VAT you are paying for each transaction. You will have the required information to decide whether to buy something or not.

Any person will be able to object a decision of the Federal Tax Authority.
As a first step, the person shall request the FTA to reconsider its decision. Such request of re-consideration has to be made within 20 business days from the date the person was notified of the original decision of the FTA, and the FTA will have 20 business days from receipt of such application to provide its revised decision.
If the person is not satisfied with the revised decision of the FTA, it will be able to object to the Tax Disputes Resolution Committee which will be set up for these purposes.
Objections to the Committee will need to be submitted within 20 business days from the date the person was notified of the FTA’s revised decision, and the person must pay all taxes and penalties subject of objection before objecting to the Committee. The Committee will typically be required to give its decision regarding the objection within 20 business days from its receipt.
As a final step, if the person is not satisfied with the decision of the Committee, the person may challenge its decision before the competent court. The appeal must be made within 20 business days from the date of the appellant being notified of the Committee’s decision

Log into the FTA e-Services portal via E-SERVICES, and go to EDIT on the VAT section and enter your Customs Registration Number. This will automatically update your records.

If you have been allocated a “Provisional TRN” and this has been communicated to you by email, you will receive the Tax Registration Certificate after the FTA has fully reviewed your application.

A residential building is a building or part thereof that is intended and designed for occupation by individuals, and mainly includes buildings which can be occupied by any person as main place of residence.It does not include:

 

  • Any place that is not a building fixed to the ground and can be moved without
    being damaged.
  • Any building that is used as a hotel, motel, bed and breakfast establishment, or
    hospital or the like
  • A serviced apartment for which services in addition to the supply of
    accommodation are provided.
  • Any building constructed or converted without lawful authority.

A commercial building is any building or part thereof that is not a residential building. Examples would be offices, warehouses, hotels, shops, etc.

A supply of real estate may include the sale, lease or giving the right in any real estate.

The first supply of a new residential building within the first three years of it being constructed shall be zero-rated. All subsequent supplies shall be exempt, even if within the first three years.

All supplies of commercial properties are subject to VAT at 5%, and this includes all buildings or parts thereof that are not residential buildings.

The owners of residential buildings do not have to register for VAT if they do not have any other business activities. Where owners have other business activities, they should consider their obligations further.
The owner of any building that is not residential, will have to register if the value of the supplies over the preceding 12 months exceeds AED 375,000 or it is expected that they will exceed AED 375,000 over coming 30 days.

An owner of residential building will not be able to recover VAT in respect of expenses related the exempt supply of the residential buildings.
An owner of a commercial building will generally be able to recover VAT in respect of expenses related to the supply of the building.

The rent or sale of a residential part of the building shall be treated as zero-rated or exempt, depending on whether this is a first supply or a subsequent supply.
The rent or sale of a commercial part of the building shall be treated as subject to VAT at 5%.
The tax incurred by the owner on the building needs to be apportioned where there is an exempt supply, and the portion related to the taxable supply (at 0% and 5%) may be recovered.

The rent of residential building will generally be exempt from VAT.
The rent of commercial building will be subject to VAT at 5%

A business must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000.
Furthermore, a business may choose to register for VAT voluntarily if their supplies and imports are less than the mandatory registration threshold, but exceed the voluntary registration threshold of AED 187,500.
Similarly, a business may register voluntarily if their expenses exceed the voluntary registration threshold. This latter opportunity to register voluntarily is designed to enable start-up businesses with no turnover to register for VAT.

All businesses in the UAE will need to record their financial transactions and ensure that their financial records are accurate and up to date. Businesses that meet the minimum annual turnover requirement (as evidenced by their financial records) will be required to register for VAT. Businesses that do not think that they should be VAT registered should maintain their financial records in any event, in case we need to establish whether they should be registered.
VAT-registered businesses generally:

  • must charge VAT on taxable goods or services they supply;
  • Energy drinks – 100%may reclaim any VAT they’ve paid on business-related goods or services;
  • keep a range of business records which will allow the government to check that they have got things right
    you’re a VAT-registered business you must report the amount of VAT you’ve charged and the amount of VAT you’ve paid to the government on a regular basis. It will be a formal submission and it is likely that the reporting will be made online.
    If you’ve charged more VAT than you’ve paid, you have to pay the difference to the government.
    If you’ve paid more VAT than you’ve charged, you can reclaim the difference.

Concerned businesses have time to prepare before VAT will come into effect in January 2018.
Businesses will need to meet requirements to fulfil their tax obligations. Businesses should have started so that they will be ready later. To fully comply with VAT, we believe that businesses may need to make some changes to their core operations, their financial management and book-keeping, their technology, and perhaps even their human resource mix (e.g., accountants and tax advisors). It is essential that businesses try to understand the implications of VAT now and once the legislation is issued make every effort to align their business model to government reporting and compliance requirements. We will provide businesses with guidance on how to fully comply with VAT once the legislation is issued. The final responsibility and accountability to comply with law is on the business.

VAT registration has opened in October 2017 for businesses that need to be registered by 1 January 2018. Any business that is required to be registered for VAT and charge VAT from 1 January 2018 must be registered prior to that date.
According to the Federal Law No. (7) on Tax Procedures, the Authority has 20 business days to review and respond on registration applications.
Registration applications shall be submitted via the E-Services Portal on the FTA website www.tax.gov.ae

Taxable Persons must file VAT returns with the FTA on a regular basis, within 28 days of the end of the Tax Period, which shall be:

      • Quarterly for businesses with an annual turnover below AED150m
      • Monthly for businesses with an annual turnover of AED150m or more.

    The Tax returns shall be filed online using eServices.

Businesses are required to keep records which will enable the Federal Tax Authority to identify the details of the business activities and review transactions. The documents which are required and the time period for keeping them is clarified in Federal Law no. (7) of 2017 on Federal Tax procedures and the Cabinet Decision No. (36) of 2017 on the Executive Regulation of the Federal Law No (7) of 2017 on Tax Procedures.

Any taxable person must retain VAT invoices issued and received for a minimum of 5 years.

The place of supply will determine whether a supply is made within the UAE (in which case the UAE VAT law will apply), or outside the UAE for VAT purposes.
For a supply of goods, the place of supply should be the location of goods when the supply takes place with special rules for certain categories of supplies (e.g. water and energy, cross border supplies).
For the supply of services, the place of supply should be where the supplier is established with special rules for certain categories of supplies (e.g. cross border supplies between businesses).

VAT shall be payable in addition to the custom duties paid by the importer of the goods and cannot be deducted. VAT shall be computed on the value that includes the customs duties.

The VAT treatment of real estate will depend on whether it is a commercial or residential property.
Supplies (including sales or leases) of commercial properties will be taxable at the standard VAT rate (i.e 5%).
On the other hand, supplies of residential properties will generally be exempt from VAT.
This will ensure that VAT would not constitute an irrecoverable cost to persons who buy their own properties. In order to ensure that real estate developers can recover VAT on construction of residential properties, the first supply of residential properties within 3 years from their completion will be zero-rated.

VAT will be charged at 0% in respect of the following main categories of supplies:

  • Exports of goods and services to outside the GCC;
  • International transportation, and related supplies;
  • Supplies of certain sea, air and land means of transportation (such as aircrafts and ships);
  • Certain investment grade precious metals (e.g. gold, silver, of 99% purity);
  • Newly constructed residential properties, that are supplied for the first time within 3 years of their construction;
  • Supply of certain education services, and supply of relevant goods and services;
  • Supply of certain Healthcare services, and supply of relevant goods and services.

The following categories of supplies will be exempt from VAT:

  • The supply of some financial services (clarified in VAT legislation);
  • Residential properties;
  • Bare land; and
  • Local passenger transport

Businesses that satisfy certain requirements covered under the Legislation (such as being resident in the UAE and being related/associated parties) will be able to register as a VAT group.
For some businesses, VAT grouping will be a useful tool that would simplify accounting for VAT.

VAT registered businesses will be able to reduce their output tax liability by the amount of VAT that relates to bad debt which has been written off by the VAT registered business. The legislation will include the conditions and limitations concerning the use of this relief.

To avoid double taxation where second hand goods are acquired by a registered person from an unregistered person for the purpose of resale, the VAT-registered person will be able to account for VAT on sales of second hand goods with reference to the difference between the purchase price of the goods and the selling price of the goods (that is, the profit margin). The VAT which must be accounted for by the registered person will be included in the profit margin. Further details of the conditions to be met in order to apply this mechanism can be found in the Executive Regulations of the Federal Decree-Law No.(8) of 2017 on Value Added Tax.

Where a VAT registered person incurs input tax on its business expenses, this input tax can be recovered in full if it relates to a taxable supply made, or intended to be made, by the registered person. In contrast, where the expense relates to a non-taxable supply (e.g. exempt supplies), the registered person may not recover the input tax paid.
In certain situations, an expense may relate to both taxable and non-taxable supplies made by the registered person (such as activities of the banking sector). In these circumstances, the registered person would need to apportion input tax between the taxable and non-taxable (exempt) supplies.
Businesses will be expected to use input tax (ratio of recoverable to total) as a basis for apportionment in the first instance although there will be the facility to use other methods where they are fair and agreed with the Federal Tax Authority.

Penalties will be imposed for non-compliance.
Examples of actions and omissions that may give raise to penalties include:

  • A person failing to register when required to do so;
  • A person failing to submit a tax return or make a payment within the required period;
  • A person failing to keep the records required under the issued tax legislation;
  • Tax evasion offences where a person performs a deliberate act or omission with the intention of violating the provisions of the issued tax legislation.

No special rules are planned for small or medium sized enterprises. However, the FTA is providing through its website materials and resources for these entities to assist them in their
enquiries.

Special rules will be provided to deal with various situations that may arise in respect of supplies that span the introduction of VAT. For example:

  • Where a payment is received in respect of a supply of goods before the introduction of VAT but the goods are actually delivered after the introduction of VAT, this means that VAT will have to be charged on such supplies. Likewise, special rules will apply with regards to supplies of services spanning the introduction of VAT.                          
  • Where a contract is concluded prior to the introduction of VAT in respect of a supply which is wholly or partly made after the introduction of VAT, and the contract does not contain clauses relating to the VAT treatment of the supply, then consideration for the supply will be treated as inclusive of VAT. There will, however, be special provisions to allow suppliers to charge VAT in situations where their recipient is able to recover their VAT but where there is no VAT clause.

Generally, insurance (vehicle, medical, etc) will be taxable. Life insurance, however, will be treated as an exempt financial service.

It is expected that fee based financial services will be taxed but margin based products are likely to be exempt.

Islamic finance products are consistent with the principles of sharia and therefore often operate differently from financial products that are common internationally.
To ensure that there are no inconsistencies between the VAT treatment of standard financial services and Islamic finance products, the treatment of Islamic finance products will be aligned with the treatment of similar standard financial services.

A scheme will be introduced to allow a UAE national who is not registered for VAT to reclaim VAT paid on goods and services relating to constructing a new residence which will be privately used by the person and his family. This will allow the recovery of VAT on such expenses as contractor’s services and building materials.

Refunds will be made after the receipt of the application and subject to verification checks, with a particular focus on avoiding fraud.

In the course of its interaction with taxpayers, the FTA may provide its views on various matters in the law. Taxpayers may choose to challenge these views. It should be noted that penalties may be imposed on taxpayers who are found to violate any tax laws and regulations.

A supplier registered or required to be registered for VAT must issue a valid VAT invoice for the supply. To be considered as a valid VAT invoice, the document must follow a specific format as mentioned in the legislation. In certain situations the supplier may be able to issue a simplified VAT invoice. The conditions for the VAT invoice and the simplified VAT invoice are mentioned legislation.

VAT will not be deductible in respect of expenses incurred for making non-taxable supplies. Furthermore, input tax cannot be deducted if it is incurred in respect of specific expenses such as entertainment expenses e.g. employee entertainment.

VAT on expenses that were incurred by a business can be deducted in the following circumstances:

  • The business must be a taxable person (the end consumer cannot claim any input tax refund).
  • VAT should have been charged correctly (i.e. unduly charged VAT is not recoverable).
  • The business must hold documentation showing the VAT paid (e.g. valid tax invoice).
  • The goods or services acquired are used or intended to be used for making taxable supplies.
  • VAT input tax refund can be claimed only on the amount paid or intended to be paid before the expiration of 6 months after the agreed date for the payment of the supply.

Non-residents that make taxable supplies in the UAE will be required to register for VAT unless there is any other UAE resident person who is responsible for accounting for VAT on these supplies. This exclusion may apply, for example, where a UAE business is required to account for VAT under a reverse charge mechanism in respect of a purchase from a non-resident.

VAT is due on the goods and services purchased from abroad.
In case the recipient in the State is a registered person with the Federal Tax Authority for VAT purposes, VAT would be due on that import using a reverse charge mechanism.
In case the recipient in the State is a non-registered person for VAT purposes, VAT would be paid on import of goods from a place outside the GCC. Such VAT will typically be required to be paid before the goods are released to the person.

Supplies made by government entities will typically be subject to VAT. This will ensure that government entities are not unfairly advantaged as compared to private businesses.
Certain supplies made by government entities will, however, be excluded from the scope of VAT if they are not in competition with the private sector or where the entity is the sole provider of such supplies. It is likely certain government entities will be entitled to VAT refunds – this is designed to avoid budgeting issues and provide a level playing field between outsourced and insourced activities.
For the supplies provided for government entities, the treatment of such supplies shall depend on the same supply and not on the recipient of the supply. Therefore, if the supply is subject to the standard tax rate, the treatment would remain the same even if it is provided to a government entity.

Businesses will need to complete additional information on their VAT returns to report revenues earned in each Emirate.
Further detail on this can be found in the Executive Regulation of the Federal Decree-Law No. (8) of 2017 on Value Added Tax.

Not necessarily. Some goods that are imported may be exempt from customs duties but subject to VAT.

Yes, tourists are a significant source of revenue for the UAE and will pay VAT at the point of sale. Nevertheless, we have set the VAT rate deliberately low so that VAT is a limited burden on all consumers.

It is intended that we will allow foreign businesses to recover the VAT they incur when visiting the UAE. This is important as it encourages them to do business and also, because a lot of other countries have VAT systems, it protects the ability of UAE businesses to recover VAT when visiting other countries (where the rates are a lot higher).

All Federal Tax Laws, Executive Regulations and Cabinet Decisions are published under the “Legislation” section on the FTA website.

As per global best practice, the UAE is exploring other tax options as well. However, these are still being analysed and it is unlikely that they will be introduced in the near future. The UAE is not currently considering personal income taxes, however.

Tax is the means by which governments raise revenue to pay for public services. Government revenues from taxation are generally used to pay for things such public hospitals, schools and universities, defence and other important aspects of daily life.
There are many different types of taxes:

  • A direct tax is collected by government from the person on whom it is imposed (e.g., income tax, corporate tax).
  • An indirect tax is collected for government by an intermediary (e.g. a retail store) from the person that ultimately pays the tax (e.g., VAT, Sales Tax).

As per global best practice, the UAE is exploring other tax options as well. However, these are still being analysed and it is unlikely that they will be introduced in the near future. The UAE is not currently considering personal income taxes, however.

Our analysis suggests that it will help the country strengthen its economy by diversifying revenues away from oil and will allow us to fund many public services. This is a sign of a maturing economy.

The government has launched an awareness and education campaigns to educate UAE residents, businesses, and other impacted groups.
As part of its awareness campaign, the Ministry of Finance has launched the first phase of the awareness sessions during the period from March till May 2017. The Federal Tax Authority has run the second phase of awareness sessions during the period from August to November 2017.
These sessions were held in the different Emirates.
All presentations of these sessions as well as guides and videos explaining VAT are published on the FTA website.
A telephone hotline has been set up so that you can call and speak to one of our employees directly on 600599994.

When VAT is introduced, the government will provide information and education to businesses to help them make the transition. The government will not pay for businesses to buy new technologies or hire tax specialists and accountants. That is the responsibility of each business.
We will, however, provide guidance and information to assist you and we are giving businesses time to prepare.

Everyone is urged to fully comply with their VAT responsibilities. The government is currently in the process of defining the exact fees and penalties for non-compliance.
Administrative penalties for violations have been issued by Cabinet Decision No. (40) of 2017 and can be found under the Legislation section on the FTA website.

A residential building is a building or part thereof that is intended and designed for occupation by individuals, and mainly includes buildings which can be occupied by any person as main place of residence.It does not include:

  • Any place that is not a building fixed to the ground and can be moved without being damaged.
  • Any building that is used as a hotel, motel, bed and breakfast establishment, or hospital or the like.
  • A serviced apartment for which services in addition to the supply of accommodation are provided.
  • Any building constructed or converted without lawful authority.

A commercial building is any building or part thereof that is not a residential building. Examples would be offices, warehouses, hotels, shops, etc.

A supply of real estate may include the sale, lease or giving the right in any real estate.

The first supply of a new residential building within the first three years of it being constructed shall be zero-rated. All subsequent supplies shall be exempt, even if within the first three years.

All supplies of commercial properties are subject to VAT at 5%, and this includes all buildings or parts thereof that are not residential buildings.

The owners of residential buildings do not have to register for VAT if they do not have any other business activities. Where owners have other business activities, they should consider their obligations further.
The owner of any building that is not residential, will have to register if the value of the supplies over the preceding 12 months exceeds AED 375,000 or it is expected that they will exceed AED 375,000 over coming 30 days.

An owner of residential building will not be able to recover VAT in respect of expenses related the exempt supply of the residential buildings.
An owner of a commercial building will generally be able to recover VAT in respect of expenses related to the supply of the building.

The rent or sale of a residential part of the building shall be treated as zero-rated or exempt, depending on whether this is a first supply or a subsequent supply.
The rent or sale of a commercial part of the building shall be treated as subject to VAT at 5%.
The tax incurred by the owner on the building needs to be apportioned where there is an exempt supply, and the portion related to the taxable supply (at 0% and 5%) may be recovered.

The rent of residential building will generally be exempt from VAT.
The rent of commercial building will be subject to VAT at 5%

Yes, the invoice should be issued on the date the goods are collected in person by the tourist at a physical store, and the Tax Free Tag issued and attached to it on the same day. If the tourist pays online, the invoice must clearly state that it is an advance / deposit / booking fee and when collectiing the goods the actual sales invoice is issued on the day. Otherwise it is not possible to purchase online and claim tax free refunds.

Yes, as long as the tourist exporting the goods is present during the purchase, and it is the exporter’s information that is completed for the VAT refund.

The tourist can get a refund in cash up to AED 10,000, for all the Tax Free Tags that add up to that amount (or less). Once they pass that amount, the remaining tags must be refunded by credit or debit card only.

The refund will be made by credit card, debit card or e-voucher where applicable.

There would be a standard currency exchange rate that would be applied to convert funds into the cardholder’s currency (where currency is not AED).

There is no charge for a refund in cash, however, if a tourist wishes to exchange the refund from AED into another currency, the Cash Refund Agent’s advertised exchange rates would be applied.

Where available, a cash refund will only be given at the airside.

Card refunds are typically processed by Planet within 10 days, excluding the bank’s or credit card company’s own processing times.

Tourists are advised to track their refund by scanning the QR code on the Tax Free Tag using a smartphone, and that will take them to a unique tracking page to see further details. If further assistance is required, the tourist can contact the Planet Customer Services team.

Returns are allowed before the Tax Free Tag has been validated at the point of exit (the merchant will have to void the Tax Free Tag following Planet’s procedures). Returns are not allowed after the tourist has validated the Tax Free Tag at the point of exit from the UAE.

The invoice must be attached to the Tax Free Tag and presented at the airport as part of the refund process. If not, the tourist will not receive their tax free refund at the exit point. Invoice wallets will be handed to tourists at the stores to keep their Tax Free Tag purchases organised.

The person requesting the refund must be the person whose name and passport number is recorded in the Tax Free Tag transaction. The return of goods is allowed before the Tax Free Tag has been validated at the point of exit (the merchant will have to void the Tax Free Tag following Planet’s procedures). Returns are not allowed after the tourist has validated the Tax Free Tag at the point of exit from the UAE.

The preference (for better customer & merchant experience) is that the tourist presents their original passport/ GCC ID at point of purchase. However, a clear copy would suffice of the passport / GCC ID number and tourist details. For validation at the point of exit, the original passport or GCC ID must be presented.

No, as the purchase invoice is required (the Tax Free Tag is attached to the purchase invoice).

All taxable goods are eligible except for: Goods that have been consumed, in full or in part, in the UAE Goods that are not accompanied by the Overseas tourist at the time of leaving UAE Motor vehicles, boats and aircraft

No, as a minimum, the original or copy of the passport or GCC ID details are needed.

The tourist can consolidate up to 8 receipts on the same day of purchase from the same store group.

Yes, a Tax Free Tag must be attached to each invoice to obtain a tax refund.

The merchant support help line will be available 7 days a week from 10am to midnight (and 2am for holidays when extended store hours are in place). Emails can be sent at any time.

Yes (e.g. smartphones) as long as they’re accompanied by the original packaging when validating their export at the exit point. A perfume that has been opened however is not eligible for a refund.

The refund may only be claimed on the 4 boxes that are being exported.

The physical Tax Free Tag must be attached to the invoice at the point of exit (validation).

The tourist must export the goods and have the Tax Free Tag validated within 3 months of purchase otherwise a tax free refund is not possible.

No, only eligible goods can receive a Tax Free Tag for refund.

No, however they should be for personal use or gifts. Purchases may be subject to increased checks if it is suspected that these goods are not for personal use.

No, but goods and original packaging will have to be available for inspection to confirm that the goods are newly purchased.

Goods must be available for inspection at the validation point. The validation point will be before check in, luggage drop-off and security. The goods must be accompanied by the tourist when leaving the UAE so if they are shipped via courier they are not eligible goods under this scheme.

The Tax Free Tag must be validated at departure or no refund can be made. However, a tourist can provide card details later to obtain the refund once goods have been validated if they didn’t have time to get a refund.

Look for stores displaying the Planet Tax Free and FTA logo, or ask in store.

The minimum purchase amount is AED 250 per Tax Free Tag. This can be made up of more than one purchase within the same store group on the same day.

The refund is 85% of the VAT minus 4.80 AED per Tax Free Tag.

The tourist must keep the Tax Free Tag attached to the invoice until their day of departure. On departure, the tourist must present their Tax Free Tag to a member of Planet staff or go to a Planet self-serve kiosk to have the Tax Free Tag digitally validated before checking in their luggage and going through security. At the end of the process, the tourist can choose whether they want a credit/debit card or cash refund.

The physical Tax Free Tag must be attached to the invoice at the point of exit (validation).

Planet Validation points will be before check in and are branded Planet Tax Free. Initially these will be in Abu Dhabi, Dubai and Sharjah International Airports. The validation points will be open 24/7. These will be followed by other validation points including Dubai Al Maktoum airport, Al Ain airport, Ras Al Khaimah airport, Port Zayed, Port Rashid, Al Ghuwaifat land border, Al Ain land border and Hatta land border.

No. Only the owner of the passport/GCC ID under which the Tax Free Tag is registered is entitled to validate them and collect the refund.

The tourist can have the refund paid to their credit or debit card or where available collect the refund in cash from a Planet cash refund agent. A tourist may also be able to claim the refund via e-vouchers at exit points where cash is not available. When validating a Tax Free Tag the tourist will choose their preferred refund method. A list of cash refund points can be found on the Planet website.

After validation, the tourist presents their passport/ GCC ID and Tax Free Tags to a Cash Refund Agent. Planet staff will be able to direct the tourist to the nearest cash agent.

During validation the tourist will be asked to enter their card details. Refunds can be made to Visa, MasterCard, Amex and Union Pay.

The tourist can track their refund by scanning the QR code on the Tax Free Tag using their smartphone, and this will take them to a unique website link that will show the refund status.

The refund will appear in the currency of the card.

The tourist can return to the UAE with the goods and obtain validation on their departure within 3 months from the date of purchase. Goods must not be consumed or partly consumed when requesting validation, and must be available for inspection.

The validation point will begin accepting Tax Free Tags from 6 hours before the tourist’s scheduled departure time.

Yes, if a restaurant sells goods that are eligible under this scheme, they can register.

Overseas Tourists are eligible for this type of refund. In the law, a tourist is defined as any natural person who is not resident in any of the Implementing States and who is not a crew member on a flight or aircraft leaving an Implementing State. Please note that currently, all GCC countries are considered as Non-Implementing States of the GCC VAT Treaty and therefore visitors from the other GCC states will be able to claim VAT refunds on their UAE shopping. This is subject to change in the future. Please note the tourist should be 18 years old or over to be eligible to claim a refund.

Yes, if a restaurant sells goods that are eligible under this scheme, they can register.

Validation will be available 24/7 and refund desks will be open at major airports 24/7.

The DTS is a newly introduced compliance programme applicable to manufacturers and importers of tobacco and tobacco products. The DTS will deliver unique pack marks to allow product tracking and traceability from the point of manufacture through to final Emirate of distribution, and to support the enforcement activity targeting the reduction in illicit tobacco trading. For the time being, DTS will apply to cigarettes.The DTS Solution will require the manufacturers to apply specific high security control markers (stamps) and digital codes to all packs, with the principle aims of the DTS System being:

  • To enhance the FTAs ability to control excise taxes on cigarettes sold in the UAE, following importation or local manufacture.
  • To enhance the control of Excise Tax collection and give the relevant Authorities the ability to analyze and audit the supply chain to better identify the trade in illicit tobacco products.
  • To meet the compliance standards laid down by the WHO’s Framework Convention on Tobacco Control (FCTC) through the enabling of tracking and traceability of compliant tobacco products.

To support the Excise tax initiative for the tobacco products, a Digital Tax Stamp (DTS) control solution is being introduced, the purpose of which is to enable the FTA to raise compliance standards for tobacco products produced or imported into the UAE, focus enforcement activity on the illicit trade market, and also ensure that the income
generated from the legal and compliant manufacture or importation is successfully distributed to the appropriate Emirate.

The scheme will initially focus on cigarettes from 2019, and will extend in time to include all tobacco-based products. Communication of the timelines for non-cigarette based
tobacco products will follow in the future. Information relating to any further products and categories to be added to the scheme will be communicated in the future.

Manufacturers – Any UAE-based or Overseas/International Cigarette Manufacturer that sells its products via importation into the UAE for EITHER domestic sales or sales via
UAE Duty free outlets (airports and ports).
Importers – ANY officially licensed IMPORTER of RECORD who purchases Cigarettes in bulk from domestic or international manufacturers and undertakes to on-sell and distribute within the UAE mainland or UAE Duty Free markets.
Distributors / Supply Chain Agents/ Warehouse keepers – ANY official distributor that will be the recipient of formally imported goods for sales in domestic market or sales via
UAE Duty free outlets (airports and ports).

1st Jan 2019: Importers and UAE-based Manufacturers will be able to order stamps to be sent to the Manufacturers for application to the pack of cigarette products.
1st May 2019: No cigarette products without a digital tax stamp will be permitted to be imported into the UAE.
1st August 2019: No cigarettes will be allowed to be held out for sale, imported or produced anywhere in the UAE unless they carry a Digital Tax Stamp. All cigarettes produced or imported into the UAE after this date must have a Digital Tax Stamp with end-to-end traceability. All cigarettes manufactured or legitimately imported with a digital tax stamp (without end-to-end traceability) between May 1st and August 1st may remain in market beyond this date.
Timelines for other tobacco products to be added to the scheme will be communicated in due course.

Tobacco companies are already used to applying track and trace technology for their products. The solution we are applying in the UAE

  • Is compliant with the Global standard for tobacco supply and distribution – the United Nations World Health Organisation’s Framework Convention on Tobacco Control (FCTC) protocol.
  • Is delivered in partnership with De La Rue, the world’s leading anti-counterfeit company.
  • The stamp itself contains world leading anti-counterfeit secure features – both visible and invisible.

We expect all cigarettes in the UAE to carry a tax stamp. There will be penalties for non-compliance with the scheme.

    • The FTA will licence all manufacturers, importers and distributors to trade in the UAE.

 

    • With this licence in place, the importers/ local manufacturers will be able to order tax stamps.

 

    • Unique tax stamps will be allocated and despatched to the manufacturers, with each stamp having a digital ‘twin’ (a unique code) with the stamp, and the coding being applied on-line to individual packs during the cigarette manufacturing process.

 

    • Manufacturers will submit the details of stamps and codes used to the central database and retain this information for reporting usage and intended export shipment data to the FTA.

 

    • The FTA will be informed when batches have cleared customs.

 

  • Law enforcement will check throughout the supply chain that the tax stamps are in use

In order to register for DTS, excise registered businesses need to download a form from (www.tax.gov.ae/digitaltaxstamp) and send it to the customer care team mailbox to ask for access (ftadtscustomercare@delarue.com).
Once the request has been processed, the team will provide the importer/manufacturer with relevant and tailored access to the Certify system. The DTS system for ordering Tax Stamps will go live on 1st Jan 2019.

Stamps will be ordered in the DTS system via a simple login and order management process which will be menu driven. When placed an order will be ratified by the FTA to ensure its veracity and completeness, and this will then trigger direct engagement with the intended recipient of the stamps (the Manufacturer).
For an importer to create an order, they need to:

  • Log on to the DLR Certify System
  • Enter their User Name and Password
  • Go to the ‘Manage Orders’ Section where they will be able to record key information relating to the order, including the market the order is for (for UAE or Duty Free, the product type (cigarettes initially) and the Product Code.
    A step by step training manual will be shared in the training session. For any further questions, please contact the Customer Care team at ftadtscustomercare@delarue.com.

The validity period for stamps as decreed in the legislation is 12 months.

There are no limitations in place, however it will be worth noting that stamps are to be delivered in specific Minimum Order Quantities (MOQs) dependent upon the format of supply required: Reels, Sheets, Bundles. The MOQ requirements for each of these formats are as below:
Reel: 30,000 stamps (per single reel)
Sheets: 240 stamps (per single sheet)
Bundles: 70,000 (per of bundled stamps)

The FTA and its partner De La Rue are on hand to deal with any on-going issues and questions.
A Customer Care team is being established to handle all queries and can be reached at ftadtscustomercare@delarue.com.

It is the responsibility of importers and manufacturers to ensure that the only products supplied into the UAE will be ones that carry tax stamps along with the approved encoding requirement at this time.
Law enforcement officers will be checking throughout the supply chain that this is the case.

We expect all cigarettes sold in the UAE from August 1st 2019 to carry a digital tax stamp.
There will be a penalty put in place for non-compliance, the details of which will be communicated in due course.

Consumers should look for both the presence of physical stamps and digital codes on
the products purchased in within the UAE.

Consumers should look for both the presence of physical stamps and digital codes on the products purchased. If a consumer believes that a pack of cigarettes is without mark and code, then they should notify the FTA where they purchased the pack from, so the appropriate action can be taken. This is likely to involve action against the retailer,
importer and manufacturer but will not impact the consumer.

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