Revealed: Goods and services subject to VAT in the UAE

The UAE’s Federal Tax Authority has announced a final list of products and services that will be subject to an impending 5 per cent value added tax rate on January 1.

Other select goods and services will be zero-rated or exempt from the tax in areas including education, healthcare, oil and gas, transport and real estate.

Scroll down for the list

Certain government and non-profit activities will also come outside of the tax system, including those carried out by the government with no competition from the private sector.

The UAE Cabinet will soon issue a decision to identify government bodies and non-profit organisations that are not subject to the tax.

New fines were also announced by the Ministry of Finance (scroll down).

Companies must register for VAT if they sell goods or services subject to the tax exceeding Dhs375,000 ($102,00).

Those that sell goods or services worth less can voluntarily register ahead of the tax’s broader implementation for all companies.

Read: UAE’s tax authority urges firms to register for VAT ahead of deadline

The VAT registration procedure is free of charge and can be completed online via the e-services portal on the FTA website.

All businesses must submit an application for registration as soon as possible in order to avoid the risk of missing the January 1, 2018, deadline, which would entail the administrative penalties stipulated under the law.

Under the new rules, the penalty for those who fail to pay tax is no less than Dhs500 ($136) and no more than triple the value of the tax on the transaction in question.

The UAE and Saudi Arabia are leading the Gulf Cooperation Council countries in implementing the tax on January 1, 2018. The other Gulf states are expected to follow in the next two years.

Read: All GCC states still committed to VAT but dates will vary, IMF says

Education

Zero-rated:
Private and public school education (excluding higher education) and related goods and services.
Higher education provided by an institution owned by the government or 50 per cent owned by the government and related goods and services.
Nursery and pre-school education.
School trips within the curriculum.
After school activities supplied by teacher and not for an extra charge.

Taxed:
Education provided by private higher educational institutions and related goods and services.
School uniforms.
Stationary.
Electronic equipment.
Renting of school grounds for events.
After school activities for extra fees.
School trips for recreation.

Healthcare

Zero-rated:
Preventative healthcare service include vaccines.
Healthcare services aimed at the treating of humans including dental services.
Medicines and medical equipment on a list approved by the UAE Cabinet.

Taxed:
Healthcare services that are not for treatment or preventative such as elective or cosmetic surgery.
Medicines and medical equipment not on the Cabinet list.
Other Medical supplies.

Oil and Gas

Zero-rated:
Crude oil and natural gas.

Taxed:
Other oil and gas products including fuel at petrol stations.

Transport

Exempt:
Domestic passenger transport including internal UAE flights.

Zero-rated:
International transport of passengers and good including that within the GCC.
Supply of a means of air, land or sea transport for commercial purposes including for passengers and goods.
Supply of goods and service relating to commercial transport.

Real estate

Exempt:
The sale or rent of residential buildings after the first supply.
Bare land.

Zero-rated:
The first sale or rent of a residential building after the completion or construction or conversion.
The first sale of a charitable building.

Taxed:
The sale and rent of commercial buildings.
Hotels, motels and serviced accommodation.
Land this is not bare.
UAE citizens building their own home (can be recovered).

Financial services

Exempt:
Margin based products with no explicit fee, commission or rebate.
Interest on forms of lending including loans and credit cards.
The issuance, allotment or transfer of an equity or debt security.

Taxed:
Products with an explicit fee, commission, rebate or discount.

Gold, silver and platinum jewellery

Zero rated:
Items that are 99 per cent pure and tradable in global markets.

Taxed:
Items that are 99 per cent pure.
Jewellery.

Insurance and reinsurance

Exempt:
Life insurance and reinsurance.

Taxed:
Health, motor, property and insurance and reinsurance.

Food and beverages

Taxed:
All food and beverage products.

Telecoms and electronic services

Taxed:
All wired and wireless telecoms and electronic services, including mobile phone and broadband services.

Government

Outside VAT:
Sovereign activities not in competition with the private sector that are undertaken by designated government bodies.

Tax rate varies:
Activities that are not sovereign and in competition with the private sector.

Non-profit organisations

Outside VAT:
Activities of foreign governments, international organisations, diplomatic bodies and missions if not in business in the UAE.
Charitable activities by societies and associations of public welfare on a UAE Cabinet list.
Activities of other non-profits not on the Cabinet list, which are not considered business activities.

Tax rate varies:
Business activities undertaken by non-profits.

Free zones

Outside VAT:
The supply of goods between businesses in the designated zones.

Tax rate varies:
The supply of services between businesses in free zones.
The supply of goods and services in non-designated zones.
The supply of goods and services from the mainland to designated zones or vice versa.

Other areas

Outside VAT:
Activities undertaken by employees as part of their employment including salaries.
Supplies between members of a single tax group.

Zero rated:
Export of goods and services outside of the GCC states also implementing the 5 per cent VAT rate.

Taxed:
Any supplies or services not mentioned including any items sold in the UAE or service provided.
Second hand goods such as used cars sold by retailers, antiques and collectors (rate is 5 per cent of the profit margin).

VAT fines

The UAE’s Finance Ministry has also outlined a list of violations and fines associated with the tax.

These include the failure of a vendor to display prices inclusive of VAT, which is punishable by a fine of Dhs15,000 ($4,084).

A first incorrect tax filing will result in a fine of Dhs3,000 ($817). Each following error will then result in a Dhs5,000 ($1,361) fine.

Failure to submit a deregistration application will result in a fine of Dhs10,000 ($2,723). A first time tax offence will result in a Dhs1,000 ($272) fine and repeat offences within two years Dhs2,000 ($545).