Taxation in the United Arab Emirates

Taxation
An aspect of fiscal policy
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Types Direct Indirect Per unit Ad valorem In rem Capital gains Carbon Consumption Dividend Ecotax Excise Fuel Georgist Gift Gross receipts Income Inheritance (estate) Land value Payroll Pigovian Property Sales Sin Single Stamp Steering Turnover Value-added (VAT) Corporate profit Excess profits Windfall profits Negative (income) Wealth
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Research Academic Mihir A. Desai Dhammika Dharmapala James R. Hines Jr. Joel Slemrod Gabriel Zucman Advocacy Groups Tax Justice Network (TJN) Institute on Taxation and Economic Policy (ITEP) Oxfam (UK) Tax Foundation (US) Tax Policy Center (US)
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The United Arab Emirates is a federation of seven emirates, with autonomous emirate and local governments. The United Arab Emirates does not have any federal income tax. An income tax decree has been enacted by each Emirate, but in practice, the enforcement of these decrees is restricted to foreign banks and to oil companies.

The UAE government implemented value added tax (VAT) in the country from January 1, 2018 at a standard rate of 5%.^[1][2]

History

Most of the revenues have been generated from oil sales to other countries. UAE is looking to diversify from this source and other hydrocarbons and hence introducing other forms of revenue such as VAT.^[3]

Registration Criteria

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.^[4]

Zero-Rated Items of VAT

VAT will be charged at 0% in respect of the following main categories of supplies:^[5]

• Exports of goods and services to outside the GCC;
• International transportation, and related supplies;register for VAT
• Supplies of certain sea, air and land means of transportation (such as aircraft 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.

Exemptions of VAT

The following categories of supplies will be exempt from VAT:^[6]

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

See Also

VAT in UAE

References