New tax schemes introduced in the UAE

UNITED ARAB EMIRATES - New tax schemes introduced in the UAE

June 2019

The Board of Directors of the Federal Tax Authority (FTA) has reported that tax compliance in the country continues to increase, with the number of VAT registered businesses now exceeding 300,000. In addition, the number of approved tax agents has increased to 316.

The FTA has also released details of several new schemes and procedures, which are summarised in this article.

Refund of VAT on goods and services connected to Expo 2020 Dubai

Dubai will host Expo 2020. To support the event, the FTA has published a Cabinet Decision allowing official participants to claim a refund of VAT paid on goods and services directly connected with the Expo 2020 site.

Official participants are required to apply for a Certificate of Refund Entitlement before reclaiming VAT under this scheme.

The refund claim can be made by official participants that are registered for VAT through their VAT returns. Official participants that are not registered for VAT must make a special refund application to The Bureau Expo 2020.

The FTA has also released a guide explaining the eligibility criteria and procedures of the scheme.

Introduction of the Business Tourist Refund scheme

The UAE’s VAT refund scheme for foreign business visitors is effective from 1 April 2019. It allows foreign businesses that are not registered for VAT in the UAE to claim a refund of VAT incurred in the UAE during business trips here. Claims have to be for a full calendar year and the minimum claim amount is AED 2,000.

Claims for 2018 can be made from 1 April 2019. Claims for subsequent calendar years can be made from 1 March of the following year.

Digital Tax Stamps for the sale of cigarettes

To control the importation and trading of tobacco in UAE, the FTA has introduced Digital Tax Stamps (DTS) under the Marking Tobacco and Tobacco Products scheme.

The DTS solution requires importers and manufacturers to apply the stamps to cigarette packs that have been subject to Excise Tax. The FTA has published a number of guidance documents and forms for DTS.

The entities subject to DTS are:

  • Manufacturers - Any UAE-based or overseas cigarette manufacturer that imports its products into the UAE;
  • Importers – Companies that purchase cigarettes in bulk from domestic or international manufacturers for the purpose of selling them in the UAE mainland or UAE Duty Free markets;
  • Distributors/Agents/Warehouse keepers – The recipient of imported goods for sale in the domestic market or for sale via UAE Duty free outlets.

The DTS for imported cigarettes applies from 1 May 2019. Beginning 1 August 2019 no cigarettes will be allowed to be sold or manufactured in the UAE unless they carry a Digital Tax Stamp.

The second phase of the Marking Tobacco Products scheme, which is expected to begin in late 2019, will include all tobacco products, whether imported or locally produced and traded, including shisha.

Allocation of VAT payments

The FTA has introduced a payment allocation option on its e-services portal. Taxpayers can choose the priority for payments to be allocated against the following:

  • Tax liability
  • Administrative penalties
  • Oldest liability

Possible extension of the Excise Tax to new products

The Ministry of Finance released an official statement that it is conducting a joint technical study with officials in Saudi Arabia on the addition of new goods to the Excise Tax list, as well as to determine tax rates on certain harmful substances. Details about what goods may be added to the Excise Tax list have not yet been provided.

Brian Conn

Amrita Chandwani