UAE amends VAT law to exempt fund management firms and certain virtual asset services

Changes aim to further boost the Emirates' investment environment and economic growth

The Ministry of Finance says it is streamlining tax laws. Khushnum Bhandari / The National

The UAE has amended its value-added tax law to exempt certain entities, as the government seeks to increase the attractiveness of the Emirates' investment environment and further support economic growth.

Investment fund management services will now be exempt from the tax, to stimulate growth in the sector "and increase the UAE’s attractiveness as a leading investment hub", the Ministry of Finance said on Saturday.

Certain services related to virtual assets will also be exempt, as "part of efforts to support innovation and advanced financial technology, further positioning the UAE as a prominent centre for virtual asset investment", it added. The ministry did not specify which virtual assets are covered.

In addition, in-kind donations between charitable and government entities will also become exempt from VAT, for values up to Dh5 million ($1.36 million) over a 12-month period, allowing donors to recover the VAT incurred for their donations, "easing the burden on these entities and enhancing their societal role".

“The ministry is committed to co-ordinating with relevant stakeholders from both the public and private sectors and working to update our regulations to enhance the UAE's business environment," said Younis Al Khoori, Undersecretary at the Ministry of Finance.

“We believe these amendments will help minimise misunderstandings or incorrect applications of the law, as well as simplify procedures for taxpayers in line with international best practices, ultimately contributing to an improved quality of life for all."

The amendments to Federal Decree-Law No 8 of 2017 on VAT "strengthen tax compliance by granting the Federal Tax Authority the authority to deregister taxpayers in specific cases, ensuring the integrity of the tax system and improving the efficiency of tax administration", the ministry added.

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The UAE in 2018 introduced 5 per cent VAT on a majority of goods and services as part of its push to diversify the economy and reduce its dependence on oil. The tax is a general consumption tax and is imposed on most goods and services that are bought and sold.

The ministry had also introduced other programmes, including corporate tax, designed to strengthen support for the business sector, which in turn promotes economic growth.

Some categories are already exempt from VAT, including the supply of a number of financial services, residential properties, bare land and local passenger transport.

The supply of certain education services and healthcare services, and exports of goods and services to outside the GCC and certain investment-grade precious metals are subject to 0 per cent VAT, according to the Ministry of Finance's website.

A business is required to register for VAT if its taxable supplies and imports exceed the notified threshold of Dh375,000. Tourists visiting the country, meanwhile, can also claim a refund of 85 per cent of the VAT paid on goods bought in the UAE before they leave the country.

Duties help boost the UAE's coffers: the government's revenue for the fourth quarter of 2023 jumped more than 8 per cent on an annual basis to Dh155.9 billion ($42.45 billion) as the Arab world’s second-largest economy continues to diversify its sources of revenue.

The new amendments "were designed in accordance with international best practices, taking into account the GCC Unified VAT Agreement, past experiences, challenges faced by the business community and stakeholder recommendations", the ministry said.