The UAE Cabinet has approved the draft of executive regulations for value-added tax, a guide to how the indirect tax will go into effect next year in the Arabian Gulf’s second biggest economy.
The much anticipated set of regulations, are ostensibly the ABCs of where businesses will fall in the tax bracket. There has been some uncertainty regarding what goods and services will be taxed and which will be exempt or zero-rated.
Khalid Al Bustani, the director general of Federal Tax Authority, says any confusion is logical as the country is moving to a new tax regime. Businesses need to seek help from qualified tax professionals to explain the crux of tax procedures.
Tax regulations have detailed which parts of some of the businesses will be exempt from the levy and which ones will need to implement VAT at a standard 5 per cent rate.
Margin accounts at the banks, for example, are exempt while the explicit fees such a charges for chequebooks will be subject to VAT. As for the stock exchanges, Mr Al Bustani, says, only the commissions of brokers and the fees charged by the bourses will fall in tax net while the sovereign fee imposed by the regulator will be exempted.
In terms of precious metals, it is very clear that gold, silver, and platinum of investment grade - sold for investment purposes will be zero rated. Thus jewellery sold will fall in the tax net.
The draft regulations have addressed the definition of a free zone. For the first time they detail how companies in their respective jurisdiction will be taxed. The final law will be gazetted soon and the Cabinet will also make a decision on which of the free zones will be non-designated – a free zone where the companies will have to apply VAT like the mainland -- and which of them will be designated where tax procedures will be different on goods and services.
The success of VAT is imperative for the continued economic development of the UAE and all stakeholders will have to come together to achieve this objective, Mr Al Bustani says.
“At Federal Tax Authority, we believe that cooperation between the government, business and the consumer is key for the success. Success of any law comes from this cooperation.”