UAE: Towards implementing Tax

On 27 Nov 2016, the GCC countries concluded the Value Added Tax Agreement and the Excise Tax Agreement between its member states in an effort to establish a uniform and organised tax framework in the region.  The GCC Agreements set forward a structure for introducing, implementing and operating VAT by fixing the percentage of the Value Added Tax at 5% as well as setting the general rules and procedures, guidelines for the establishment of tax authorities and entities to oversee the overall implementation and execution of VAT.  The GCC Tax Agreements aim to minimise the impact of VAT on the economies of the GCC countries who have been moving towards diversifying and changing the economic landscape by developing the infrastructure and encouraging international investment in order to support economic growth.  Saudi Arabia led the way and announced the implementation of Tax in January 2018.  Kuwait Counsel of Ministers also approved the proposed VAT Law in early August 2017.  On 8 Nov 2017, Bahrain Parliament passed Decree 58/2017 regarding the draft Tax Law which is anticipated to be issued early next year 2018.  The United Arab Emirates had a pro-active approach to VAT and commenced plans towards the implementation of VAT early next year 2018.  The UAE issued Legislative Decree 13/2016 regarding The Establishment of The Federal Tax Authority by late September 2016 (“FTA”), prior to the GCC Tax Agreements.  On 11  June 2017 the UAE issued Federal Law 7/2017 regarding Tax Procedures which came into effect 30 days after being published in the UAE official Gazette.  Since then, the business community has been preparing for the introduction of taxes in January 2018 and revising strategies concerning products and services process, accounting, financial budgeting and reporting etc.  Decree Law 7/2017 regarding Excise Tax was issued on August 2017 and followed by Decree Federal Law 8/2017 regarding Value Added Tax.

On 7 November 2017, the FTA and UAE Ministry of Finance announced the by-laws for the Federal Law 8/2017 and Decree Law 7/2017 regarding the procedures for the execution of VAT which will come into effect on 1 January 2018.  The Executive Regulations for both laws were issued under Ministerial Order 52/2017 (full text here) and Ministerial Order 36/2017 (full text here).  Starting next year, the FTA will oversee all tax related to tax and shall supervise corporate entities through conducting tax audits, determining tax evasions and assessing payable taxes.  Article 4 of Legislative Decree 13/2016 sets outs the mandate of the FTA.