UAE VAT Law, Decoded : Definitions

Understanding Value Added Tax in UAE is not an easy job, as UAE VAT law can be tricky it not interpreted properly.  UAE VAT law consists of 8 Titles as below: -

Title One: Definitions
Contains key definitions and basic understanding of the UAE VAT law.

Title Two: Tax Scope and Rate
Defines the scope of VAT and rate at 5%, whereas Title Six (6) deals with Zero Rated and Exemptions

Title Three: Supply, Supply of Goods and Services
Definition of supply of goods and services is explained. The most important is the Supply by Agency, it has a huge impact on whether the supply is made in the name of the principal or is made in Agent’s name.

Title Four: Tax Registration and De-registration
Here explained the procedure, Fundamental pillar of all the VAT Exercise is the Registration as De-registrations will not be very often. Like Mandatory, voluntary registration and most importantly the registration of “Tax Group”. This title is one of the most Title in UAE VAT Law.

Title Five: Rules Pertaining to Supplies
VAT is where the supplies are so the Date, place and value of Supply. A crucial part of UAE VAT law.

Title Six: Zero Rates and Exemptions
This title draws a thick line between the Zero rated and Exempt supplies in detail.

Title Seven: Calculation of Due Tax
Deals with very delicate matters of Due Tax for a Tax Period “tax calculation”, adjustments and Recovery therein.

Title Eight: Tax Period, Tax Returns, Payment and Reclaiming of Tax
This title is all about tax period, tax compliance & resultant payments, tax refund (claim), recovery of tax, violations and penalties.

Title One | Definitions | Article (1)

In the application of the provisions of this Decree-Law, the following words and expressions shall have the meanings assigned against each, unless the context otherwise requires:

State: United Arab Emirates

Minister: Minister of Finance

Authority: Federal Tax Authority

Value Added Tax: A tax imposed on the import and supply of Goods and Services at each stage of production and distribution, including the Deemed Supply.

Tax: Value Added Tax (VAT).

GCC States: all countries that are full members of The Cooperation Council for the Arab States of the Gulf pursuant to its Charter.

Implementing States: The GCC States that are implementing a Tax law pursuant to an issued legislation.

Goods: Physical property that can be supplied including real estate, water, and all forms of energy as specified in the Executive Regulation of this Decree-Law.

Services: Anything that can be supplied other than Goods.

Import: The arrival of Goods from abroad into the State or receipt of Services from outside the State.

Concerned Goods: Goods that have been imported, and would not be exempt if supplied in the State.

Concerned Services: Services that have been imported, where the place of supply is in the State, and would not be exempt if supplied in the State.

Person: A natural or legal person.

Taxable Person: Any Person registered or obligated to register for Tax purposes under this Decree-Law.


Taxpayer: Any person obligated to pay Tax in the State under this Decree-Law, whether a Taxable Person or end consumer.

Tax Registration: A procedure according to which the Taxable Person or his Legal Representative registers for Tax purposes at the Authority.

Tax Registration Number (TRN): A unique number issued by the Authority for each Person registered for Tax purposes.

Registrant: The Taxable Person who has been issued with a TRN.

Recipient of Goods: Person to whom Goods are supplied or imported.

Recipient of Services: Person to whom Services are supplied or imported.

Importer: With respect to importing Goods, it is the Person whose name is listed as the importer of the Goods on the date of Import for customs clearance purposes. With respect to Services, it is the Recipient of these Services.

Taxable Trader: A Taxable Person in the Implementing States, whose main activity is the distribution of water and all types of energy as specified in the Executive Regulation of this Decree-Law.

Tax Return: Information and data specified for Tax purposes and submitted by a Taxable Person in accordance with a form prepared by the Authority.

Consideration: All that is received or expected to be received for the supply of Goods or Services, whether in money or other acceptable forms of payment.

Business: Any activity conducted regularly, on an ongoing basis and independently by any Person, in any location, such as industrial, commercial, agricultural, professional, service or excavation activities or anything related to the use of tangible or intangible properties.

Exempt Supply: A supply of Goods or Services for Consideration while conducting Business in the State, where no Tax is due and no Input Tax may be recovered, except according to the provisions of this Decree-Law.

Taxable Supply: A supply of Goods or Services for a Consideration by a Person conducting Business in the State, and does not include Exempt Supply.

Deemed Supply: Anything considered as a supply and treated as a Taxable Supply according to the instances stipulated in this Decree-Law.

Input Tax: Tax paid by a Person or due from him when Goods or Services are supplied to him, or when conducting an Import.

Output Tax: Tax charged on a Taxable Supply and any supply considered as a Taxable Supply.

Recoverable Tax: Amounts that were paid and may be returned by the Authority to the Taxpayer pursuant to the provisions of this Decree-Law.

Due Tax: Tax that is calculated and charged pursuant to this Decree-Law. Payable Tax: Tax that is due for payment to the Authority.

Tax Period: A specific period of time for which the Payable Tax shall be calculated and paid.

Tax Invoice: A written or electronic document in which the occurance of a Taxable Supply is recorded with details pertaining to it.

Tax Credit Note: A written or electronic document in which the occurance of any amendment to a Taxable Supply that reduces or cancels the same is recorded and the details pertaining to it.

Government Entities: Federal and local ministries, government departments, government agencies, authorities and public institutions in the State.

Charities: Societies and associations of public welfare not aiming to make a profit that are listed within a Cabinet Decision issued at the suggestion of the Minister.

Mandatory Registration Threshold: An amount specified in the Executive Regulation of this DecreeLaw; if exceeded by the value of Taxable Supplies or is anticipated to be exceeded, the supplier shall apply for Tax Registration.

Voluntary Registration Threshold: An amount specified in the Executive Regulation of this DecreeLaw; if exceeded by the value of Taxable Supplies or taxable expenses or is anticipated to be exceeded, the supplier may apply for Tax Registration.

Transport-related  Services:  Shipment,  packaging  and  securing  cargo,  preparation  of  Customs documents, container management, loading, unloading, storing and moving of Goods, or any another closely related services or services that are necessary to conduct the transportation services.

Place of Establishment: The place where a Business is legally established in a country pursuant to the decision of its establishment, or in which significant management decisions are taken and central management functions are conducted.

Fixed Establishment: Any fixed place of business, other than the Place of Establishment, in which the
Person conducts his business regularly or permanently and where sufficient human and technology
resources exist to enable the Person to supply or acquire Goods or Services, including the Person’s
branches.

Place of Residence: The place where a Person has a Place of Establishment or Fixed Establishment, in accordance with the provisions of this Decree-Law.

Non-Resident: Any person who does not own a Place of Establishment or Fixed Establishment in the State and usually does not reside in the State.

Related Parties: Two or more Persons who not separated on the economic, financial or regulatory level, where one can control the others either by Law, or through the acquisition of shares or voting rights.

Customs Legislation: Federal and local legislation that regulate customs in the State.

Designated Zone: Any area specified by a Cabinet Decision issued at the suggestion of the Minister, as a Designated Zone for the purpose of this Decree-Law.

Export: Goods departing the State or the provision of Services to a Person whose Place of Establishment or Fixed Establishment is outside the State.

Voucher: Any instrument that gives the right to receive Goods or Services against the value stated thereon or the right to receive a discount on the price of the Goods or Services. Vouchers do not include postage stamps issued by the Emirates Post Group.

Activities conducted with Sovereign Capacity: Activities conducted by Government Entities in their sole competent capacity, with or without Consideration.

Capital Assets: Business assets designated for long-term use.

Capital Assets Scheme: A scheme whereby the initially recovered Input Tax is adjusted based on the actual use during a specific period.

Administrative Penalties: Amounts imposed upon a Person by the Authority for breaching the provisions of this Decree-Law or Federal Law No. (7) of 2017 on Tax Procedures.

Administrative Penalties Assessment: A decision issued by the Authority concerning to Administrative Penalties due.

Excise Tax: A tax imposed on specific Goods.

Tax Group: Two or more Persons registered with the Authority for Tax purposes as a single taxable person in accordance with the provisions of this Decree-Law.

HOW WE CAN HELP

Our Indirect Tax Team of experts is available in GCC Region to discuss and bring clarity to the specific challenges that your businesses might face in getting yourself ready for VAT. Please contact our indirect tax executives to learn more.

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