Federal Tax Authority clarifies registration procedure for VAT in the UAE

The Federal Tax Authority, FTA, has called on natural and legal persons exercising business in the UAE to expedite their registration process for the Value Added Tax, VAT, to avoid the risk of missing the deadline, on 1st January 2018.

This applies to businesses whose taxable supplies and imports of goods and services exceed AED375,000 over the previous 12 months. Taxable supplies are identified as all supplies of goods and services made by a person who is not exempt.

Registration is available on a 24/7 basis through the VAT website. Businesses are required to visit the website, select the e-Services portal, sign up and create an account. Once the email has been verified, they can log in and register.

The FTA has urged businesses to provide accurate information and make sure they enter it properly into the application form. To complete the registration process, scanned documents must be attached,

•  The business or trade license
•  Passport Copy
•  Emirates ID, for UAE residents, of the manager or owner of the business.
• The Authorized signatory, if the signatory is not the manager him/herself, as well as proof of authorization for the manager or signatory for example articles of association, power of attorney attested by notary.

 Issuing a Tax Registration Number, TRN, may require up to 20 working days or less. Therefore, and in order to ensure that the application is processed, and the TRN issued before 1st January, 2018, the FTA urged businesses to complete their registration to avoid the administrative penalty of AED20,000, as well as additional penalties related to late payment of tax, according to the Cabinet Decision No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE Two or more legal persons conducting business in partnership may apply for Tax Registration as a Tax Group if each of them has a place of establishment or fixed establishment in the UAE; if the persons are related parties, thus not separated in economic, financial or regulatory aspects; or if one or more of the Persons in the group control the others.

Persons intending to register as a Tax Group need to nominate a representative member who shall apply to register them. The representative member applies first by completing a VAT registration application stating that the intention is to be part of a Tax Group.

After the representative member is issued with a Tax Identification Number, TIN, the additional members of the group may be added through Tax Group Registration. Members can be added whether they have registered separately or not. After the process is complete and the application to add members has been submitted, a TRN will be issued for the whole Group.

More information can be found in theLegislation and Guides section, on the FTA website.

Residential Buildings Subject to the Zero Rate VAT in the UAE

His Highness Shaikh Mohammad Bin Rashid Al Maktoum, the Vice-President and Prime Minister of the UAE and Ruler of Dubai, has approved the executive regulations of Federal Law No.8 of 2017 on Value Added Tax (VAT). The bylaws govern the implementation of the VAT, which will come into effect from January 2018.

The regulations define VAT as the 5 percent tax imposed on the import and supply of goods and services at each stage of production and distribution, including what is a deemed supply, with the exception of specific supplies subject to the zero rate and what is exempted as specified in the law

.Article (37) Residential buildings

1. The phrase “residential building” means a building intended and designed for human occupation, including:

a. Any building or part of a building that the person occupies, or that it can be foreseen that a person will occupy, as their principal place of residence.

b. Residential accommodation for students or school pupils.

c. Residential accommodation for armed forces and police.

d. Orphanages, nursing homes, and rest homes.

2. A “Residential building” does not include any of the following:

a. Any place that is not a building fixed to the ground and can be moved without being damaged.

b. Any building that is used as a hotel, motel, bed and breakfast establishment, or hospital or the like.

c. A serviced apartment for which services in addition to the supply of accommodation are provided.

d. Any building constructed or converted without lawful authority.

3. A building shall be considered as a residential building if a small proportion of it is used as an office or workspace by the occupants if it includes garages and gardens used in conjunction with it, or it includes any other features that may be said to comprise part of the residential building.

Article (38) Zero-rating of Buildings Specifically Designed to be Used by Charities

1. The first sale or a lease of a building, or any part of a building, shall be zero-rated if the building was specifically designed to be used by a Charity and solely for a relevant charitable activity.

2. In Clause (1) of this Article, “relevant charitable activity” means an activity for the purpose other than for the purpose of profit or benefit to any proprietor, member, or shareholder of the Charity, and one which is undertaken by the Charity in the course or furtherance of its charitable purpose or objectives to carry out a charitable activity in the State as approved by the Ministry of Community Development, or under the conditions of its establishment as a charity under Federal or Emirate Decree, or as otherwise licensed to operate as a Charity by an agency of the Federal or Emirate Governments authorised to grant such licences.

Such charitable purposes and objectives include, for instance, advancing health, education, public welfare, religion, culture, science and similar activities.

Article (39) Zero-rating Converted Residential Building

1. The first supply of a building or any part of a building, which is converted to a residential building shall be subject to the zero rate provided that the supply takes place within 3 years of the completion of the conversion and the original building, or any part of it, was not used as a residential building and did not comprise part of a residential building within (5) five years prior to the conversion work commencing.

2. The presence of shared or common facilities, or dividing walls or similar features in a residential building should not cause the residential building to be considered or any part thereon as part of a pre-existing residential building.

RTA proposed no driving license for select expat categories in UAE

Regulating the registration permits of old vehicles, and linking registration and licence fees of vehicles to engine capacity are among other ideas.

The Roads and Transport Authority (RTA), in an attempt to further reduce congestion on roads in Dubai, is mulling several proposals, including regulating the issuance of driving licences to select categories of expats.

In a letter by the authority to an Arabic newspaper, the RTA said it has identified means that could help alleviate the traffic problem in the emirate, especially during office hours.

Regulating issuance of driving licences, regulating the registration permits of old vehicles, linking registration and licence fees of vehicles to engine capacity and annual consumption of fuel and annual distance travelled, modifying registration fees for environment friendly vehicles, and incentives to e-vehicles are the ideas on the table that may be implemented after consultation with at the federal level, the RTA letter stated.

Among sustainable solutions that may be implemented within the emirate include encouraging the public to use public transport, improving the vehicle rental market, adjusting start times of schools and offices to reduce the burden on the roads, the letter further added.

Commercial Property sales and Lease attract VAT in UAE

The UAE implementing value-added tax (VAT) from January 1 2018, and businesses can start now register on the website of the Federal Tax Authority (FTA). Commercial property sales and leases will be subject to the standard rate of VAT (five percent), residential property sales and leases will be exempt from VAT, with the exception of the first sale of new residential property, which will be subject to the zero rate of VAT, and bare land will be exempt from VAT.

What is a supply in relation to real estate?

A supply of real estate may include the sale, lease or giving the right in any real estate.

What is a residential building for VAT purposes?

A residential building is a building or part thereof that is intended and designed for occupation by individuals, and mainly includes buildings which can be occupied by any person as a main place of residence. It does not include:

• Any place that is not a building fixed to the ground and can be moved without being damaged.
• Any building that is used as a hotel, motel, bed and breakfast establishment or hospital or the like.
• A serviced apartment for which services in addition to the supply of accommodation are provided.
• Any building constructed or converted without lawful authority

 What is a commercial building for VAT purposes?

A commercial building is any building or part thereof that is not a residential building. Examples would be offices, warehouses, hotels, shops, etc

Is a residential building subject to VAT?

The first supply of a new residential building within the first three years of it being constructed shall be zero-rated. All subsequent supplies shall be exempt, even if within the first three years

Does the owner of real estate have to register for VAT?

The owners of residential buildings do not have to register for VAT if they do not have any other business activities. Where owners have other business activities, they should consider their obligations further.The owner of any building that is not residential, will have to register if the value of the supplies over the preceding 12 months exceeds Dh375,000 or it is expected that they will exceed Dh375,000 over the coming 30 days.

Can a real estate owner recover VAT paid in relation to real estate?

An owner of the residential building will not be able to recover VAT in respect of expenses related to the exempt supply of the residential buildings.An owner of a commercial building will generally be able to recover VAT in respect of expenses related to the supply of the building.

How is a mixed-use building (residential and commercial) treated for VAT?

The rent or sale of a residential part of the building shall be treated as zero-rated or exempt, depending on whether this is a first supply or a subsequent supply.The rent or sale of a commercial part of the building shall be treated as subject to VAT at 5%.

The tax incurred by the owner on the building needs to be apportioned where there is an exempt supply, and the portion related to the taxable supply (at 0% and 5%) may be recovered.

Will VAT be charged for the property I am renting?

The rent of residential building will generally be exempt from the VAT.The rent of commercial building will be subject to VAT at 5%.

Fines to replace court trials in minor offences in Dubai from December 4th 2017

From December 4, 2017, on-wards, prosecutors in Dubai will be able to fine suspects involved in certain types of misdemeanor and minor offenses, including some bounced cheque and cursing cases, instead of referring them to court.

Dubai’s Attorney-General Essam Eisa Al Humaidan issued decision No. 88 of 2017, according to which prosecutors of the of Deira, Bur Dubai, and Family and Juvenile's prosecution wings can start issuing criminal orders starting December 4.

According to Al Humaidan’s decision, members of the three prosecution wings can fine suspects involved in specific minor offences rather than indicting them and referring them to the Dubai Misdemeanours Court to stand trial.

The list of misdemeanours is limited to certain minor offences including bounced cheques up to Dh200,000, failing to pay for food, car rent or room rent up to Dh50,000, defamation and cursing [excluding government sector employees], attempted suicide and disturbing victims through the use of telecommunication systems.

Prosecutor-General Mohammad Ali Rustom, Head of the Family and Juveniles Prosecution, told Gulf News on Monday: “The criminal order is an excellent step and a timely one as well. It has come to solve many hindrances and delays that litigants face. The litigation process requires a prosecutor to issue a decision on whether or not to indict a suspect and refer him/her to court or dismiss the case. Litigants [suspects and/or victims] used to wait for long periods … but now the criminal order has come to save the time for litigants and, remarkably, tourists.”

Dubai is a major international tourist hub attracting millions of visitors every year, many of whom could get involved in misdemeanours, he said.

“There have been cases involving tourists, who came here to enjoy their holidays but ended up getting stuck for weeks and months after having committed minor offences. In certain incidents, some litigants had to wait for six months. The criminal order reduces the waiting time for tourists, who end up being involved in such misdemeanours, and who do not have to wait for long periods waiting to be referred to the Misdemeanours Court … in case they are guilty, they pay a fine rather than waiting,” Rustom told Gulf News.

A chief prosecutor, who preferred not to be named, said the criminal order assists Dubai Public Prosecution in achieving its goals to make procedures faster and easier to complete for litigants in cases pertaining to specific minor crimes.

According to the Attorney-General’s decision, a copy of which was obtained by Gulf News, Rustom; Prosecutor-General Yousuf Foulad, head of the Deira Prosecution; and Prosecutor-General Sami Al Shamsi, head of the Bur Dubai Prosecution, are entitled to assign a prosecutor to issue, amend or cancel a criminal order.