The UAE introduced Value Added Tax (VAT), a broad-based indirect tax levied on the consumption of goods, from January 1, 2018, at a standard rate of 5 percent.
Following is the most general list of questions:
1. Do property owners have to register for VAT? What if the property is registered in joint names?
If the property is owned and self-used, registration is not required. If it is rented but if it is residential property more than 3 years old, registration is not required. However, if it is residential property newly constructed, or commercial property (irrespective of new or old), registration is required, if the rental exceeds Dh375,000.
However, if the property is not for rental or business and is sold in an individual capacity, registration is not required irrespective of the selling price.
2. Is VAT applicable on renewal of lease agreement of residential property?
No, VAT is not applicable on residential property.
3. In the contracting business we get payment delays of up to 6 months and often the payment settlement is of lesser value than the invoiced value. Can we prepare the “Performa Invoice” or a “payment application” at the initial stage without actually paying VAT?
Yes. If it is a valuation application under consecutive invoices or periodic payments. However, once it is certified, you shall raise the tax invoice. If the final settlement is lesser than the tax invoice, you shall issue a tax credit note.
4. We are a Dubai-registered company buying and selling in different countries and shipping goods directly between those countries. Is VAT applicable to my business?
If goods are not entering UAE, the transactions would be out of the scope of UAE VAT laws.
5. Our company is a newly registered free zone entity, do we have to register for VAT?
No, unless you cross the threshold limit of Dh375,000 in the next 30 days.
6. Does VAT apply to the transport of goods within the country over land?
Yes.
7. Do auto-maintenance workshops need to register for VAT?
Registration is based on taxable supplies and not the nature of the activity. If the workshop’s turnover exceeds the threshold limit, it must register.
8. My DMCC company has only one activity which is brokerage between non-GCC suppliers, and non-GCC importers. Since both suppliers and importers are out of GCC is VAT applicable?
Applicable if brokerage service is performed in UAE.
9. Is VAT applicable on sale and trading in used auto tires and spare parts?
Registration is based on taxable supplies and not the nature of the activity. If the workshop’s turnover exceeds the threshold limit, it must register.
10. Will prepaid phone recharge cards have VAT added to the price?
Yes, It will have as the same is telecommunication service.
11. Our rent notice renewal amount is the same as for next year's amount of 100,000, would it become 105,000?
No, if you are asking about a residential property.
12. Will VAT apply to the revenues of my newly opened company?
No, VAT is a consumption tax and is applicable only to the supplies you make.
13. I am renewing my car insurance in December and as of now no VAT is applied to my premium, can the insurance company charge me the VAT in January for the premium I paid in December 2017?
No. VAT is applicable only from January 1, 2018
14. How about the salary; is there VAT or any other tax on salaries?
No, VAT is a consumption tax, and salary is out of the scope of VAT.
15. Do I have to pay VAT on university fees?
Yes, if the university is privately owned and/or funded.
16. Do we need to pay VAT on existing car loans?
No, loans are in the VAT-exempt category.
17. Will VAT apply to rent also and parking in the building?
No, VAT is not applicable to residential rents. If the parking fee is charged separately, you have to pay VAT.
18. Will metro, tram and bus fares be higher for each trip with VAT?
No, as it falls under the definition of passenger transport and is exempt.
19. Are my postpaid phone bills going to be affected by VAT?
Yes, It will have the same telecommunication service.
20. Will the purchase of travel packages online have VAT charges?
Yes, as it falls under the definition of service.
21. Would resident health care and pharmacy costs based on co-payment be higher with VAT?
No, as long as they are basic health care services. This also depends on the health service provider.
22. Will my ATM transactions be affected by VAT?
No, it is simply a transaction in money and thus out of scope.
23. Will getting a driver’s license (including classes and tests) cost more once VAT comes into force?
Yes, it is a service and so taxable
24. Will I be charged VAT when renting office space for my SME?
Yes
25. Will VAT be added to my shipping costs if I send out a personal package or cargo?
No, but this is subject to change and custom duties may be subject to VAT.
26. Will all my tech purchases and services be subject to tax?
Yes
27. Will going to the cinema cost more once VAT is rolled out?
Yes
28. Would salon and spa services be affected by VAT?
Yes
29. Will selling my property in the UAE be affected by VAT?
No, if the property is residential.
30. Will hotel stays have VAT added to the final bill?
Yes
31. Will go to theme parks and family entertainment venues in the UAE such as Dubai Safari Park, Dubai Parks and Resorts, Ferrari World, Aquaventure, and Wild Wadi, cost more with VAT?
Yes
32. Will buying or selling used cars come under the purview of VAT?
Yes
33. I am getting married in Dubai; will wedding venues charge VAT for the rent of the space in 2018?
Yes
34. Is a gym membership going to be more expensive from January 1?
Yes
35. Will government services including ID services, passport services, and visa (visit, tourist and residence) services cost higher after VAT?
Possibly. We are waiting for confirmation as to which government entities will be exempt.
