UAE amends VAT law, announces new tax exemptions

The UAE Cabinet has changed some parts of the Value Added Tax (VAT) law, the Ministry of Finance stated on Saturday.

Three services are exempt under the new amendments: in-kind gifts between government and nonprofit organizations, some services pertaining to virtual assets, and investment fund management services.

In order to encourage investment, spur growth, and lessen the burden on nonprofit organizations, these services—which were previously subject to a 5% VAT tax—will now be free from the VAT.

Governmental organizations and charities can obtain more benefits from the products they acquire because in-kind gifts up to Dh5 million made over a 12-month period will not be subject to taxes.

In order to enforce tax compliance, the Cabinet also gave the Federal Tax Authority the authority to de-register taxpayers in specific circumstances.

According to the authority, these adjustments are a part of ongoing efforts to improve the UAE's tax environment with the goal of striking a balance between increasing tax collection, improving the investment climate, and drawing in more companies and investors.

"The Ministry is committed to coordinating with relevant stakeholders from both the public and private sectors and working to update our regulations to enhance the UAE's business environment," stated Younis Haji Al Khoori, the undersecretary of the Ministry of Finance.

"These changes, in our opinion, will reduce misinterpretations or improper implementations of the law and streamline processes for taxpayers in keeping with utilizing global best practices, thereby enhancing everyone's quality of life.

The GCC Unified VAT Agreement, prior experiences, business community concerns, and stakeholder comments were all taken into consideration when designing the revisions, which were done in compliance with worldwide best practices.

The aforementioned modifications are introduced by the Cabinet Decision revising the Executive Regulations of Federal Decree-Law No. 8 of 2017 on Value Added Tax. Federal Decree-Law No. 18 of 2022, which also revised Federal Decree-Law No. 8 of 2017, outlines some of the Regulations' sections that the modifications aim to bring into accordance with. Additional modifications are intended to carry out the legislative policy of revising particular Executive Regulation provisions.