UAE VAT legislation

  • Written By: John Voyez, Rajesh Sharma
  • Published: Thu, 31 Aug 2017 15:01 GMT

On Sunday 27 August 2017 the UAE VAT Law was published. The legislation confirms that VAT will come into effect as of 1 January 2018 in response to a recognition that the country needs to diversify away from an over dependence on oil revenues.


Though much is still to be confirmed by way of the Executive Regulation, the Decree-Law confirms that much of the VAT regime will be based upon the EU VAT model. The Decree-Law also clarified a number of key questions, as below.

The following supplies will be zero-rated:

  • Exports
  • International transport of passengers and goods (and services in relation to such transport)
  • In relation to international transport of passengers and goods, the supply of goods and services designated for consumption on board, or anything consumed by any means of transport, any installations or addition thereto or any other use during transport
  • Air, sea and land means of transport (intended for use to transport passengers and goods) and the operation, repair, maintenance and conversion of such transport
  • Aircrafts or vessels designated for rescue and assistance by air or sea
  • Investment precious metals
  • The first supply of residential buildings (within 3 years of completion); whether it be by sale or lease
  • Crude oil and natural gas
  • Education services
  • Preventative and basic healthcare services (as well as specified goods and services)

The following supplies will be exempt from VAT:

  • Some financial services
  • Residential buildings whether by sale or lease; unless falling within zero-rated category
  • Bare land
  • Local passenger transport

The Decree-Law mentions that “designated zones” (to be defined in the Executive Regulation) will receive special treatment as follows:

  • "Designated zones” will be treated as being outside the State
  • Goods may be transferred from one zone to another without tax falling due
  • There will be a designated method of keeping, storing and processing such goods therein

We believe that these rules will apply to one or two existing free-zones only, and that most UAE free-zones will have no preferential status for VAT purposes.

We are already working with a number of clients in the region, and have a growing contact data base with local law firms and boutique tax advisers. If you currently have operations in the UAE (or more widely in the GCC),or you are interested in knowing more about how the planned introduction of VAT, and direct taxes in the future, may affect your business, or require advice on employee relocation issues, then please get in touch with your principle contact at Smith & Williamson, or a member of our GCC Tax Team.

The Smith & Williamson GCC Tax Team

John Voyez 
Rajesh Sharma 
James Mitchell (

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.

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