United Arab Emirates: UAE VAT: Two Urgent Action Points For Businesses

Last Updated: 21 November 2017
Article by Adrian Low and Justine Reeves

The draft UAE Executive Regulations provide two immediate action points – register for VAT as soon as possible and review your contractual position. In this article we explain why these two steps are important.

The much awaited UAE VAT Executive Regulations of Federal Decree Law No. 8 of 2017 on Value Added Tax have been widely circulated in draft (the Draft Regulations). On 8 November, the Director General of the UAE Federal Tax Authority (the FTA) stated that the draft has been signed by the UAE Cabinet.

Register for VAT as quickly as possible

Under Article 17 of the Draft Regulations, a person required to register for VAT with effect from 1 January 2018 (the Implementation Date) must apply for that registration in accordance with the deadlines announced by the FTA. This will affect any business which anticipates that the total value of all its VATable supplies will exceed the mandatory registration threshold of AED375,000. 

The FTA has announced on its website the following deadlines:

  • Businesses with a turnover of greater than AED150 million should have applied for registration before 31 October 2017;
  • Businesses with a turnover of greater than AED10 million should apply for registration before 30 November 2017;
  • All businesses which will reach the mandatory registration threshold in 2018 must register before 4 December 2017 to minimise the risk of "not being registered in time for the beginning of the new year". This will apply to businesses with a turnover of VATable supplies of between AED375,000 and AED10 million, but also appears to be a "harder" deadline for all businesses to avoid late registration.

Ultimately any business which is registered late for VAT due to a failure to comply with the FTA announced deadlines may be subjected to administrative penalties under Article 25 of the Tax Procedures Law (Federal Law No. 7 of 2017). Cabinet Resolution No. 40 of 2017 on administrative penalties for breach of the UAE tax laws provides that the fine for this breach will be AED20,000.

The process of registering for VAT may be completed online on the FTA website. The FTA requires a wide range of information and documentation as part of that process. Clyde & Co can assist your organisation in obtaining a Tax Registration Number, email UAE.VAT@clydeco.com for more information.

Review your contractual position: deal with VAT silent agreements

Ideally, all commercial agreements entered into before the Implementation Date will expressly contemplate how VAT will affect prices, as being either VAT inclusive or VAT exclusive.  All UAE businesses looking to enter into commercial agreements from now on should insert clear VAT language to deal with this point.

However, in recognition of the fact that many UAE businesses will have entered into long term contracts before the Implementation Date which are silent on VAT, the Draft Regulations contain transitional provisions in Article 70. 

In short, the Draft Regulations state that consideration set out in contracts entered into before the Implementation Date will be treated as exclusive of VAT provided that:

  • the recipient of the VATable supply is a VAT registered business itself;
  • the recipient is able to recover the VAT on that supply as input VAT (fully or partially); and
  • the supplier of the VATable supply requests confirmation of the above two points before the Implementation Date.

Prices set out in contracts entered into before the Implementation Date for supplies to non VAT registered recipients, or VAT registered persons making exempt supplies, will be deemed to be inclusive of VAT if the contract does not deal with VAT expressly. 

The recipient of the supply has up to 20 days to reply to the supplier in writing, upon receipt of this request. If the recipient does not reply within that timeframe, the supplier is entitled to treat the supply as exclusive of VAT in any event. Of course, it may be difficult in practice for a UAE business to know whether a business customer is registered for VAT - in most cases, this will depend on whether the business meets the mandatory registration threshold, or has opted to register for VAT if it satisfies the conditions for voluntary registration. To date, there is no indication from the FTA as to whether there will be a searchable public database of VAT registered companies and their TRNs. Without this, it is possible that non VAT registered customers in the UAE may be improperly charged VAT in addition to the agreed prices due to a failure to respond to a request for information within 20 days. 

As an anti-avoidance measure, if the recipient misinforms the supplier as to its VAT status, the VAT Executive Regulations make clear that the recipient will be prohibited from reclaiming the VAT as input VAT. This is helpful in that the VAT is a real cost to the recipient, but it is still disadvantageous for the supplier, who has to bear the cost of the VAT within its pre-agreed prices.

The approach taken by the UAE government in relation to VAT silent contracts differs to the KSA government's stance.  As we reported in our earlier briefing, the KSA government has chosen to zero rate business to business supplies instead. This means that the KSA government will only recover the VAT at the time of final supply to the end consumer, rather than throughout the supply chain as in the UAE.  However, the crucial date against which to assess provisions for VAT treatment in KSA is set at 30 May 2017. In essence, the KSA government has signalled that it expects that contracts entered into from 31 May 2017 to deal expressly with VAT on prices.  However, where they do not, the supply is deemed to be inclusive of VAT.

Urgent action points for business contracts

Clients are well advised to:

  • perform due diligence on their pre-Implementation Date supply contracts, to assess whether they contain a VAT clause, or a clause which may enable them to renegotiate the terms in the absence of such a provision;
  • send immediate confirmation requests to all customers within the UAE, in order to ascertain whether supplies to them after the Implementation Date will be exclusive or inclusive of VAT (other than supplies which are clearly retail in nature);
  • log all confirmations received and the deadlines for failure to respond;
  • apply the relevant VAT treatment to the invoicing procedures on the basis of the confirmations received;
  • businesses which are not required to be VAT registered in the UAE on or before 1 January should:
    • respond promptly to all requests for information, or risk the agreed supply price being deemed to be exclusive of VAT;
    • carefully consider whether to agree to any request to amend contractual terms to allow for VAT to be charged on top of prices agreed before the Implementation Date.
  • VAT registered businesses in the UAE which regularly receive supplies of goods or services from suppliers from KSA should notify their KSA suppliers of their TRN to avoid being charged KSA VAT, and to enable the reverse charge mechanism.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Michael Kyprianou Advocates & Legal Consultants
BSA Ahmad Bin Hezeem & Associates LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Michael Kyprianou Advocates & Legal Consultants
BSA Ahmad Bin Hezeem & Associates LLP
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions