Overview
Amendments to the UAE VAT Executive Regulations were published in the Official Gazette (No. 783) on 16 September 2024 and the changes became effective on 15 November 2024. To provide further precision, the FTA published a Public Clarification on the amendments on 14 March 2025.
Key Clarifications
1. VAT Exemptions for Financial Services
The Public announcement elaborates on amendments to Article 42, particularly regarding financial services, including Islamic finance and new exemption categories.
- Islamic Financial Arrangements: The definition now references “relevant laws,” requiring consideration of commercial laws governing transactions such as Ijarah, Murabaha, and Salam.
- New Categories of Financial Services: Inclusion in Article 42(2) alone does not ensure VAT exemption; eligibility is determined under Article 42(3).
Key confirmations by the FTA:
- Investment Fund Management: Services provided by independent fund managers for UAE-licensed funds (e.g., operations and investment management) are VAT-exempt. However, funds that do not meet exemption conditions remain taxable.
- Virtual Asset Transactions: The transfer and conversion of virtual assets (e.g., Bitcoin) are VAT-exempt retroactively from 1 January 2018. Taxable persons must reassess past VAT applications and issue tax credit notes if needed.
- Virtual Asset Custody and Management: Services such as crypto wallet management are taxable when provided in the UAE for a fee, commission, or similar charge. The FTA clarifies that cryptocurrencies, as a subset of virtual currencies, are not considered legal tender for VAT purposes.
2. Revised Export Documentation Requirements
Amendments to Article 30 simplify documentary proof requirements for zero-rated exports. From 15 November 2024, exporters can retain:
- Customs declarations and commercial export evidence.
- Shipping certificates and official export confirmation.
- For goods under customs suspension (as per GCC Common Customs Law), customs declarations confirming suspension status.
Expanded forms of official evidence now include:
- Export certificates issued by UAE customs after verifying goods exit.
- Clearance certificates from local customs or UAE authorities.
- Certified destination-country documents proving goods entry (must bear official stamps/seals and be in Arabic or English or have a certified translation).
Exports before 15 November 2024 remain subject to the previous documentation requirements, ensuring compliance during the transition.
3. Zero-Rating for Services and Transport
Export of Services
Amendments to Article 31 refine the zero-rating conditions for service exports:
- Removal of “personal” from Article 31(1)(a)(2): Services connected to movable assets in the UAE (e.g., installations) do not qualify for zero-rating.
- New exclusions from zero-rating include:
- Services on goods in the UAE.
- Leasing transport to non-taxable lessees in the UAE.
- Hospitality services (e.g., hotels, catering).
- Cultural, educational, and entertainment services performed in the UAE.
- Real estate-related services in the UAE.
- Domestic transportation linked to exports/imports.
- Telecommunication and electronic services used in the UAE.
Additionally, Article 31(2) now specifies a “30-day” threshold (instead of “a month”) to determine whether a non-resident recipient is “outside the UAE.” If a non-resident recipient’s director spends more than 30 days in the UAE in a rolling 12-month period, they are considered within the UAE.
International Transport Services
Zero-rating applies to domestic transport only if it is part of an international journey and provided by the same entity handling the international leg. Services supplied to third parties do not qualify.
4. Non-Recoverable Input Tax
The new Article 53 exception allows VAT recovery on employee health insurance, regardless of legal obligations, but only for premiums covering 15 November to 31 December 2024 (if costs relate to taxable supplies and documentation is maintained). Employers legally required to provide health insurance can still recover VAT under existing rules.
5. Input Tax Apportionment
Standard input tax apportionment applies to government entities and charities. Despite amendments to Article 55(7)(a), the simplified apportionment method outlined in VATGIT1 remains valid.
What is VATGIT1?
VATGIT1 refers to the “Value Added Tax Guide on Input Tax Apportionment,” published by the United Arab Emirates Federal Tax Authority. This guide provides detailed guidance for businesses making both taxable and exempt supplies on how to recover input tax.
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