The UAE, along with Saudi Arabia, introduced VAT for the first time on 1 January to attempt to address falling oil prices.
The new levy has been set at 5% and applies to the majority of goods and services in both regions.
Some outgoings have been made exempt from the tax, or given a zero-tax rating, including exports of goods and services and certain healthcare and educational services.
VAT and financial services
Sean Kelleher, chief executive of Mondial Dubai, said VAT applies, his firm understands, to all services it provides within the UAE.
“For those who arbitrage the law by playing on semantics between commission and fees, I think they would be treading a dangerous line,” Kelleher said.
Sam Instone, chief executive of AES International, said his company had been “fortunate” to have direct contact with the tax authorities, as they sought clarification on the implementation of VAT and how it would impact the financial services sector.
“Along with many in our sector in the region, we initially assumed the UAE would follow the UK’s model when implementing VAT, but that has not been entirely the case,” he said.
Questions still need answers
Instone said while the information his firm has received from the authority is pleasing, there are still some open questions they would like answered.
“For example, with regard to whether VAT is applicable in intermediation, and how it applies when we’re dealing with UK providers.”
Instone said the firm is not concerned there are still some questions that need answers, as changes to taxation “rules and rates in any country require a period of establishment, during which uncertainties are addressed, and any issues ironed out”.
“Until we’re 100% clear on everything, we’re simply taking the line of maximum safety, and assuming that VAT is applicable.
“What we do know, is that with regard to AES MEIB, our employee benefits arm, commission payments received on health insurance business is vatable. And of course, we’re 100% clear on VAT exempt and zero-rated sectors,” he said.
The UAE estimates that VAT income, in the first year, will be around AED12bn (£2.4bn, $3.3bn, €2.8bn).
