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VAT Alert - September 2019

United Arab Emirates (‘UAE’) Updates


Value Added Tax (‘VAT’)


1. Guidelines on Refund for Business Visitors

The Federal Tax Authority (‘FTA’) in September has released guidelines on claiming refund for Business Visitors. The guidelines will assist foreign businesses/ business visitors check if they are eligible to make a claim and if so, to successfully complete the ‘Business Visitor (VAT Refund Scheme for Foreign Businesses) VAT Refund Form’.

For the purposes of submitting claims for a VAT Refund under this recovery arrangement available to foreign businesses, an eServices account with the FTA must be created, which will then allow you to access the Refund Form under the VAT section.

The guidelines can be accessed here



Excise Tax


1. New Requirements for Excise Tax 

The FTA has released new requirements for Excise Tax for Designated Zones.

The new procedures include separate reporting of goods released from designated zone, movements of goods into, within and between designated zones, as well as local purchases and transfer of ownership within a designated zone. 

Additional forms include EX202A (Transfer Goods to another Designated Zone/ Transfer of Goods for Export/ Import to designated Zones where there is no customs check), EX203B (Lost and Damaged Declarations) and EX203C (Transfer of Ownership within Designated Zones) are to be filled and filed accordingly as mentioned in the updated guide.

The updated guide can be accessed here


2. Cabinet Decision No. 33 of 2019 on Administrative penalties for Violations related to Marking of Excise Goods

The Cabinet Decision has released a list of penalties that will be levied on a person by the FTA for breaching the provisions of the Tax Law and Cabinet Decision No. 42 of 2018 Marking Tobacco and Tobacco Products

The list of penalties can be accessed here


3. FTA Decision No. 2 of 2019 on Implementing the Marking Tobacco and Tobacco Products Scheme

The FTA has stated in its decision the cost of and dates from which the marks will be available, date from which it will not be permissible to import Designated Excise Goods into the State which do not have Marks and date from which it will not be permissible to supply, transfer, store or possess Designated Excise Goods in the State which do not have Marks.

The decision can be accessed by here


4. Cabinet Decision No. 52 of 2019 Excise Goods, Excise Tax Rates, and Methods of Calculating Excise Price 

A new decision by the FTA mentions the updated list of goods on which Excise tax will be levied along with the tax rate on each product as well as the method of calculating excise and designated retail price of goods.

The products include ready-to-drink beverage and concentrates, powders, gel, extracts or any form that can be converted into a sweetened drink.

The decision can be accessed here


5. Cabinet Decision No. 55 of 2019 on Excise Price for Tobacco Products

The FTA has announced that the Excise Price for Tobacco Products shall be no less than:

  • 4 Dirham per cigarette,
  • Dirham per 1 gram of water pipe tobacco, or ready to use tobacco or other similar products.

The decision can be accessed here



Economic Substance Requirement


1. Guidance on Economic Substance Requirement

On September 12, guidelines on Cabinet of Ministers Resolution No. 31 of 2019 on Economic Substance Requirement was issued.

The guidelines clarify who is within the scope of the Regulations and core income generating activities among other aspects.


2. Regulatory Authority – RAKICC

RAK International Corporate Centre (‘RAKICC’), an offshore free zone based in Ras Al Khaimah, takes lead in public acknowledgement of being a ‘Regulatory Authority’ for UAE economic substance purposes.

The proactive move had manifested through release of a six-pager document as attached explaining economic substance regulations and its impact on RAKICC registered member companies.

RAK ICC will be establishing the requirements for sending the appropriate notification by 1st January 2020 and RAK ICC will ask the companies to confirm whether they are undertaking a Relevant Activity. If the answer is “No” then, no further action is likely to be required.



Other Updates

1. Press Release: FTA Reaffirms: ‘Refunding Tax for Eligible Applicants a Direct Transaction Between Registrants and the FTA’

The FTA reaffirmed that refunding taxes for legally eligible applicants is a direct transaction between the registered business and the FTA and does not call for any intermediaries.

The FTA issued the above statement in response to reports that certain bank customers received emails from unidentified sources impersonating banks and financial institutions, and asking recipients to provide personal data, including names, credit card numbers, and PIN codes, claiming that providing the information will allow them to recover VAT.

The press release can be accessed here


2. Press Release: FTA Organises 2 Awareness and Inspection Campaigns to Monitor Compliance with ‘Digital Tax Stamps’

The FTA has conducted two simultaneous awareness and inspection campaigns to verify compliance with ‘Marking Tobacco and Tobacco Products Scheme’ in the first month since the ban on selling cigarettes not bearing the Digital Tax Stamps in local markets came into effect.

The FTA explained that several violations were detected in August 2019 in a campaign that included 20 inspection trips conducted in collaboration with departments of Economic Development in all seven emirates and covering 530 retail outlets.

The press release can be accessed here


GCC Updates



1. VAT Treatment of Director’s Fee

The Bahrain National Bureau for Revenue (‘NBR’) has clarified the VAT treatment for director’s fee and has confirmed that fee earned as board members or directors will be out of scope for VAT.