Compilation of FTA Clarifications & User Guides by CA Manoj Agarwal

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Compilation of FTA Clarifications & User Guides by CA Manoj Agarwal
www.uaetaxation.com ; Facebook @UAETaxation; Linkedin @UAETaxation
Compilation of
Clarifications and User Guides issued by FTA
The UAE VAT Law & Regulations
By CA Manoj Agarwal
AFA (UK), MIPA (Australia), AAIA (UK), AFTA (UK)
The United Arab Emirates (UAE) has implemented VAT effective from 1st
January 2018. With an aim to
effective implementation and compliance by the businesses, Federal Tax Authority (FTA) of the UAE has
released multiple clarifications and guides.
This eBook is a compilation of Clarifications and Guides issued by FTA.
©All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or
transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise
without prior permission, in writing, from the author.
DISCLAIMER:
The views expressed in this compilation are of the author. Ministry of Finance and Federal Tax
Authority of the UAE may not necessarily subscribe to the views expressed by the author.
The information cited in this compilation has been drawn primarily from the clarifications and
guides and Cabinet Decisions issued by the Federal Government of the UAE, Ministry of
Finance, FTA websites and other sources.
While every effort has been made to keep the information cited in this compilation error free,
author or any other related person does not take the responsibility for any typographical or
clerical error which may have crept in while compiling the information provided.
This compilation consists of unofficial translation of the official documents with views and
suitable modifications of the author, wherever appropriate.
E-mail : c4camanoj@gmail.com

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Index
S. No. Description Page Range
1. VAT Treatment of Compensation Type Payments - VATP001 4 - 6
2. Profit Margin Scheme – Eligible Goods - VATP002 7 – 9
3. Labour Accommodation: Residential Vs Serviced Property - VATP003 10 – 12
4. Use of Exchange Rates for VAT purposes - VATP004 13 – 15
5. Non-Recoverable Input Tax – Entertainment S ervices - VATP005 16 – 21
6. Designated Zones - VAT Guide | VATGDZ1 - Issue 1/July 2018 22 – 33
7. VAT REFUND USER GUIDE - July 2018 34 – 38
8. Clarification User Guide - APRIL 2018 39 – 46
9. Director’s Services - VAT Guide | VATGDS01- April 2018 47 – 52
10. Voluntary Disclosure User Guide – VAT & Excise Tax - July 2018 53 – 69
11. Payment User Guide - May 2018 70 – 73
12. Real Estate - VAT Guide | VATGRE1 - March 2018 74 – 97
13. Tax Groups - VAT Guide | VATGGR101 – May 2018 98 – 106
14. Tax Group User Guide - July 2018
(REGISTRATION, AMENDMENTS AND DE- REGISTRATION)
107 – 138
15. VAT Refund for Business Visitors User Guide - Summary 139
16. VAT Import Declaration User Guide December 2017
(REGISTERED AND NON-REGISTERED USERS)
140 – 149

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17. VAT Payment for Commercial Property Buyers – User Guide- Jan 2018 150 – 154
18. VAT Refund for Exhibitions & Conferences - MAY 2018 155 – 169
19. Taxable Person Guide – June 2018 - Issue 2 170 – 217
20. Tax Agents & Tax Agencies User Guide – May 2018
REGISTRATION, AMENDMENTS, LINKING AND DE-LINKING
218 – 239
21. VAT REFUND FOR BUILDING NEW RESIDENCES BY UAE NATIONALS
USER GUIDE - August 2018
241 - 249

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1. VAT Treatment of Compensation Type Payments
VATP001
Issue
VAT is a tax on supplies of goods and services.
Therefore, no VAT is due if no supply takes place. As part of business arrangements, businesses will often
make payments to compensate each other for any loss, omissions or other wrongdoings. Question arises
whether VAT is due on such payments.
Summary
Where a payment is not consideration for supply, no VAT is due on the payment.
Detailed discussion
Under Article 2 of the Federal Decree-Law No. 8 of 2017 on Value Added Tax (“VAT Law” ), VAT is imposed,
among other things, on taxable supplies of goods and services.
“Taxable supply” is defined in Article 1 of the VAT Law as a “supply of goods or services for a consideration
by a person conducting business in the State, and does not include exempt supply”. As a consequence, in
order for an obligation to charge VAT to arise, there must be a supply of goods or services. If any payment
does not relate to a supply of goods or services then the payment is not subject to VAT.
The question of whether or not a payment is consideration for a supply is the matter of fact. Typically, this
requires the taxpayer to consider the underlying arrangements that give rise to the payment in order to
determine whether the payee has provided anything in return for the payment.
Below, a number of situations are considered where a payment may or may not be treated as being
consideration for a supply of goods or services. It should be noted that the purpose of the discussion is not
to provide answers for all types of payments that might be made in such situations, but to give an example
of principles that should be used in determining whether VAT should be due on compensation-type
payments.

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A contractual payment to compensate for-
An example of such a compensatory payment are “liquidated damages ”. Liquidated damages are
predetermined amounts that parties to an agreement designate during the formation of the agreement
for the injured party to collect as compensation upon a specific breach – for example, for an early
termination of a contract or a late performance. The purpose of such payments is not to provide
consideration for a provision of any goods or services but to compensate a party for loss of earnings. As
such, the payments are outside the scope of VAT.
That does not, however, include where a contract allows a hotel guest to cancel a booking in return for a
cancellation charge, as such charges are considered a cessation of a right, which are a supply of services
and hence subject to VAT. This is regardless of whether the hotel room remains available to the guest or
not.
A payment to settle a dispute
Where a dispute is settled (e.g. in or out of court) and a payment is awarded to a party, it is necessary to
consider the reason behind the payment in order to determine the VAT treatment. For example:
 Where a payment is to enforce a contractual term, the payment is consideration for the
contractual supply to which it relates. For example, where a dispute regarding a price of goods is
settled by requiring a contractual recipient of the goods to make a payment for these goods, the
payment will be consideration for the supply of the goods and therefore subject to VAT.
 Where a payment is in the nature of damages or compensation for any loss suffered by a party, the
payment is not consideration for any supply and is outside the scope of VAT. For example, a
payment for loss of earnings or a payment of interest in respect for a late payment of contractual
consideration would not be a consideration for any supply.
 Where a payment is in return for granting a right then the payment is consideration for the supply
of the right and may be subject to VAT. For example, a person may agree to allow another person
to use its property (including intellectual property) in return for a payment; the payment is
consideration for the supply of the right to use the property.
A fine or penalty
A fine or penalty charge may be imposed for contravening terms of an agreement, performing an
unlawful act or otherwise be imposed, usually by government bodies, for breaches of statutory
obligations. True fines and penalties are not consideration for any supply and therefore outside the
scope of VAT. For example:

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 A contract may stipulate that a party must make a payment if it breaches a term of the contract.
The payment made as a result of a breach of a contract is in the nature of damages and therefore
also outside the scope of VAT.
 A fine or penalty may be imposed by a government authority for an unlawful act – for example, a
speeding fine or fine for incorrect parking. The purpose of such fines is to punish the wrongdoer for
the act and the party imposing the penalty is not making any supply in respect of the payment.
Therefore, no VAT is due on such fines and penalties.
Payment for damaged goods
Where a person has damaged or lost goods belonging to another person ( for example, damaging a
leased car), it may be required to make a payment to compensate for the damage or loss. Where the
payment is compensation and for breaching pre-existing terms of a contract, it is unlikely to be
consideration for a supply and therefore would be outside the scope of VAT.
In other circumstances, there is likely to be consideration for a supply – for example, where a customer
breaks a good and is obliged to take title to it, the payment the customer makes would represent
consideration for a supply of goods, and so would be subject to VAT.
Holistic analysis
In summary, in determining whether or not a payment is consideration for any supply, it is necessary to
consider the contractual and legal arrangements in full to determine the reason for the payment. Thus,
it may be necessary to consider whether:
 the payment is consideration for any previously agreed goods or services
 the payment is consideration for any newly created supply of goods or services
 the purpose of the payment is to adjust a previously agreed consideration for a supply
 a party is granting a right to another party in return for a payment
 a party is promising not to exercise a right in return for a payment
 a party is giving something up in return for a payment
In considering whether a payment is consideration for a supply or is in the nature of compensation, it is
important to ignore the labels or titles the parties give to a payment. For example, a description of an
administrative payment as a “penalty” or a “compensation” will not prevent the nature of the payment
from being consideration for a supply.

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2.Profit Margin Scheme
Eligible Goods
VATP002
Issue
It is important that businesses properly identify those goods which qualify to be sold under the profit
margin scheme, in the context of transitional periods where ‘second hand’ goods may not have been
subject to VAT prior to implementation of VAT in the UAE.
Summary
Only those goods which have previously been subject to VAT before the supply in question may be
subject to the profit margin scheme. As a result, stock on hand of used goods which were acquired
prior to the effective date of Federal Decree-Law No. (8) on Value Added Tax (“VAT law”), or which have
not previously been subject to VAT for other reasons, are not eligible to be sold under the profit
margin scheme.
VAT is therefore due on the full selling price of such goods.
Detailed discussion
Goods which qualify to be supplied under the profit margin scheme
Only certain goods are eligible to be supplied under the profit margin scheme. Those goods are listed
below, but may only be supplied under the scheme where they were subject to VAT before the supply
which shall be subject to the profit margin scheme:
 Second hand goods, meaning tangible moveable property that is suitable for further use as it is or
after repair;
 Antiques i.e. goods that are over 50 years old;
 Collectors’ items i.e. stamps, coins, currency and other pieces of scientific, historical or
archaeological interest

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Conditions to apply the profit margin scheme:
A VAT registered business may apply the profit margin scheme to eligible goods in the
following circumstances:
1. The goods must have been purchased from either:
 A person who is not registered for VAT; or
 A taxable person who calculated VAT on the supply by reference to the profit margin i.e. a VAT
registered business which already applied the profit margin scheme on the same goods.
2. The taxable person made a supply of the goods where input tax was not recovered in accordance
with Article 53 of Cabinet Decision No. 52 of 2017
A taxable person will not be allowed to apply the profit margin scheme in such cases where he has
issued a tax invoice or any other document mentioning an amount of VAT chargeable in respect of the
supply.
Goods purchased prior to the introduction of VAT:
As mentioned above, it is a requirement of Article 29(2) of Cabinet Decision No. 52 of 2017 that the
goods which are eligible to be sold under the profit margin scheme are those which have previously
been subject to tax. As a result, goods which would ordinarily be eligible to be included within the
scheme, but which were purchased during a period in which they would not have been subject to VAT,
are not eligible for the scheme.
If a good was
purchased in…..
….and the original purchase
was….
….. then….
2017 or earlier not subject to VAT the good is not eligible to be sold under
the profit margin scheme and VAT
should be applied to the full selling price
2018 or later from a supplier who did not
charge VAT on the supply, and
the good may have been
purchased in a period prior to
the effective date of VAT
the good is not eligible to be sold under
the profit margin scheme and VAT
should be applied to the full selling price
unless evidence is available to show the
good had been subject to VAT on an
earlier supply
2018 or later from a supplier and it is known
that the good would have been
purchased by the supplier in a
period after the effective date
of VAT
The good is eligible to be sold under the
profit margin scheme where you have
evidence to show that the good has
been subject to VAT on an earlier supply

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Evidence that a good was subject to tax previously
As mentioned above, a supplier should be confident that a good has previously been subject to tax in
order to apply the profit margin scheme. Such evidence or information of this position could
include but is not limited to:
 Information relating to the date the good was first manufactured, sold or brought in to use e.g. in
the case of a car, the date the car was first registered would indicate its sale would have been
subject to VAT if it was registered on a date after 1 January 2018;
 Evidence that the supplier paid VAT on their original purchase e.g. by asking the supplier for a
copy of the tax invoice relating to their purchase of the good

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3. Labour Accommodation
Residential Vs Serviced Property
VATP003
Issue
Labour camps and labour accommodation are generally areas where labourers are housed by their
employers. They can take many different forms and some may provide residents with additional
services on top of the living accommodation. It is therefore necessary to consider on a case by case
basis whether labour accommodation is:
 a residential building, and therefore exempt from VAT (or zero-rated if the first supply); or
 serviced accommodation, and therefore standard rate
Summary
There will be instances where the supply of certain labour accommodation shall be a supply of
residential property, and other instances where the supply of certain labour accommodation shall be a
supply of serviced accommodation. The distinction is important as it will affect the VAT liability of the
supply. Suppliers are required to consider the extent of the additional services supplied along with the
accommodation in order to determine the nature of the supply. Suppliers should also consider whether
they are making a single composite supply, or whether they are making a mixed supply of several
different component parts.
Detailed discussion
Labour accommodation as residential property
As mentioned in Paragraph 3.5 of the Real Estate guide, labour accommodation will be considered to
comprise of lodgings which are to be treated as residential buildings where:
 the building or lodging is occupied by the employees as their principal place of residence
 it is a building which is fixed to the ground and which cannot be moved without being damaged
 the building has been constructed or converted with lawful authority and
 it is not a building which is similar to a hotel, motel, bed & breakfast establishment or serviced
apartment for which services in addition to the supply of accommodation are provided.

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Labour accommodation as serviced accommodation
In certain cases, residents may be provided with additional services on top of the living accommodation. In
such cases, it is necessary to consider whether the extent of the additional services provided would move
the supply from one of residential accommodation to serviced accommodation. Each scenario must be
assessed on its actual facts.
Services normally supplied along with residential accommodation
Residential accommodation may provide certain services as ancillary to the main supply. Where those
additional services are incidental to the main supply of accommodation and not provided for an additional
fee, they should not normally cause the supply to become one of serviced accommodation. Such incidental
services may include, but are not limited to, the following:
 cleaning of communal areas
 maintenance services required for the general upkeep of the property
 pest control
 garbage collection
 security
 utilities e.g. electricity , water, etc
 access to facilities within the building for residents to use themselves, e.g. launderette facilities, gym,
pool, prayer rooms etc
Additional services indicating a supply of serviced accommodation
The additional services which may indicate that the supply is one of serviced accommodation, rather than
residential accommodation, includes but is not limited to the following:
 telephone and internet access
 cleaning of the rooms, other than purely the communal areas of the property
 laundry services, including the regular changing of bed linen
 catering
 maintenance services other than those required for the general upkeep of the property
Mixed versus composite supplies
Suppliers of labour accommodation should also consider whether they are making a single composite
supply (of either residential accommodation, or serviced accommodation based on the above), or whether

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they are making a mixed supply with separate component parts. Where a single composite supply is made,
the entire consideration for the supply shall be subject to the VAT treatment of the principal component.
Where a mixed supply is made, each component part must be valued and the correct VAT treatment
applied to each component part.
In accordance with Article 4 of the Cabinet Decision No. 52 of 2017 on the Executive Regulations of
the Federal Decree-Law No. 8 of 2017 on Value Added Tax, a single composite supply shall exist in the
following cases:
a. Where there is a supply of all of the following:
1. a principal component
2. a. component or components which either are necessary or essential to the making of the
supply, including incidental elements which normally accompany the supply but are not of a
significant part of it; or do not constitute an aim in itself, but are instead a better means of
enjoying the principal supply.
b. Where this is a supply which has two or more elements so closely linked as to form a single supply
which it would be impossible or unnatural to split.
Where it is considered that a single composite supply is being made, based on the above, the following facts
must also be taken into account:
a. the price of the different components of the supply is not separately identified or charged by the
supplier.
b. All components of the supply are supplied by a single supplier
As a result of the above, even where it is considered that a single composite supply is being made, it shall be
prevented from being treated as such if the various components are supplied by different suppliers or where
the prices of each component are separately listed out.
Simply charging a single price does not, however, automatically mean a single composite supply is being made
e.g. if there is not an identifiable principal component.
Where a supplier supplies more than one component for one price and the supply is not a single composite
supply, then the supply of the components shall be treated as multiple supplies i.e. whether they are subject
to VAT or not.

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4. Use of Exchange Rates for VAT purposes
VATP004
Issue
Article 69 of Federal Decree-Law No. (8) of 2017 (“VAT Decree-Law”) requires that where a supply
was made in a currency other than UAE Dirham that the amount stated on the issued tax invoice should
be converted into the UAE Dirham according to the exchange rate approved by the UAE Central Bank at
the date of supply.
The UAE Central Bank began publishing exchange rates on 17 May 2018, therefore businesses are
seeking clarity in respect of the FTA’s approach for the period from 1 January 2018 up until 16 May
2018, and the approach which should be adopted since the publication of exchange rates by the UAE
Central Bank.
Summary
The UAE Central Bank began publishing exchange rates on 17 May 2018. Businesses are required by
the VAT Decree-Law to use this exchange rate on any tax invoice issued in a currency other than the
UAE Dirham from this date onwards.
Any tax invoices issued in a foreign currency prior to 17 May 2018 should have been converted to UAE
Dirham using a reliable source for exchange rates. Provided this is the case, and the same source has
been used consistently, there will be no need to rework tax invoices issued prior to 17 May 2018
where they do not use the UAE Central Bank exchange rate.
Detailed discussion
Tax invoices issued prior to 17 May 2018
Where a tax invoice was issued prior to 17 May 2018 in a currency other than UAE Dirham, the tax
invoice should have been converted to UAE Dirham using an exchange rate from a reliable source.
The source used to obtain the exchange rate should have been consistently used by the business for all
tax invoices issued in foreign currencies during the period from 1 January to 16 May 2018.

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Examples of reliable exchange rate sources include, but are not limited to:
 Thomson Reuters
 Oanda
 the exchange rate published by a UAE bank
Use of historical rates published by the Central Bank
The UAE Central Bank has also published on 17 May 2018, historical rates on its website, for periods
prior that date. There is no requirement for businesses to reissue historical tax invoices from periods
prior to 17 May 2018 to show the Central Bank exchange rate, provided the exchange rate used is from
a reliable source and the same source has been used consistently.
In the event a tax invoice is issued post 17 May 2018 but where the date of supply was prior to 17 May
2018, businesses should use the historical rates as published by the Central Bank.
Use of exchange rates from 17 May 2018 onwards
Where a tax invoice is issued from 17 May 2018 onwards, it is required that the exchange rate
published by the UAE Central Bank is used to convert the foreign currency to the UAE Dirham.
Businesses must use the exact exchange rate as published by the UAE Central Bank, which includes using
the same number of decimal places as published.
For example, if the exchange rate for US Dollars is published as 3.672500, the full exchange rate
should be used for the purposes of the tax invoice, and it is not permitted to round the exchange rate to
fewer decimal places e.g. 3.7.
Time of publication of exchange rates
The UAE Central Bank updates the exchange rates on its website each day on or after 6pm, to cover
the rate applicable for that day. Where a tax invoice is issued prior to 6pm on any given day, it will be
acceptable to use the exchange rate published on the UAE Central Bank website at the time the tax
invoice is raised, i.e. the rate for the day before.
Use of exchange rates for imports of services
Where businesses import services from foreign suppliers which are subject to VAT under the
reverse charge mechanism, the invoice received for the supply is likely to be in a foreign currency. For

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the purposes of applying the reverse charge mechanism to such imports, businesses should use
the UAE Central Bank exchange rate applicable on the date of supply in order to calculate the VAT
liability to be reported in the VAT return.
A foreign supplier, not VAT registered in the UAE, is likely to issue an invoice which is not a tax invoice
for UAE VAT purposes. It is acceptable to use the date of the invoice as the date of supply of the
imported service and use the exchange rate applying as per that date.
Use of exchange rates for imports of goods
Where goods are imported into the UAE, the VAT due on import shall be automatically calculated based on
the import declarations submitted via the relevant Customs Department. This value is automatically
populated in Box 6 of the VAT return.
Where invoices for imported goods are received in a foreign currency, the Customs department shall
convert the value to UAE Dirham for the purposes of the import declaration. Where the Customs
exchange rate used differs from the UAE Central Bank exchange rate, businesses shall be permitted to
use the exchange rate applied by the Customs department for the purposes of declaring the VAT due
on import.
There shall not be a requirement for businesses to convert the value of the import based on the UAE
Central Bank rate and declare any adjustment due to exchange rate used within Box 7 of the VAT
return.

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5. Non-Recoverable Input Tax
Entertainment Services - VATP005
Issue
Article 53 of Cabinet Decision No. (52) of 2017 on the Executive Regulation of the Federal Decree-Law
No. (8) of 2017 on Value Added Tax (“VAT Executive Regulations”) stipulates input tax which is non-
recoverable by businesses (which, in most cases, will mean Taxable Persons).
There are a number of circumstances in which businesses have sought clarity over the definition of
‘entertainment’ for the purposes of the input tax restriction, and in particular what should constitute
entertainment of staff or business contacts as opposed to incidental business-related expenses which
would be recoverable under normal VAT rules.
Summary
This Public Clarification explains the application of Article 53 of the VAT Executive Regulations with
regards to VAT which is non-recoverable in respect of entertainment or hospitality of any kind.
VAT incurred on any costs which are used for a genuine business purpose, or which are incidental to a
business purpose e.g. food and drink provided during a business meeting, shall be recoverable (subject
to normal VAT recovery rules). However, where the hospitality provided becomes an end in itself and
could be construed as the purpose for attending an event, such costs will be considered to be
entertainment in nature and the VAT incurred shall not be recoverable. More information on how to
define whether costs are incidental to a business purpose, or considered to be an end in themselves, is
provided below.

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Detailed discussion
Entertainment provided to non-employees
Designated Government entities
Article 53(1)(a) of the Executive Regulations specifies that a Designated Government Entity (which is
specified in a Cabinet Decision) is able to provide entertainment services to anyone not employed by
the entity and shall be able to recover the input tax incurred on those costs.
This exception for Designated Government Entities only applies to entertainment provided to non-
employees. For example, the following forms of entertainment would be considered to be in the
course of the activities of the Designated Government Entity and any VAT incurred should be
recoverable:
 meetings with delegations from other countries where lunch or dinner is provided.
 meetings with representatives from other Government entities to discuss official business,
where refreshments are provided
 ceremonies held to mark significant political events e.g. the signing of an international
agreement, where entertainment is provided to the audience
See below for further comments on entertainment services provided to employees.
VAT registrants who are not Designated Government Entities
Input Tax shall be non-recoverable if it is incurred by a person in respect of entertainment services
provided to anyone not employed by the person (see below for further comments on entertainment
services provided to employees), including:
 Customers
 potential customers
 officials
 shareholders, or other owners or investors
As a result, where a VAT registrant who is not a Designated Government Entity provides
entertainment services to any non-employee, the VAT incurred on such costs shall be blocked from
recovery in full.
This rule shall apply even where the business makes fully taxable supplies and would otherwise have the
right to full input tax recovery.

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Entertainment services are defined under Article 53(2) of the Executive Regulations as “hospitality of
any kind” including the provision of:
 Accommodation
 food and drinks which are not provided in a normal course of a meeting; and
 access to shows or events, or trips provided for the purposes of pleasure or entertainment
Entertainment provided to employees
Where goods or services are purchased by any person to be used by employees for no charge to them
and for their personal benefit, including the provision of entertainment services, then the VAT incurred
on the cost is not recoverable unless an exception applies.
This means that any entity, including Designated Government Entities, which provide entertainment
services to employees are prevented from recovering any VAT included on such costs.
The only circumstances in which a taxable person is entitled to recover VAT on such costs are:
1. where it is a legal obligation to provide those services or goods to those employees under any
applicable labour law in the UAE or Designated Zone in which the entity is;
2. it is a contractual obligation or documented policy to provide those services or goods to those
employees in order that they may perform their role and it can be proven to be normal
business practice in the course of employing those people; or
3. where the provision of goods or services is a deemed supply under the provisions of the Decree-
Law.
For example, where a new employee joins a business and is provided with hotel accommodation
for a short initial period prior to finding their own accommodation, this would not be considered
entertainment and the VAT incurred on such costs would be recoverable, as this cost is necessary for the
person to perform their role.
However, where a business organizes a lunch or dinner for employees e.g. a Ramadan Iftar, this
would be considered to be entertainment and the VAT incurred on such costs would be blocked from
recovery.

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Definition of entertainment services
Food and drinks “in the normal course of a meeting”
The FTA considers that certain hospitality and entertaining expenses should be classed as normal
business expenses which should not give rise to non-recoverable input tax under Article 53.
Where simple hospitality is provided in the normal course of a business meeting e.g. where simple
food and refreshments are provided during the course of a meeting, the cost is considered to be
recoverable.
The FTA considers the following criteria is indicative of simple hospitality provided during a business
meeting:
 the hospitality is provided at the same venue as the meeting
 if the meeting is interrupted, only by a short break for the provision of the hospitality and then
resumes as normal e.g. a lunch break
 the cost per head of providing the hospitality does not exceed any internal policy the business
normally has in place around employee subsistence claims, where available
 the food and beverage provided is not accompanied by any form of entertainment e.g. a
motivational speaker, a live band etc.
However, where the food and refreshments are considered to be so substantial that they would
constitute an end in themselves and may have encouraged someone to attend the meeting, the
input tax incurred is non-recoverable. For example, a gala dinner event with a short introduction by a
speaker would not be considered to be food and beverage in the normal course of a business
meeting and the input tax incurred on costs would be blocked from recovery, where no charge is made for
attendance.
Conference and Business events
Recoverability of input tax in respect of costs incurred for catering services during conferences and
business events would be dependent on whether any fee is charged from the attendees, as detailed
below:

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1. Where a fee is charged and VAT is accounted on the same, the input tax incurred on catering
services would be recoverable on the basis that the expense is attributable to making taxable
supplies.
2. Where no fee is charged, the input tax related to catering services will be blocked as this
situation will fall within the scope of Article 53(1)(a) of the Executive Regulations.
Where the business cannot establish or is uncertain whether or not hospitality is provided in the normal
course of business meeting, it should refrain from recovering input tax on the expenses.
Sundry office expenses
The FTA considers that certain normal incidental office expenses for general use by both employees
and visitors does not give rise to non-recoverable input tax under Article 53.
Examples of sundry office expenses on which the FTA accepts a business should be entitled to input tax
recovery include:
 tea and coffee available in the office or provided during meetings for general use by
employees and non-employees for no charge
 flowers for display in receptions, offices or for decoration during special events
 dates, chocolates, or equivalent snacks which may be available in the office or during meetings
for general use by employees and non-employees for no charge.
Employee entertainment
Where events are held purely for the purposes of entertaining staff, for example staff parties, the VAT
incurred on the associated costs shall be blocked from recovery unless a charge is made to the employee
for attending.
Taxable Persons may also purchase goods or services to be given away to staff free of charge, in order
to reward them for long service, for example. Based on the provisions of Article 53, the VAT incurred on
such costs should be blocked from recovery.
Examples of the type of gifts given away free of charge on which VAT recovery would normally be
prevented (unless the business accounts for a deemed supply) would include:
 long service awards
 retirement gifts
 Eid gifts, or gifts for other festivals or special occasions

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 gifts given on the occasion of a wedding or birth of a child
 employee of the month gifts; or
 a dinner to reward service
Employee expenses
There will also be circumstances where a taxable person will fund or reimburse an employee for
certain costs which the employee incurs for business purposes, in the course of performing their
role. In such cases, the costs are considered to be genuine business expenses and the VAT incurred is
recoverable where a tax invoice is provided and the cost is for business purposes.
An example of costs incurred by an employee which the FTA considers should be recoverable by the
business (subject to normal VAT recovery rules) include:
 where an employee is on a domestic business trip and requires overnight accommodation, the
VAT incurred on e.g. hotel costs; or
 input tax incurred on subsistence costs e.g. food and drinks purchased by the employee for their
own consumption during the business trip.
If the employee incurs costs which are related to entertaining a current/potential customer/supplier
then any associated input tax incurred will be non- recoverable.

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6. Designated Zones - VAT Guide | VATGDZ1
Issue 1/July 2018
S. No. Contents Page No.
1 Introduction 23
1.1 Overview 23
1.1.1 Short brief 23
1.1.2 Purpose of this document 23
1.1.3 Who should read this document 23
2 Identification of Designated Zones 24
2.1 VAT treatment of Free Zones 24
2.2 Identification of a Designated Zone 24
2.3 Entities within a Designated Zone 25
2.4 VAT registration 25
3 Application of VAT 25
3.1 Introduction 25
3.2 Supply of services 26
3.3 Supply of goods within a Designated Zone 26
3.3.1 Default rule 26
3.3.2 Override of the default rule 26
3.3.3 Identification of the intended use of goods 28
3.4 Transfers of goods into a Designated Zone 28
3.4.1 Transfers from outside the UAE 28
3.4.2 Transfers from mainland UAE 28
3.4.3 Transfers between Designated Zones 28
3.5 Import of goods from Designated Zones 29
3.5.1 VAT on import 29
3.5.2 Supplies following importation 29
3.5.3 Summary 29
3.6 Subsequent consumption or loss of goods 30
3.7 High level outline of VAT treatment of goods 30
4 Specific cases 31
4.1 Supplies of water and energy 31
4.2 Supplies of real estate 32
4.3 Tax groups (VAT groups) 32
4.4 Branches 32
4.5 VAT recovery 33

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1. Introduction
1.1. Overview
1.1.1. Short brief
VAT has been introduced with effect from 1 January 2018 in the UAE. As a general consumption tax on
the supply of goods and services, it applies to those supplies which take place within the territorial area
of the UAE.
Historically, Free Zones have been excluded from the territorial scope of the UAE. For VAT purposes, this
is not automatically the case. Only those Free Zones listed in a Cabinet Decision qualify for special VAT
treatment and that special VAT treatment has certain limitations. These nominated Free Zones are
known as Designated Zones for VAT purposes.
Designated Zones are:
 subject to strict control criteria;
 required to have security procedures in place to control the movement of goods and people to and
from the Designated Zone;
 required to have Customs procedures to control the movement of goods into and out of the
Designated Zone; and
 treated as being outside the territory of the UAE for VAT purposes for certain supplies of goods.
The effect for businesses operating in Designated Zones will be that many supplies of goods will be
outside the scope of UAE VAT, subject to strict criteria and detailed record keeping. However, supplies of
services are subject to the normal UAE VAT rules.
Strict qualifying criteria are applied to limit the use of the Designated Zones measure to those businesses
for which it is designed, i.e. it is a measure to facilitate international trade on a VAT neutral basis and is
not one designed to enable tax avoidance at any level.
1.1.2. Purpose of this document
This document contains more detailed guidance about the characteristics of a Free Zone which must be
present in order for it to qualify as a Designated Zone for VAT purposes.
In addition, this document provides guidance for businesses operating in Designated Zones seeking to
understand the VAT implications of their activities within and outside the Designated Zones.
1.1.3. Who should read this document?
This document should be read by key stakeholders in businesses operating in Designated Zones who are
responsible for tax matters.

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2. Identification of Designated Zones
2.1. VAT treatment of Free Zones
VAT is a general consumption tax imposed on most supplies of goods and services in the UAE. By default,
it is chargeable on supplies of goods and services throughout the territorial area of the UAE.
This territorial area will also include those areas currently defined as both fenced and non-fenced Free
Zones.
For VAT purposes, both fenced and unfenced Free Zones are considered to be within the territorial scope
of the UAE and therefore subject to the normal UAE VAT rules unless they fulfil the criteria to be treated
as a Designated Zone as defined by the Federal Decree-Law on VAT and Executive Regulations. Those Free
Zones which are Designated Zones are treated as being outside of the territory of the UAE for VAT
purposes for specific supplies of goods.
In addition, there are special VAT rules in respect of VAT treatment of certain supplies made within
Designated Zones. The effect of these rules is that certain supplies of goods made within Designated
Zones are not be subject to UAE VAT. In contrast, supplies of services made within Designated Zones are
treated in the same way as supplies of services in the rest of the UAE.
Important: Free Zones meeting the criteria have been specifically identified by way of a Cabinet Decision as
Designated Zones. Where a Free Zone is not a Designated Zone, it is treated like any other part of the UAE.
2.2. Identification of a Designated Zone
A Designated Zone is an area specified by a Cabinet Decision as being a “Designated Zone”. Free Zones
listed by the Cabinet Decision as being a Designated Zone can be found under the Legislation tab on the
FTA website (www.tax.gov.ae).
Although an area might be identified as a Designated Zone, it is not automatically treated as being outside
the UAE for VAT purposes. There are several main criteria which must be met in order for a Designated
Zone to be treated as outside the UAE for VAT purposes. These are as follows:
1. The Designated Zone must be a specific fenced geographic area.
2. The Designated Zone must have security measures and Customs controls in place to monitor the entry
and exit of individuals and movement of goods to and from the Designated Zone.
3. The Designated Zone must have internal procedures regarding the method of keeping, storing and
processing of goods within the Designated Zone.
4. The operator of the Designated Zone must comply with the procedures set out by the FTA.

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This means that where a Designated Zone has areas that meet the above requirements, and areas that do
not meet the requirements, it will be treated as being outside the UAE only to the extent that the
requirements are met.
In addition, should a Designated Zone change the manner of its operation or no longer meet any of the
conditions imposed on it which led to it being specified as a Designated Zone by way of the Cabinet
Decision, it shall be treated as though it is located within the territory of the UAE.
Important: Only where a Designated Zone meets all the above tests it can be treated as outside the UAE for
VAT purposes.
2.3. Entities within a Designated Zone
Those businesses which are established, registered or which have a place of residence within the
Designated Zone are deemed to have a place of residence in the UAE for VAT purposes6.
The effect of this is that where a business is operating in a Designated Zone, it itself will be onshore for
VAT purposes, even though some of its supplies of goods may be outside the scope of UAE VAT.
2.4. VAT registration
Any person carrying on a business activity in the UAE and making taxable supplies in excess of the
mandatory VAT registration threshold (i.e. a taxable person) must apply to be registered for VAT
purposes.
Any other person that is making taxable supplies or incurring expenses (which are subject to VAT), in
excess of the voluntary VAT registration threshold may apply to register for VAT purposes.
Important: Designated Zone businesses are considered to be established ‘onshore’ in the UAE for VAT
purposes. This means that they have the same obligations as non-Designated Zone businesses and have to
register, report and account for VAT under the normal rules. It also means they can join a tax group (VAT
group) provided they meet the required conditions.
3. Application of VAT
3.1. Introduction
As outlined above, in certain instances, an area of a Designated Zone will be effectively treated as
‘offshore’ for VAT purposes, i.e. as if it is outside of the territory of the UAE for the purposes of the tax.
Since UAE VAT only applies on supplies made in the UAE, such special treatment of Designated Zones will
affect the VAT treatment of supplies made within Designated Zones.
This section of the Guide discusses the consequences of treating Designated Zones as being outside the
UAE for various types of transactions.

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3.2. Supply of services
The place of supply of services is considered to be within the UAE if, under the normal rules, the place of
supply would be the Designated Zone7.
This override to the normal place of supply of services rules means that, in all circumstances, the place of
supply of services supplied in Designated Zones reverts to being in the UAE. Such supplies are then taxed
in accordance with the general VAT rules for supplies of such services.
This means that most services will be liable to VAT at the standard rate, as would be the case were they
performed within the UAE. Equally, where services are exported (i.e. made to a person who is resident
and located outside the GCC Implementing States), then the services may be zero-rated.
3.3. Supply of goods within a Designated Zone
As outlined above, Designated Zones will be treated as being ‘offshore’ if the necessary conditions are met.
3.3.1. Default rule
Since the place of supply for goods generally follows the location of the goods, a supply of goods within a
Designated Zone is treated as made outside the UAE. This means that the default position is that such
supplies are not subject to UAE VAT.
3.3.2. Override of the default rule
This default position is overridden where a supply of goods is made within a Designated Zone to a person
to be consumed by him or another person – in these situations, the place of supply will be treated in the
UAE and VAT will be applicable under the normal rules.
In the above context, the term “consumed” should be interpreted broadly as including any utilisation,
application, employment, deployment or exploitation of the goods. For the purpose of the provision, the
resale of purchased goods is not treated as consumption of the goods. Therefore, a supply of goods in
such circumstances would still be outside the scope of VAT if the purchaser intends to sell them.
Furthermore, it should be noted that the override does not apply, and the supply can still be treated as
being outside the scope of VAT, when the purchased goods are:
 incorporated into, attached to or otherwise form part of another good located in the same Designated
Zone and that other good is not consumed; or
 used in the production of another good located in the same Designated Zone and that other good is
not consumed.
For the purposes of the second exception to the override, there must be a direct connection between the
purchased goods and the production of another good. For example, the exception will generally apply to
tools and equipment used to manufacture other goods; in contrast, a computer used by the business to
create designs for goods which are later manufactured will not have sufficient connection with the goods
to be treated as “used in the production” of the goods.

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The following are some of the examples of the application of Article 51(5) of the Executive Regulations to
supplies taking place in Designated Zones.
Example of supply VAT treatment of the Comments
supply for UAE VAT
A business buys trading Outside the scope The resale of the goods is not
stock for the purpose of treated as consumption of the
resale within the DZ goods in the context of Art 51(5) ER
An oil equipment Outside the scope Although steel will be
manufacturer in the “consumed” by the manufacturer
Designated Zone buys steel this steel will be form part of the
which will be used in Manufactured equipment which itself
production of equipment. will not be consumed by the
The manufactured manufacturer. As a consequence, the
equipment is then sold by exception to the default place of supply
the manufacturer. rules in Art 51(5) of the VAT Executive
Regulations will not apply.
A manufacturer in the Outside the scope Although the tools will be “consumed”
Designated Zone buys work by the manufacturer, these tools will
tools which are used in be applied directly in the process of
manufacturing goods. The manufacturing other goods which are
manufactured goods are not
then sold by the manufacturer. Consumed by the manufacturer. As a
consequence, the exception to
the default place of supply
rules in Art 51(5) of the VAT
Executive Regulations will not apply.
A business in the Within the scope of UAE The purchased goods will be consumed
Designated Zone buys an VAT by the business, and will not be
office computer, food, Incorporated into, attached to or
stationery, a company car, Otherwise form part of or are used
fuel for the company car, in the production of another good.
office furniture, and similar Therefore, Art 51(5) of the VAT
goods to be used in the Executive Regulations brings the sale
general running of the business. into the scope of UAE VAT.
A manufacturer in the Within the scope of UAE Although the computer is used
Designated Zone buys a VAT in wider manufacturing process,
computer to be used to it is not used directly in the process of
create designs for goods to producing the goods – i.e. the creation
be manufactured by the of designs is one step removed from
manufacturer. the process of actually producing the
goods themselves. Therefore, Art 51(5)
of the VAT Executive Regulations
brings the sale into the scope of UAE.
An individual buys goods in Within the scope of UAE Since the goods will be used
the Designated Zone to be VAT for non-business purposes,
used for private purposes. they will be treated as consumed
by the individual. Therefore, Art 51(5)

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of the VAT Executive Regulations brings
the sale into the scope of UAE.
3.3.3. Identification of the intended use of goods
The onus is on the supplier to ensure that it treats a supply correctly for VAT purposes. Therefore, as a
general rule, suppliers should not treat supplies of goods as being outside the scope of UAE VAT unless
they are satisfied that there is no risk that the goods may be used by the purchaser for non-qualifying
purposes.
The Authority expects that in most arm-length situations, a written statement from the recipient that
the goods will not be consumed should be sufficient for these purposes.
It should be noted that in many situations, the reasons behind the purchase should be clear from the
context. For example, food sold by a grocery store within a Designated Zone are unlikely to be used for
anything other than consumption by the purchaser or a third party.
3.4. Transfers of goods into a Designated Zone
3.4.1. Transfers from outside the UAE
Since Designated Zones are treated as outside the UAE for VAT purposes, a movement or supply of
goods into a Designated Zone from outside the UAE would be treated as taking place outside the UAE.
Therefore, no UAE VAT would be charged on such movement or supply.
3.4.2. Transfers from mainland UAE
A movement of own goods, or a supply, from mainland UAE to a Designated Zone is not considered to be
an export of goods from the UAE.8 Therefore, such movements and supplies are treated as local
movements / supplies.
3.4.3. Transfers between Designated Zones
A transfer of goods (that is, either a sale or movement of own goods) between two Designated Zones
will be treated as outside the scope of VAT subject to the following two conditions9 being met:
 the goods, either in part or in their entirety are not released into circulation, nor used or altered in any
way during the transfer between the Designated Zones; and
 the transfer for the goods is undertaken in accordance with the rules for Customs suspension per the
GCC Common Customs Law.10
Important: Where goods are moved between Designated Zones, the FTA may require the owner of the goods
to provide a financial guarantee for the payment of VAT, which that person may become liable for should the
conditions for movement of the goods not be met.

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3.5. Import of goods from Designated Zones
3.5.1. VAT on import
A movement of goods from a Designated Zone into the mainland UAE is treated as an import of goods
into the UAE. Therefore, import VAT is payable by the importer of the goods.
It should be noted, however, that there may be situations when goods were subject to VAT when
purchased within the Designated Zone, and then subject to VAT again when imported by the same
person into the mainland UAE.
Where a VAT registered person has incurred VAT on purchase of goods within a Designated Zone and
then again on import of the same goods from the Designated Zone into the mainland, the VAT registered
person will be able to recover VAT incurred on the importation of the goods into the mainland in full
(irrespective of the person’s normal input tax recovery percentage) on its tax return.
It should be noted that import VAT can only be recovered in respect of the goods under this special rule
if the same goods were subject to VAT when purchased by the importer in the Designated Zone, and that
there were no intervening transactions in respect of the goods between the purchase by the importer
and the actual import. The importer is required to retain evidence (and provide it to the Authority, if
requested) of the VAT incurred in respect of the purchase and import.
3.5.2. Supplies following importation
It is important to remember that even if VAT is charged on the import of goods into the UAE mainland
from the Designated Zone, VAT may also be charged again on the subsequent sale of the goods within
the mainland on the date of supply of that sale (i.e. if it is a taxable supply made by a taxable person).
Whether or not VAT is charged on such a sale will depend on whether or not the date of supply is
triggered in respect of the sale when the goods are in the Designated Zone or following their importation
into the mainland. The date of supply has to be determined on a case-by-case basis.
3.5.3. Summary
The table below provides high-level examples of potential VAT treatments in scenarios involving a sale of
taxable goods with importation into the UAE mainland. In practice, each situation must be analysed on a case-
by-case basis.
Scenario Phase 1 VAT treatment Phase 2 VAT treatment
of Phase 1 of Phase 2
Goods are Import of goods Import VAT due Sale of goods in Supplier charges VAT on
imported from DZ into ML from DZ into ML from the importer the mainland sale if a taxable supply
The goods are
sold in the
mainland by the

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importer
Goods are sold Sale of goods Outside the Import of goods Import VAT due
within DZ and the within DZ scope of VAT from DZ to from the importer
goods will not be mainland
consumed by the
purchaser
The goods are
imported into the
mainland by the
purchaser
Goods are sold Sale of goods Supplier charges Movement of Import VAT due
within DZ and the within DZ VAT on sale goods from DZ from the importer
goods are to mainland (but can be
intended to be recovered via the
consumed by the VAT return)
purchaser
The goods are
imported into the
mainland by the
purchaser
3.6. Subsequent consumption or loss of goods
In all cases, goods which are located in a Designated Zone on which the owner has not paid VAT will be
treated as imported into the UAE where:
 the goods are consumed by the owner, unless the goods are incorporated into, attached to or
otherwise form part of or are used in the production of another good located in a Designated Zone and
that other good is not itself consumed; or
 the goods are unaccounted for.
These provisions apply to the owner of the goods.
Important: Where VAT has not been paid on the acquisition of goods, owners have to monitor the status of
the goods to ensure that VAT is paid if the conditions for importation are triggered.
3.7. High level outline of VAT treatment of goods
On the basis of the analysis in the previous sections, the table below provides a high-level summary of VAT
treatment of the various supplies of goods which may be made within, from or to a Designated Zone. Please
note that this is high-level guidance only, and businesses should consider how legislation applies to their
specific cases.
Origin Destination VAT treatment Notes
Designated Zone 1 Designated Zone 1 Outside the scope Subject to conditions
of VAT being met.

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Designated Zone 1 Designated Zone 2 Outside the scope Subject to correct
of VAT controls, processes and
records being in
place, and any
financial guarantee
provided as may
be required.
UAE mainland Designated Zone Subject to normal Same treatment as
VAT rules any other local supply
Designated Zone UAE mainland Subject to normal Treated as an
VAT rules for import – importer
imports pays VAT either
via its VAT return
(if registered) or at
the time of import
(if unregistered).
Outside UAE Designated Zone Outside the scope Subject to correct
records being in place
Designated Zone Outside UAE Outside the scope Subject to correct
records being in place
4. Specific cases
4.1. Supplies of water and energy
Supplies of water or any form of energy are supplies of goods. Therefore, similar to supplies of other
goods within Designated Zones, such supplies may be treated as being outside the scope of the UAE if
they meet conditions discussed in part 3.3 of this Guide.
However, where water or energy is supplied for consumption (e.g. water and electricity provided by a
water and electricity authority), then the place of supply of such water and energy reverts to being
treated as being within the UAE and the supply is subject to the normal VAT treatment. This override
applies even if the water or energy is used in the process of production of other goods in the Designated
Zone. This means that suppliers of water and energy shall charge VAT without the need to distinguish
between the potential uses for water and energy.
For the purpose of the rule, the term “energy” includes electricity and gas, including biogas, coal gas,
liquefied petroleum gas, natural gas, oil gas, producer gas, refinery gas, reformed natural gas, and
tempered liquefied petroleum gas, and any mixture of gases, whether used for lighting, or heating, or
cooling, or air conditioning or any other purpose.
It should be noted that the rule only applies to water and energy sold for the purpose of consumption.
Supplies of oil, gas, and other similar goods traded by businesses within Designated Zones may still be
outside the scope of UAE VAT if the necessary conditions are met.

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4.2. Supplies of real estate
Supplies of real estate, which include the sale and lease of real estate, are treated as supplies of goods.
The place of supply of such supplies is where the real estate is located.
It should be noted that real estate is not treated as consumed when sold or leased within a Designated
Zone and therefore such supplies of real estate are not brought into the scope of UAE VAT by Article 51(5)
of the Executive Regulations. As such, supplies of real estate made within Designated Zones are outside
the scope of VAT.
In light of the above, raw materials purchased within a Designated Zone for the purpose of constructing
real estate in the Designated Zone are also outside the scope of VAT. This is because the raw materials
will be used in the production of another good (the real estate) located in the same Designated Zone
which itself is not consumed.
Where real estate is not supplied by way of sale or a lease, it is a supply of services related to real estate.
This includes, but is not limited to granting a personal right to use real estate, licences to occupy real
estate, the provision of contractual rights exercisable over or in relation to real estate, including the right
to use accommodation in a hotel or similar establishment, and similar16.
As mentioned earlier in this Guide, the place of supply of all services is considered to be within the UAE if,
under the normal rules, the place of supply would be within a Designated Zone.17 As a result, supplies of
services related to real estate will be taxable even if supplied within a Designated Zone.
4.3. Tax groups (VAT groups)
For tax grouping purposes, a business established within a Designated Zone (which is still treated as a UAE
business) is able to form a tax group with an onshore company (or companies) or another Designated
Zone company (or companies), subject to meeting the normal control criteria.
The usual consequences of tax grouping follow, such as supplies between members being disregarded for
VAT purposes, and there being joint and several liability of the members of the tax group.
It should be noted, however, that where a supply of goods between the tax group members results in the
goods being moved from a Designated Zone into the UAE mainland, this importation of the goods would
trigger the obligation to pay import VAT. The payment of import VAT will be done using the normal
process for such payments that is, a VAT registered tax group will be able to defer accounting for the VAT
to its VAT return.
4.4. Branches
A single entity may have a branch or head office located in a Designated Zone and a branch or head office
located in the UAE mainland.
Supplies between different parts of the same legal entity, for example, between the head office and the
branch, are treated as intra-entity supplies for VAT purposes and therefore disregarded.

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Similar to the tax groups, it should be noted that a movement of goods from a Designated Zone into the
mainland UAE may trigger the obligation to pay import VAT (e.g. when transferring goods from the
branch in the Designated Zone to the head office in the mainland). A VAT registered entity will be able to
defer accounting for import VAT to its VAT return; in contrast, an unregistered entity would be required
to make a payment of import VAT before the goods are released from the Designated Zone.
4.5. VAT recovery
Businesses operating in Designated Zones will be subject to the normal VAT rules of
VAT recovery on their expenses:
 If a business makes only supplies which are liable to VAT (or which would be liable to VAT if they were
taking place in the UAE), it should be able to recover its VAT on expenses (input tax) in full.
 Where the business makes supplies which do not give right to the VAT recovery (e.g. exempt supplies),
the business is unable to recover VAT on expenses directly attributable to making such supplies.
 Where an expense relates to both supplies that give right to the VAT recovery and those that do not,
the business would be required to apportion the input tax in order to identify the recoverable part.
In order to recover any VAT under the normal VAT rules, the businesses must be registered for VAT with
the FTA.

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7. VAT REFUND USER GUIDE - July 2018
INDEX
S. No. Contents Page Range
1 Brief overview of this user guide 35
2 Purpose of the Claim 35
3 Timeframes for repayment 35
4 Submitting the Claim 35
4.1 Login to FTA e-Services Portal and access the Refund
form
35
4.2 Complete and submit the form 36
5 Verify your Balance post the approval 36
Appendix A Important On-Screen Tips 36
Appendix B Details about the VAT Refund Form 37

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1. Brief overview of this user guide
This guide will help you navigate the e-Service portal, and is designed to be read in conjunction
with the Taxable Person Guide for VAT to file your VAT Refund Claims (hereinafter referred to as
Claim). It is intended to help eligible Taxable Persons prepare their Claim to the Federal Tax Authority
(FTA).
The guide explains the process to be followed along with the forms and information that needs to be
provided when applying for a refund to the FTA. The process is available with effect from February 1,
2018.
The Claim can be submitted by the Taxable Person, or another person who has the right to do so on
the Taxable Person’s behalf (for example, a Tax Agent or a Legal Representative).
2. Purpose of the Claim
Every Taxable Person is required to file a VAT return summarizing the VAT due to the FTA for the tax
period. When the input tax is greater than output tax on a VAT return, the Taxable Person is able to
request a VAT refund after submission of the VAT return or at any later time when there is a credit
owed to them.
3. Timeframesforrepayment
Where the Taxable Person makes a claim for a refund of excess refundable tax, the FTA will within 20
business days of an application being submitted, review the application and notify the Taxable Person
of its decision to accept or reject the refund claim.
The FTA may notify the applicant that it requires a longer period than (20) business days to consider the
application where appropriate.
4. SubmittingtheClaim
4.1. Login to FTA e-Services Portal and access the Refund form
Login to FTA e-Services Portal using your username and password. In order to access the Refund form,
go to the ‘VAT’ tab and then to the ‘VAT Refunds’ tab.
Under ‘Request VAT Refund’ box, access the form by clicking on ‘VAT Refund Request’ button as per the
screen shot.

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4.2. Complete and submit the form
Please fill in each field on the form. Any questions that are marked with an asterisk (*) are mandatory and
must be completed in order to submit the form. Some fields will be automatically retrieved.
Once you complete the form, click on the ‘Submit’ button.
The Refund Form will be processed within 20 business days of submission. You will receive an email
notification from the FTA on the result of your application. Once your claim is approved, the amount will
be refunded within 5 business days.
IMPORTANT NOTES
 Before submitting the refund claim, ensure that bank account details are provided on the registration
form. Refund requests that do not have bank account details will be rejected.
 A bank account validation letter / certificate must be provided to the FTA. This letter must be issued
and stamped by your bank and includes details about the account holder name (must be the same as
the taxable person’s name as registered with the FTA), bank’s name, bank’s address, SWIFT/ BIC and the
IBAN. The letter/ certificate shall be uploaded as an attachment to the refund application.
 If your bank is international and does not have a correspondent bank in the UAE, the refund payment
may take more than 5 business days and you will incur the transfer fees charged by your bank
5. Verify your Balance post the approval
Once you receive a confirmation email of the refund, youmay check your balance through the ‘My Payment’
tab under the Transaction History section, where a row will appear mentioning the amount refunded.
Appendix A: Important On-Screen Tips
You can change the language of the form from
Arabic to English. Click on the icon at the top
right hand side of the screen to do so.
For some fields you will see a small icon with an
“i” next to the field. Hover the cursor over
the icon to read additional information
relevant to the completion of the field.
To upload a file, click the Choose Files button,
select the file on your desktop and click the
Open button to upload the file. To upload
multiple files, repeat this process. To delete
a file that has already been uploaded click the
small red x.

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To complete a field with a drop-down menu,
click the downwards pointing arrow to the
right of the field and select the option that
applies. You will only be able to select one
option in most cases.
To complete a field that requires a date,
click the Calendar icon to the right of the field
and enter the date from the calendar. The date
will then appear in the field in dd/mm/yyyy
form.
Appendix B: Details about the VAT Refund Form
Basic Information
TRN
Legal name of entity
(English) etc.
TRN
This section is pre-populated on the basis of the information contained in
your account User Profile. It is therefore very important that the
information contained in your Profile is both correct and accurate. Please
check it before completing the Refund form.
About the Refund
Total amount of Excess
Refundable Tax (AED)
This field is prepopulated based on:-
 The excess refundable tax reported in the relevant past VAT
Returns, which have already been submitted up to the last return;
minus
 Administration penalties due (except for the late registration
penalty which is shown separately)
The amount you wish to
have refunded (AED)
Please enter the amount you wish to have refunded here. This amount
must be equal to or less than the “Total amount of Excess Refundable
Tax”.Remaining amount of
eligible Excess Refundable
Tax
This field is prepopulated and represents the remaining amount of excess
refundable tax you may apply for in the future.

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Late registration penalty
amount (in AED)
This field is prepopulated depending on whether you have had a penalty
imposed and have settled the late registration penalty for VAT or not:-
Note
 If after deduction of the penalty the refund amount is a negative
amount, you may still be able to submit this form but your
application will be automatically rejected.
 If after deduction of the penalty the refund amount is a positive
amount, only the balance will be presented to the FTA for refund
claim purposes.
IBAN Validation Please upload a bank account validation letter / certificate. This
letter must be issued and stamped by your bank and includes details about the account holder name
(must be the same as the taxable person’s name as registered with the FTA), bank’s name, bank’s
address, SWIFT/ BIC and the IBAN. The letter/ certificate shall be uploaded as an attachment to the
refund application.
Authorized Signatory
Name (English) Name (Arabic) etc. This section is prepopulated from the system.
Declaration
I agree to submit additional documentary
proof to support the VAT Refund claim, if
requested by the FTA.
I agree to pay back any amount wrongfully
obtained
You must tick “Yes” to agree to the declaration before
submitting this form
If you have Then this field
is
not been charged a penalty Zero
been charged a penalty
 and you have paid the penalty
Zero
 but you have yet paid the penalty at the
time of claiming this refund
Shown as
20,000
(Note)

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8. CLARIFICATIONS USER GUIDE
APRIL 2018
1 Brief overview of this user guide 40
2 Purpose of the Clarifications Form 40
2.1 What is a Clarification? 40
2.2 Who is qualified to apply for a Clarification? 40
2.3 How to apply? 41
2.4 Who can submit the Clarifications Form on your behalf? 41
3 What information will you need when completing the
Clarifications Form?
41
4 Completing your Clarifications Form 42
5 Submitting the Clarifications Form 45
6 Response from the FTA on your Clarification 45
7 What you can do if you disagree 46
7.1 Reconsideration 46

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1. Brief overview of this user guide
This guide is prepared to help you submit Clarification requests to the Federal Tax Authority (FTA)
regarding specific matters of uncertainty on which you would like further guidance, and will help you:
o provide accurate answers to the questions on your Clarifications Form by explaining
what information you are required to provide; and
o understand the icons and symbols you might see as you complete the form.
The Clarifications Form is for use by all persons that would like to ask the FTA to provide technical
clarifications to matters of uncertainty they encounter after analysing the legislation.
If you have additional questions on specific fields in the Clarification Form, please contact us at
info@tax.gov.ae.
2. Purpose of the Clarifications Form
2.1What is a Clarification?
A Clarification is a mechanism to provide taxpayers with written guidance or advice about the FTA’s
interpretation and position on specific tax matters of uncertainty, subject to the terms, conditions and
procedures established by the FTA.
The answer provided by the FTA applies to the applicant and the specific transaction on which such
advice has been requested only. There is no precedence for the advice set out by the FTA’s response
that could be applied to other persons or to the applicant for materially different transactions carried
out.
2.2 Who is qualified to apply for a Clarification?
Any person may use this Clarifications Form to seek technical clarification on specific tax matters, provided
that:
 The person has analysed the relevant tax law, regulations and guidance and the answer is still
uncertain – It is the responsibility of the applicant to monitor from time to time all publications
issued by the FTA including but not limited to the law, regulations and guidance to avoid
unnecessary and invalid submissions of a Clarifications Form.
 The person has an interest in the matter at hand (i.e. this is a genuine factual matter that has a
material impact on the taxable person’s activities); and
 The matter is not covered by previous Clarifications issued by the FTA.
It is not required that:
 The person has to be a Taxable Person registered with the FTA;
 The person has to appoint a Tax Agent; or
 The matter has to relate to a transaction which has already occurred.

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2.3 How to apply?
The taxpayer must submit the Clarifications request by email. Refer to section 6 for details on
the submission.
2.4 Who can submit the Clarifications Form on your behalf?
Generally, the person seeking a Clarification should submit the Clarifications Form. However,
submissions will also be accepted from:-
 Appointed Tax Agents; or
 Appointed Legal Representatives.
If you are a member of a Tax Group, the request should be submitted by the Representative Member of
the Tax Group.
3. What information will you need when completing the ClarificationsForm?
You are required to submit the below attachments along with the form:
 Any tax advice you received on the matter of uncertainty to be clarified;
 A formal letter including details of the facts, legal references, your technical view, any alternative
treatment which you consider may apply as well as your question(s) for the FTA to clarify; and
 If a person is not registered, supporting details to identify the applicant (either Emirates ID or
Passport copy) and proof of authorisation.
 If a person is registered, the email should be sent from the authorized signatory.
IMPORTANT:
If you are a Tax Agent you must send the Clarifications Form from the email address you registered with
the FTA as a Tax Agent (i.e. your online user account) and which is linked to the taxable person. Any
emails sent from other email addresses by a Tax Agent will be disregarded and no response will be sent
out by the FTA
IMPORTANT: Tax Advisors (who are not registered Tax Agents) are not permitted to submit any
Clarification requests on behalf of another person.
IMPOPRTANT: The FTA will not provide Clarification on the area of uncertainty which you raise if:-
 You request Clarification for a matter that does not fall within the criteria above;
 The application form is not filled in correctly;
 The content of the application form is not complete and/ or the FTA considers more information is
required to proceed with the review;
 The FTA does not believe that there are genuine points of uncertainty for your application;
 Your application is about the treatment of transactions which the FTA believes that are for the
purposes of avoiding tax;
 You are asking the FTA to give tax planning advice; or
 The application is related in any way to a matter raised in a tax inspection, audit or assessment by
the FTA.

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To facilitate the review of your request, you are encouraged to provide any additional documentary
proof to support the factual and legal grounds on which the request is being made (e.g. sample invoices,
contracts, payment slips or other).
4. Completingyour Clarifications Form
Please fill in the form field by field. Any questions that are marked with an asterisk (*) are mandatory
and must be completed in order to submit the form. You don’t need to input anything for the boxes
where document uploads are requested; instead, you should include the information and
relevant documents, as supporting documentation on the email to be sent to the designated email
address along with the Clarifications Form.
You must fill out the form first electronically. Handwriting is not accepted.
The following guidance is designed to help you understand the questions that the
Clarifications Form asks in order to complete the form accurately.
1. About the Applicant
Name of the Applicant* Please input the full English name under which you are registered
with the FTA (if applicable).
Tax Registration Number (TRN) If you are registered with the FTA, please provide your TRN. If you
are registered with the FTA for both VAT and Excise Tax, input the
TRN most relevant to your query.
Reasons for not being registered
with the FTA
In the case that you are not registered with the FTA for tax purposes,
please specify the reasons for not being registered (e.g. a business
below the voluntary registration threshold). Please note that the FTA
may ask you to provide additional supporting documentation before
proceeding with reviewing your Clarification request.
Tax Agent Approval Number
(TAAN)
If you have an appointed Tax Agent, please input the TAAN here.
2. Contact Details of the Applicant
Building name and number,
Street etc.*
Please provide your contact details here.
If you are located outside the UAE, some fields may or may not be
relevant to you (e.g. PO box).
3. About the Request for Clarification
Which tax does this request
relate to?*
Please select from the drop down list including:
 VAT;
 Excise Tax; or
 VAT and Excise Tax.

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Is this request related to any
previous Clarifications issued by
the FTA?*
Please review the existing Clarifications and avoid submission of
duplicate requests for Clarification on similar technical areas of
uncertainty.
You should not apply for a Clarification request if your situation is
identical to any previous Clarifications by the FTA. Your request will
be rejected.
If yes, please provide the form
reference number of the previous
claim
Please do not submit duplicate claims - you should provide the FTA
with the complete, relevant and accurate information necessary to
assess the technical position of the relevant topic. In case you have
similar and/or additional enquires which are relevant to a previous
request, please enter the reference number of the previous
request here.
Estimated Tax amount that
is/may be impacted from this
technical clarification (AED)*
Please estimate the potential tax amount impacted by your
request. This can be either an additional amount of tax payment or,
a credit or refund of tax. You may leave the field as zero if you
believe the amount cannot be quantified, however, it may impact
the turnaround time that the FTA will need to respond to this
request.
Please specify the nature of the
estimated Tax amount*
Please specify the nature of the estimated Tax amount impacted by
your request. For example:-
 If it is related to VAT, please specify if it is in relation to input tax,
output tax, import VAT or reverse charge;
 If it is related to Excise Tax, please specify if it is in relation to
payable tax or deducible tax.
What periods have been
/ may be impacted by the matter
at hand?
Please specify all tax periods impacted by this matter. These can
be past, present and / or future periods.
Does the Clarification relate to a
completed, current, or proposed
supply chain / transaction?*
Please select from the drop down options as provided below:
 Proposed transaction(s)
 Current transaction(s)
 Completed transaction(s)
4. Background and Facts
Please provide a detailed
description of the background,
including transactions, steps and
the intentions of the matter
which is the subject of the
Clarification *
Please provide your input in no more than 500 words.

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Please provide any documentary
proof to support the factual and
legal grounds on which the
request is based (e.g. sample
invoices, contracts, payment slips
or other)*
You may attach the relevant supporting documents to facilitate
the processing of your request. You may hide certain information
that is commercially sensitive when submitting the document(s).
5. Technical view
Specify the legal provisions which
are relevant to assessing the tax
treatment of the matter which is
the subject of the Clarification*
Please detail the article number as well as the name of the
legislation. For example, Article 80 of the Federal Decree-Law No.
(8) of 2017 on Value Added Tax
Specify any guidance issued by
the FTA which is relevant to the
technical position of the matter
which is the subject of the
Clarification
Please include all relevant materials that you have reviewed and
considered before raising this request. These can be guides (e.g.
Taxable Person Guide), awareness session materials, e-Learning,
Quick references, orother. Please specify the relevant sections and /
or page references of the content you have reviewed. For example,
Taxable Person Guide for Value Added Tax (Issue 1/March 2018),
section 5.3 Deemed Supplies, page 19.
Please specify details of any
previous Clarifications issued by
the FTA relevant to your claim
In cases where any previous Clarifications that the FTA has provided
is relevant to your current request, please indicate here the details
of the previous Clarification(s). Please ensure that the details
provided here correspond to the Clarification(s) reference number
that you have provided above in section 3.
Please upload any tax advice
you received in respect of the
matter for which you are seeking
Clarification
Please provide any relevant tax advice that you have received
and which supports your technical position. You may provide multiple
documents and / or advice.
What is the outcome of your tax
technical assessment of this
matter?*
Briefly describe the tax treatment which you consider to be correct
based on your technical analysis.
What is the outcome of other
alternative tax technical
assessments of this matter?*
Briefly describe the other tax treatments which you have considered
but do not consider to be correct.
Please describe your analysis on
the tax technical position which
you consider to be correct in
more detail*
Please elaborate on the analysis which you consider to be the
correct position in no more than 500 words.
Please describe your analysis on
the alternative tax technical
position(s) in more detail*
Please elaborate on the alternative analyses to the above position
which you have considered in no more than 500 words.

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Please provide the questions
which you would like the FTA to
answer*
Please provide the questions which relate to the matter which is the
subject of this specific request. Generally, try to limit the number of
questions to 5. The FTA may not be able to address all the questions
on an individual basis.
6. Summary
Please upload a formal letter
including details of the facts,
legal references, your technical
analysis, the alternative
treatments which you have
considered may apply, and the
question(s) for the FTA on which
you are seeking Clarification*
Please include a scanned PDF copy.
How many times have you submitted a request seeking the FTA's Clarification during the past 12 months?*
Please confirm how many times you have approached the FTA for Clarifications in the last 12 months.
5. SubmittingtheClarifications Form
Once you have completed the Clarifications Form, please send the soft copy (signed version in PDF
format) to the following email address along with the supporting documents. clarifications@tax.gov.ae
Clarification requests sent to other FTA email addresses will not receive a reply.
Accepted file types are PDF, JPG, PNG and JPEG. The total file size limit is 10 MB. You will obtain an email
notification upon successful submission of the Clarifications Form.
6. Response from the FTA on your Clarification
It may take the FTA up to 40 business days to respond to your Clarification request.
The answer provided by the FTA is based on the facts provided by you at the time the Clarifications Form is
submitted. Once a response is issued by the FTA, you may decide whether to follow the Clarification provided
by the FTA or not at your own risk. You may also apply to the FTA for a Reconsideration if you do not agree with
the FTA’s response.
The final response to your Clarifications request will be in a letter format and you will receive it as an
attachment to an email.
Note: If your application is incomplete, or additional information is required, the FTA will ask you to
provide the required / additional documentation. After re-submitting the complete application, it
may take the FTA a further 40 business days to respond to your updated request for Clarification.

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7. What you can do if you disagree
7.1 Reconsideration
If you do not agree with the answer provided by the FTA regarding your Clarification request, you
may apply for a Reconsideration for the decision issued by the FTA via the following link within 20
business days from the date of receiving the Clarification as per article 27 (2) of the Federal Law No.
(7) of 2017 on Tax Procedures. https://www.tax.gov.ae/contact-us.aspx
You must specify the detailed reasons for disagreeing with the FTA’s decision on your Clarifications
Form in the following question taken from the Reconsideration Application Form:-
Please provide the reasons you are applying for a reconsideration of this decision, including an
analysis of the alternative treatment which you consider should apply. You may provide details
directly into this form or upload a letter if you wish.
The FTA will review the request for Reconsideration and, if the application has fulfilled the
requirements, issue its justified decision within 20 business days from receipt of such application.
NOTE: Please note that not following the advice given by the FTA could lead to a violation of the
tax legislation and the issuance of penalties.

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9. Director’s Services - VAT Guide
VATGDS01
April 2018
1 Guidance Note 48
1.1 Overview 48
1.1.1 Short brief 48
1.1.2 Purpose of this document 48
1.1.3 Who should read this document? 48
2 Director’s Services 48
2.1 VAT treatment of director services 48
2.1.1 Summary 48
2.1.2 Why are director’s services subject to VAT? 49
2.2 Determining Place of Supply for Director’s Services provided 50
2.3 Imposition of VAT 50
2.4 Recovery of input tax 51
2.5 Director Fee – Special scenarios 51
2.5.1 Director providing services overseas 51
2.5.2 Director providing services to overseas company 51
2.5.3 Business supplied director 52
2.5.4 Common director 52
2.5.5 Right to a director 52

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1. GuidanceNote
1.1. Overview
1.1.1.Short brief
VAT has been introduced in the UAE with effect from 1 January 2018. As a general consumption tax
on the supply of goods and services, its effects must be understood by businesses, individual persons,
and government entities in the following contexts:
 Whether director’s services that are provided to other persons, are considered a supply subject
to VAT.
 How the place of supply shall be determined for director’s services in order to apply VAT to the
correct country, if applicable.
 Applicability of different VAT rates to director services.
In particular, employees who perform services for their employer are not considered to be making a
taxable supply. However, taxable persons who provide independent director’s services to other legal
entities would be considered to be making a taxable supply of services (subject to place of supply
rules). The services are subject to VAT at 5%, with a few possible exceptions where 0% VAT may apply.
1.1.2. Purpose of this document
This document contains guidance about the characterization of director’s services under several
models to determine whether a taxable supply of services exists for VAT purposes.
1.1.3. Who should read this document?
This document should be read by anyone appointed in a director capacity, and key stakeholders who
are responsible for tax matters.
2. Director’sServices
2.1. VAT treatment of director services
2.1.1.Summary
The general rule is that directors provide a service for VAT purposes to their company. As such, if the fees
for services (in addition to any other supplies that might be made by the person) exceed the VAT
mandatory registration threshold, namely AED 375,000, then directors are liable to register for VAT
and charge VAT on the director fees.
Specifically, services provided by a director should be taxable if:

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 the director undertakes services on a regular, ongoing and independent basis (such as an
individual who acts as an executive or non-executive director on a board or a number of different
boards); and
 the total value of taxable supplies made by the director, including supplies of director services,
exceed the mandatory registration threshold.
2.1.2.Why are director’s services subject to VAT?
VAT is charged on taxable supplies made by a taxable person. Therefore, it is necessary to
identify whether a director is a taxable person who makes taxable supplies.
“Taxable supply”
A “taxable supply” is defined in the VAT legislation as any supply of goods or services for consideration
by a person conducting business in the UAE, excluding exempt supplies. Therefore, a supply would
be a taxable supply if the following conditions are met:
 It is a supply of goods or services;
 for consideration;
 by a person conducting business;
 in the UAE; and
 not an exempt supply.
The Federal Decree-Law No. (8) of 2017 on Value Added Tax defines a “supply of services” to be
any supply that is not considered a supply of goods. Directorship services would not be a supply of
goods, and therefore is a supply of services for VAT purposes.
To be a taxable supply, services must usually be provided for consideration. “Consideration” is all
that is received or expected to be received for the supply of the services, irrespective of whether in
money or other forms of payment. Applied to directors, depending on circumstances, consideration
may include the director fee,
bonuses, stock options, recharges for goods and services acquired by the director, and so forth.
The third condition is that services must be provided by a person in the course of conducting
business. The VAT legislation defines “business” as any activity conducted regularly, on an ongoing
basis and independently by any person, in any location such as industrial, commercial, agricultural,
professional, service or excavation activities or anything related to the use of tangible or intangible
properties. This is a very broad definition, which may encompass most activities which are
conducted regularly and independently. As a consequence, directorship activities would be able to
be performed in the course of conduct of business.
The identification of whether or not services are provided in the UAE is done on the basis of place of
supply rules. The default rule, subject to certain exceptions for cross- border supplies, is that the
services are treated as taking place where the supplier is located. Therefore, generally, director’s
services provided by UAE residents will be treated as taking place in the UAE.
Finally, directorship services are not an exempt supply.

Compilation of FTA Clarifications & User Guides by CA Manoj Agarwal

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Compilation of FTA Clarifications & User Guides by CA Manoj Agarwal