Oman Personal Income Tax – Key Highlights

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Waiver of Administrative Penalty for failing to submit a Corporate Tax registration application within the deadline

Important definitions

  • Tax Resident: A person present in Oman for 183 days or more in a tax year
  • Tax Year: Calendar year from January 1 to December 31
  • Gross Income: All executory amounts and benefits received by the person during the tax year according to the provisions of this Law
  • Net Income: The amount exceeding 42,000 Omani Rials from the Gross Income
  • Taxable Income: The Net Income minus the value of exemptions, costs, and losses deductible under this Law, as well as exemptions granted under international agreements

Scope of law

An annual tax shall be imposed on the Net Income of the Person as follows:

  • Residents are taxed on global income
  • Non-residents are taxed on income sourced in Oman

Applicability

The law will come into effect on 01 January 2028

Taxable sources of income

The Gross Income of the Person consists of all or some of the following sources:

  • Salaries and wages
  • Self-employment
  • Leasing
  • Royalties
  • Interest
  • Profits from shares, quotas, and sukuk, and proceeds from their disposal
  • Proceeds from the disposal of real estate assets
  • Retirement pensions and end-of-service benefits
  • Prizes
  • Grants and gifts
  • Membership remunerations

Tax Rate

The tax is due at a rate of 5% of the Taxable Income

Which income is Exempted

Exemptions include:

  • Income of foreign diplomats (with reciprocity)
  • Additional allowances for Omani diplomats abroad
  • Income of a resident earned outside Oman for 18 months after return
  • Overseas income of Omani residents
  • Certain pension contributions
  • Education and healthcare expenses
  • Capital gains from sale of primary residence (after 2 years of registration)
  • Donations (up to 5% of gross income)
  • Income realized from industrial property rights related to patents, designs and drawings, models, trademarks, and secret methods or formulas. (exempt for first 5 years from the date of registration)

Carry forward of losses

Losses can be carried forward up to 5 years, but only from:

  • Self-employment
  • Leasing
  • Disposal of real estate assets
  • Disposal of shares, quotas, sukuk, and bonds
  •  

Tax Returns

  • A tax return is required if gross income exceeds OMR 42,000
  • Filing deadline: Within 6 months from the end of tax year
  • If the Person has no other source of income other than salaries and wages, membership remunerations, or retirement pensions paid from a single employer, the employer is obligated to submit the return on his behalf upon his request on the forms prepared for this purpose, as specified by the Regulations

Amendment of Return

If the Person discovers, within 3 years following the end of the period specified for submitting the tax return, that the return he submitted contained an error or omission, he must submit an amended return to the Authority within 30 from the date of discovering the error or omission which shall be considered as an original return.

Payment of Tax

  • Normally due when the return is filed
  • The Employer is obligated to pay the amounts required to be withheld for the account of the tax on salaries and wages, retirement pensions and end-of-service benefits, and membership remunerations

Control and Audit

  • The person obligated to pay the tax must keep the records, documents, data, information, invoices, and others for a period of 5 years from the date of submitting the return
  • The Authority may annually audit the tax returns of individuals

Penalties

A fine of not less than 1,000 Omani Rials and not more than 5,000 Omani Rials shall be imposed on anyone who commits any of the following acts in violation of the provisions of this Law:

  • Intentionally refraining from submitting the tax return within the prescribed deadlines
  • Intentionally refraining from complying with the Authority’s request to submit records, documents, data, information, invoices, or others, related to the tax
  • Intentionally refraining from withholding the amounts required to be deducted for the account of the tax
  • Intentionally refraining from paying the amounts he has withheld for the account of the tax

Imprisonment for a period of not less than 1 year and not more than 3 years, and a fine of not less than 10,000 Omani Rials and not more than 20,000 Omani Rials, or one of these two penalties, shall be imposed on anyone who commits any of the following acts in violation of the provisions of this Law:

  • Stating incorrect data in the tax return with knowledge thereof.
  • Attaching forged records, documents, information, data, invoices, or others to the tax return with knowledge thereof.
  • Intentionally destroying, concealing, or disposing of records, documents, information, data, invoices, or others, before the end of the period specified for their retention.

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Corporate Tax Public Clarification

Waiver of Administrative Penalty for failing to submit a Corporate Tax registration application within the deadline

Issue under consideration

  • In case of failure of the Taxable Person to submit a Corporate Tax (‘CT’) Registration application within the timeframe specified by the Federal Tax Authority (‘FTA’) in accordance with the CT Law, an Administrative Penalty of AED 10,000 is levied.
  • However, recently, the Cabinet approved that the FTA may waive and refund (where paid) the late registration administrative penalty applicable to Taxable Persons and certain categories of Exempt Persons, subject to meeting specific conditions.

Conditions to waive off or avail refund of Late Registration Penalty

The FTA has launched an initiative to waive this late registration penalty provided that a Taxable Person submits its Tax Return within seven months from the end of its first Tax Period, instead of nine months.

Cases covered under the Corporate Tax Public Clarification on Waiver of Late Registration Penalty

  • Persons that were subject to a late registration penalty and subsequently became exempt from CT following an application approved by the FTA, may also benefit from this waiver, if they submit their annual declaration within seven months from the end of their first Financial Year, instead of nine months.
  • Persons within the scope of this initiative are eligible for this waiver even if the Late Registration Penalty has already been settled. In such case, a refund shall be made by crediting the amount to the person’s EmaraTax account.
  • Where the Person has submitted a request to the FTA for reconsideration in respect of the Late Registration Penalty, such request shall be considered null and void, as the late registration penalty will be waived under this initiative.
  • Where the Person has submitted a request to the FTA for reconsideration of the late registration penalty, and the reconsideration request has already been approved, i.e. the penalty has already been waived, the Person will not be eligible for a further waiver under this initiative.
  • Where a Tax Group files its Tax Return within seven months from the end of the Tax Period, the late registration penalty imposed on any member of the Tax Group shall be waived under this initiative and the amount credited, if applicable, provided that it is the first Tax Period of the member of such Tax Group.

What happens with amount lying in the EmaraTax account

Where the amount of the late registration penalty is credited to the Person’s EmaraTax CT account, the Person may either leave the amount in the account towards settling CT Payable or request a refund of such amount via EmaraTax.

Note: This initiative only applies to the first Tax Period, whether in the past or in the future. This initiative does not affect the deadline of when a Taxable Person must settle the CT Payable to the FTA, which remains payable within nine months from the end of the first Tax Period.

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Mutual Agreement Procedure – Key Highlights

Mutual Agreement Procedure – Key Highlights

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Mutual Agreement Procedure – Key Highlights

Mutual Agreement Procedure

The Mutual Agreement Procedure (‘MAP’) is a formal process under Double Taxation Agreements (‘DTA’) that enables taxpayers to resolve international tax disputes arising due to differing tax treatments between two jurisdictions, which could result in double taxation. The primary objective of MAP is to provide taxpayers with relief from such double taxation by facilitating discussions and negotiations between the Competent Authorities (‘CA’) of the concerned countries.

Legal Basis of the Mutual Agreement Procedure

The legal foundation for MAP (Mutual Agreement Procedure​) is established under:

  • Article 25 of the OECD Model Tax Convention, which provides the framework for MAP between contracting states
  • In the United Arab Emirates (‘UAE’), MAP is implemented through:
    • The DTA signed by the UAE with various countries.
    • The Multilateral Instrument (‘MLI’), which amends existing DTAs to incorporate BEPS-related minimum standards, including dispute resolution mechanisms
  • The UAE CA responsible for handling MAP cases is the Ministry of Finance (‘MoF’), acting independently of the Federal Tax Authority (‘FTA’).

Where multiple and distinct services are provided and the cost of each can be separately identified (even if charged as a single inclusive price) it is treated as multiple supplies. If the components have different VAT rates, the value of each must be determined separately to calculate the total VAT due.

When is MAP (Mutual Agreement Procedure) Available?

A taxpayer may initiate a MAP request under any of the following circumstances:

Double Taxation on Same Income: 

When income is taxed in two jurisdictions due to differences in the application of treaty provisions.

Transfer Pricing Adjustments:

If the FTA or a foreign tax authority makes a transfer pricing adjustment that results in the same income being taxed in both jurisdictions.

Tax Residency Disputes:

Where there is a conflict in determining the tax residency of the taxpayer under different jurisdictions.

Permanent Establishment Reassessments:

If a tax authority reclassifies a taxpayer’s activities as creating a permanent establishment (‘PE’), leading to additional tax liability.

Multilateral Disputes:

Involving tax issues across multiple countries where coordinated resolution is required.

Need for MAP in UAE

  • MAP provides relief in cases of economic double taxation.
  • MAP also provides relief in cases where automatic relief, such as tax credits, tax exemption etc. are not available.
  • The interest Article of a tax treaty may permit interest arising in one Contracting State and paid to, and beneficially owned by, a resident of the other Contracting State to be taxed in both these States, with the tax charged in the source State limited to an agreed-upon rate.
  • Double taxation is then eliminated by the relief from double taxation Article, under which the residence State would generally allow a deduction or credit against its tax

How to File a MAP Claim

Requirements for Filing a MAP Request:

  • Full taxpayer details, including entity name, tax registration number (TRN), and contact information.
  • Information about related foreign entities involved in the dispute.
  • A clear description of the tax issue, including:
    • Nature of the adjustment or dispute
    • Background facts and transaction details
    • Financial years affected
  • References to specific articles of the applicable DTA that the taxpayer believes have not been correctly implemented.
  • Submission of all relevant documentation, such as:
    • Transfer Pricing reports and analysis.
    • Notices of tax assessments or adjustments.
    • Rulings, correspondences with tax authorities, and any other supporting evidence.
 

MAP Process Steps

The process for handling MAP cases involves the following sequential steps:

Eligibility Assessment:

The UAE CA conducts an initial assessment to determine whether the MAP request is admissible under the applicable DTA.

Submission of MAP Request:

The taxpayer formally submits the MAP request to the UAE CA, including all required details and supporting documents.

Review by the UAE Competent Authority:

The CA reviews the merits of the case, may request additional information, and prepares for discussions with the foreign CA.

Unilateral or Bilateral Resolution:

Negotiations take place between the UAE CA and the foreign CA to arrive at a mutually acceptable solution. Resolution can be:

  • Unilateral, where the UAE resolves the issue without involving the foreign CA; or
  • Bilateral, involving agreement between both CAs.

Outcome of MAP

  • If an agreement is reached, the resolution is implemented via the FTA to provide relief to the taxpayer.
  • If no agreement is reached, the taxpayer retains the right to pursue domestic remedies, such as administrative appeals or court proceedings.

Drawbacks of the Mutual Agreement Procedure

  • MAP may take too long to complete
  • Taxpayer participation may be limited
  • Time limit under domestic law may make corresponding adjustments unavailable if those limits are not waived in the relevant tax treaty.

Time Limit for Mutual Agreement Procedure​

  • The MAP request must generally be filed within three (3) years from the date of first notification of the action resulting in taxation not in accordance with the DTA.
  • This time limit aligns with the OECD BEPS Action Plan recommendations to ensure timely resolution of disputes.
  • The UAE CA retains the discretion to accept late claims under reasonable circumstances, considering the merits of each case.

Interaction with Domestic Remedies

  • Taxpayers cannot pursue MAP and court proceedings simultaneously. Filing a MAP request usually requires that domestic litigation be suspended or withdrawn.
  • Acceptance of the resolution reached under MAP requires the taxpayer to withdraw any ongoing domestic legal actions pertaining to the same issue.

Penalties related to MAP

  • Penalties directly related to the issue covered under MAP may be adjusted if the resolution alters the tax position.
  • Penalties for domestic compliance violations (e.g., failure to maintain Transfer Pricing documentation) are not covered under MAP and remain enforceable.
  • Taxpayers are generally required to pay the assessed tax during the MAP process. Refunds or adjustments are made only if the MAP results in a reduction in tax liability.

Multi-year periods

To avoid duplicate MAP requests and permit a more efficient use of the UAE CA’s resources, a taxpayer will be allowed to request a multi-year resolution via MAP for a recurring issue, provided that for each relevant year, the facts and circumstances of the issue are the same and the MAP request is submitted within the time limit specified in the DTA. Where a taxpayer submits more than one MAP request for the same issue over several years, the UAE CA will aim to deal with all such requests in a coordinated manner.

Arbitration

Some of the UAE’s DTAs provide access to arbitration for an issue that is unresolved via MAP. In circumstances where:

  • Arbitration is provided for under the relevant DTA; and
  • UAE CA is unable to reach an agreement with the CA of the other contracting state to resolve the issue via MAP within the time limit specified in the MAP article of the relevant DTA; and
  • No decision has been issued by a court or tribunal of the UAE or the other contracting state,the taxpayer may request the UAE CA to refer the unresolved issues to arbitration. Depending on the DTA, this may be a voluntary or mandatory provision and may be requested by either the CA of either contracting state or by the relevant person that submitted the MAP claim.

Mutual Agreement Procedure​: Key Takeaways for Taxpayers

  • Ensure timely filing of MAP requests within the stipulated time limits.
  • Refer to relevant DTAs and treaty articles before filing.
  • Avoid pursuing MAP and court litigation simultaneously.
  • Maintain robust supporting documentation for all cross-border transactions.
  • Respond promptly to requests for additional information from the CA to avoid delays in resolution.

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FTA Guide on Insurance and Related Services

The Federal Tax Authority (FTA) has issued a VAT Guide (VATGIN1) which outline the VAT treatment of various Insurance Services, the eligibility to recover input VAT on certain expenses and the apportionment of costs used for both taxable and exempt services.

VAT Treatment of Some of the Insurance charges and its Related Services

VAT Treatment of some of Insurance charges and its related services

Multiple Supplies vs. Single Composite Supplies

In cases where insurance products offered in “package” or “bundle”, the taxability of each type of service must be taken into consideration.

Multiple supplies

Where multiple and distinct services are provided and the cost of each can be separately identified (even if charged as a single inclusive price) it is treated as multiple supplies. If the components have different VAT rates, the value of each must be determined separately to calculate the total VAT due.

Example

The insurer provides theft insurance and life insurance; each charged with separate premiums on a single invoice. The life insurance premium is exempt from VAT, while the theft insurance premium is subject to a 5% VAT.

Single composite supplies

A single composite supply occurs when one element is the principal component and the others are ancillary, forming a single, inseparable supply. It is subject to VAT at a single rate applied to the total value of the supply, typically when: a) the price of the components is not separately identified or charged, and b) all components are provided by a single supplier.

Example

An insurer may offer life insurance that includes an element of health insurance to enhance the product’s appeal. Since the prices are not separately identified, the premium would be exempt, as the principal component is the life insurance, not the health insurance.

Insurance Intermediaries (Agents)

Where an insurance intermediary (i.e. an agent or broker) acts as disclosed agent for a taxable insurance transaction, the following supplies generally occur:

  • The insurer supplies (re)insurance to the insured and charges the premium, which is subject to VAT at the applicable rate.
  • The intermediary collects for the premium on behalf of the (re)insurer, which is not considered a supply for VAT purposes.
  • The intermediary may charge the (re)insurer a fee or commission for the collection service which is subject to VAT at the applicable rate.
  • Finally, the intermediary remits the premium to the insurer, which is not considered a supply for VAT purposes.

Where the intermediary acts in its own name (undisclosed agent), the above sequence becomes a series of supplies liable to VAT.

Real Estate Insurance

It is stated that insurance related to real estate is not considered a “service related to real estate” for the purpose of determining the place of supply.

According to the general rule, the place of supply for services is where the supplier is resident. However, for services related to real estate, the place of supply is determined by the location of the real estate itself, which is an exception to the general rule.

The place of supply for insurance related to real estate follows the general place of supply rules. However, when the insurance is part of a single composite supply, where the principal element is a service related to real estate and the insurance is ancillary, the place of supply for the insurance is determined by the location of the real estate.

Employee health insurance

The Federal Tax Authority (FTA) has introduced an amendment to the Executive Regulations of the UAE VAT Law through Cabinet Decision No. 100 of 2024, which amends Cabinet Decision No. 52 of 2017. According to the amended Article 53, from 15th November 2024 when an employer provides health insurance to its employees and their family members—limited to a spouse (either a husband or one wife) and up to three children under the age of eighteen—the input tax on such expenses can be recovered.

Islamic Insurance products

Any supply made under an Islamic financial arrangement, which is certified as Shariah compliant, shall be treated similarly for VAT as traditional financial products.

This is to ensure the “equality” of VAT treatment between Islamic and non-Islamic finance products.

Example

Family takaful is a type of insurance that combines long-term savings with protection for the participant and their family, usually in cases like death, disability, or survival. Normally, family takaful and family retakaful products don’t have to pay VAT because their similar non-Islamic life insurance products are also exempt.

However, if the savings part involves investing in a fund and the provider charges a separate fee for managing this fund, then that fee would be taxable under VAT rules.

Input tax apportionment for insurance providers

The standard input VAT apportionment rules apply to insurance providers:

  • VAT incurred on costs wholly attributable to the standard rated and zero-rated supplies can be recovered in full.
  • VAT on costs incurred wholly attributable to exempt supplies cannot be recovered at all.
  • When VAT incurred is partly attributable to taxable supplies and partly to exempt supplies, the VAT is considered residual and must be apportioned. The standard method for attributing residual input tax is based on the recovery ratio percentage, which is calculated as follows:

(Input tax directly attributable to taxable supplies) ÷ (Input tax directly attributable to taxable supplies + Input tax that cannot be recovered)

If the standard apportionment method is not considered fair and reasonable, an insurance provider may apply to use a special method, subject to FTA approval. This method can only be applied from the second tax year of registration.

Insurance companies – recovery of claims costs

Where an insurer makes a payment in respect of the provision of some goods or services under the contract of insurance – e.g. for a replacement product or a repair of an asset – the question arises who may recover the VAT incurred.

The following principles should be applied in respect of determining which party may recover the VAT incurred:

  • If the insurer provides a payment to the insured which is in the nature of compensation for costs incurred by the insured (e.g. in repairing a car), the input tax in respect of the costs will be recoverable by the insured (subject to the normal recovery rules).
  • If the insurer incurs the cost of acquiring goods or services itself, then the input tax in respect of the costs will be recoverable by the insurer

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UAE VAT Clarification on Concerned Services (VATP044) in detail

Purpose of the UAE VAT Clarification on Concerned Services

This Public Clarification, issued by the UAE Federal Tax Authority (FTA), provides clarification on the VAT treatment of Concerned Services. It clarifies the circumstances under which VAT must be accounted for, the requirement for issuing tax invoices, and the documentation needed to recover input tax.

1. What are Concerned Services?

Concerned Services are services received by a VAT-registered business in the UAE from a supplier outside the UAE, where the place of supply is considered to be within the UAE. These services are subject to VAT unless they would have been exempt if provided within UAE.

Example

A Dubai company hires a UK-based consultant. The UAE company must treat this as imports of services.

2. VAT Treatment – Reverse Charge Mechanism

When a UAE-registered person imports Concerned Services, the law treats this as imports of services.

Therefore, the recipient is required to:

  • Account for the output VAT using the reverse charge mechanism;
  • Report this VAT in Box 3 of the VAT return for the relevant tax period.

Example

If a UAE company pays AED 10,000 to a foreign service provider, it must account for 5% VAT (AED 500) under RCM on its VAT return in Box 3 and Box 10.

3. Requirement to Issue Tax Invoices

Generally, a tax invoice must be issued within 14 days of the date of supply. Since the recipient is treated as both the supplier and recipient, they are required to issue a tax invoice to themselves.

However, the FTA allows an exception to this requirement in the following case:

  • If the recipient retains the original invoice issued by the foreign supplier, which contains sufficient details (e.g., service description, amount paid etc), than recipient is not required to issue an additional tax invoice to themselves.

In exceptional cases where the supplier does not issue an invoice (e.g., in reinsurance), the recipient must keep alternative documentation that includes key details like:

  • Name and address of the supplier and recipient
  • Date of supply and service completion
  • Description of the service
  • Consideration including relevant currency and payment terms

If no proper invoice or acceptable documentation is available, the recipient may apply to the FTA for an administrative exception.

Example

if UAE entity receives an invoice from a US software provider showing date, service details, and amount. Then UAE entity doesn’t need to issue the TAX invoice.

4. Input Tax Recovery

A VAT-registered recipient may recover the VAT paid (input tax) under the reverse charge mechanism if the Concerned Services are used to make taxable supplies.

To recover input tax:

  • The recipient must have valid supporting documentation (e.g., a supplier’s invoice);
  • The recipient must have paid or intend to pay the consideration within six months of the agreed due date.

Input tax can be recovered in the tax period in which:

  • The tax invoice or supporting document is received and retained; and
  • The consideration has been paid (or is intended to be paid within the allowed timeframe).

Notes: 

  • This clarification reflects the FTA’s interpretation of Federal Decree-Law No. 8 of 2017 and Cabinet Decision No. 52 of 2017 and its amendments.
  • VATP044 constitutes an official clarification of the law.

UAE VAT Clarification on Concerned Services (VATP044): In Summary

Issued: 27 May 2025 by UAE Federal Tax Authority

UAE VAT Clarification on Concerned Services (VATP044)
Topic
Details
Concerned Services
Services received by a UAE VAT-registered business from a foreign supplier where supply is deemed within UAE.
Reverse Charge Mechanism
Output VAT must be self-accounted for – Declare in Box 3 and Box 10 of VAT return
Tax Invoice Requirement
-Normally, the recipient must issue a self-invoice within 14 days – Exception: Not needed if foreign invoice has all key details.
Documentation Alternative
If no invoice (e.g., reinsurance), retain: name, address, date of supply, service details, consideration, currency, terms.
Administrative Exception
May be requested if invoice or required documentation is missing.
Input Tax Recovery allowed if:
-Service used for taxable supplies -Valid Documentation is Kept – Payment made/intended within 6 months
Relevant Laws
Federal Decree-Law No. 8 of 2017 & Cabinet Decision No. 52 of 2017 (with amendments)

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VAT Applicability on the Real Estate Sector in the UAE

The introduction of Value Added Tax (VAT) in the UAE on January 1, 2018, represented a significant shift in the country’s taxation framework. The real estate sector, a key contributor to the UAE’s economy, was directly impacted by this change. VAT, at 5%, applies to goods and services, including real estate. However, the VAT treatment of real estate transactions in the UAE is distinct, with specific rules that depend on the type of property involved and the nature of the transaction. 

VAT Applicability on Real Estate Supplies in the UAE

In the UAE, the VAT treatment of real estate is categorized into two main types: commercial and residential properties. The VAT liability differs significantly depending on whether the transaction involves the supply of residential or commercial real estate. 

1. Residential Properties  

The supply of residential properties is typically exempt from VAT under UAE tax laws. This exemption applies to: 

  • The sale or lease of residential properties (houses, apartments, villas). 
  • The granting of long-term leases for residential purposes. 

This exemption aims to make residential properties more affordable and accessible for individuals and families. However, it is important to note that while the sale of residential properties is exempt from VAT, developers and property owners may still incur VAT on expenses related to the development, construction, and maintenance of residential properties. These VAT costs may be recoverable if the property is subsequently used for taxable supplies. 

2. Zero-Rating of Residential Properties 

In addition to the exemption, there are specific circumstances in which residential properties are subject to zero-rated VAT. Zero-rating means that VAT is charged at 0%, and the seller or developer can recover VAT incurred on related costs. 

  • First Supply of a Newly Constructed Residential Property: The first sale of a newly constructed residential property is subject to zero-rated VAT but it must be made within 3 years of the building’s completion date. This allows developers to recover VAT on construction and development costs, which can reduce the overall cost of building new homes. 
  • Leasing of New Residential Properties: The leasing of newly built residential properties (those never leased before) can be zero-rated, provided the lease is long-term (more than six months). Short-term leases of residential properties remain exempt from VAT. 

Exception of Zero rating the export of services 

According to Article 31 of the VAT Public Clarification on Amendments to the Executive Regulation of Federal Decree-Law No. 8 of 2017 on Value Added Tax – Cabinet Decision No. 100 of 2024 (VATP040), services directly related to real estate located in the UAE that are supplied to a non-resident do not qualify for the zero-rated export of services. 

3. Commercial Properties 

Unlike residential properties, the supply of commercial real estate is subject to VAT at the standard rate of 5%. This includes: 

  • The sale or lease of office buildings, retail spaces, and industrial properties. 
  • The supply of vacant land intended for commercial use. 

Commercial property transactions, including both the sale and leasing of such properties, attract VAT at the standard rate 5%, and the buyer or tenant is required to pay VAT on the transaction. Businesses that engage in such transactions can recover VAT paid on expenses incurred during the purchase, construction, or development of these properties, provided they are using the property for taxable business purposes. 

4. Mixed-Use Properties 

Properties that are used for both residential and commercial purposes, such as mixed-use developments, present a more complex VAT treatment. The VAT liability depends on the proportion of the property’s use that is residential versus commercial. The commercial portion will generally be subject to VAT 5%, while the residential portion will be exempt. Developers and property owners must carefully assess and allocate the VAT treatment based on the intended use of each part of the property. 

Place of Supply of Real Estate 

For real estate-related services, the place of supply is where the property is located. This includes services such as construction, leasing, and maintenance. If the property is in the UAE, the supply is considered made within the UAE, and UAE VAT applies (subject to the usual rules).  

Additional Key Points from the UAE VAT Real Estate Guide

To ensure comprehensive compliance, real estate professionals must also consider the following nuanced areas from the UAE VAT Real Estate Guide: 

1. VAT on Property-Related Services 

In addition to the sale and lease of properties, the VAT Real Estate Guide also covers property-related services that may be subject to VAT: 

  • Property Management Services: Services such as maintenance, cleaning, and security for properties, which are subject to VAT at the standard rate of 5%. However, for residential properties where the lease is exempt, related services may still attract VAT. 
  • Real Estate Agency Fees: Commissions and fees charged by real estate agents or brokers for selling or renting properties are subject to VAT at 5%. 
  • Ancillary Services: Additional services that are provided in connection with the supply of real estate, such as leasing services, parking, and utilities, may also be subject to VAT 5% depending on the nature of the service and the type of property. 

2. Sale of Land 

Sale of land is generally exempt from VAT unless the land is being developed or used for a commercial purpose. The VAT treatment on land sales depends on whether the land is sold for development or commercial use. 

  • Sale of Vacant Land: The sale of vacant land is typically exempt from VAT, but VAT may apply if the land is being used for taxable supplies or is part of a commercial development. 
  • Development of Land: If a developer constructs or improves property on the land, the resulting sale of the developed property (whether residential or commercial) may be subject to VAT 5%. The VAT Real Estate Guide encourages developers to assess the VAT implications of land sales carefully, particularly in relation to the potential for future taxable developments. 

3. Mixed-Use Developments 

For mixed-use developments (e.g., developments with both residential and commercial spaces), the VAT treatment depends on the use of the property. The residential portion is generally exempt from VAT, but the commercial portion is subject to VAT at the standard rate of 5%. 

  • Proportional Allocation: Developers and owners must properly allocate VAT treatment between the residential and commercial parts of the development. The VAT Real Estate Guide emphasizes the importance of maintaining accurate records and ensuring the correct allocation for VAT purposes. The treatment of common areas in mixed-use developments should also be assessed to determine if VAT applies to services or common property. 

Conclusion

In summary, the VAT liability for real estate in the UAE varies based on the type of property and the nature of the transaction: 

  • Residential properties: Typically exempt from VAT, but subject to zero-rated VAT for the first sale of new homes and leases of new residential properties. 
  • Commercial properties: Subject to VAT at 5% for both sales and leases. 
  • Mixed-use properties: VAT applies to the commercial portion of the property; the residential portion is exempt. 
VAT Applicability on the Real Estate Sector in the UAE
Transactions
VAT Liability
Input VAT Recoverability
First supply of residential buildings within completion of 3 years
0%
Input Tax Credit can recover
Second supply of residential buildings within completion of 3 years
Exempt
Input Tax Credit cannot recover
Supply residential buildings after completion of 3 years
Exempt
Input Tax Credit cannot recover
Supply residential buildings after completion of 3 years However, when lease is for less than 6 six months or the tenant does not possess an ID card issued by Federal Authority for Identity and Citizenship
5%
Input Tax Credit can recover
Supply of Commercial Buildings
5%
Input Tax Credit can recover
Mixed used of Supply
Input Tax Credit can recover
1. First supply of Residential building (within completion within 3 Years)
0%
2. Commercial building
5%
Mixed used of Supply
Input Tax Apportionment required
1. Supply of Residential building (After Completion of 3 Years)
Exempt
2. Commercial building
5%

These guidelines ensure that the real estate sector operates within the VAT framework while balancing the need for affordable housing with the commercial viability of development projects. Real estate professionals must remain mindful of the specific VAT treatments applicable to their transactions to ensure compliance with UAE tax laws. 

Understanding these provisions, as outlined in the UAE VAT Real Estate Guide, is crucial for developers, investors, and property owners navigating the real estate market in the UAE. 

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FTA Clarifies UAE VAT Amendments in VATP040

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The Federal Tax Authority (FTA) in the United Arab Emirates (UAE) has released its Value Added Tax (VAT) on Amendments to the VAT Executive Regulation which were effective from 15 November 2024. To provide further clarity, the FTA published Public Clarification VATP040 regarding these amendments on March 14, 2025.

FTA Clarifies UAE VAT Amendments in VATP040

Clarifications on changes in documentary requirements for export of goods (Article 30)

The recent Public Clarification has provided clarity on the amendments to Article 30 of the Executive Regulation, which aim to streamline the proof requirements for suppliers applying the zero-rate for exporting goods, whether directly or indirectly. 

The updated regulations allow taxable persons exporting goods to retain any of the following documentation: 

  • Customs declarations and commercial evidence verifying export. 
  • Shipping certificates and official proof of export. 
  • For goods under customs suspension as per the GCC Common Customs Law, customs declarations confirming the suspension status. 

Starting from 15 November 2024, additional official evidence forms will be accepted, including: 

  • Export certificates issued by local customs authorities, confirming the goods have departed the UAE. 
  • Clearance certificates from local customs or relevant UAE authorities. 
  • Certified documents from authorities in the destination country confirming the goods’ entry. These documents must clearly display official stamps or seals and be either in Arabic or English, or include a certified translation should be retained in one of these languages. 

It is important to note that exports made before 15th November 2024 will still be subject to the previous documentary evidence requirements under Article 30. Before this date, both a customs declaration and an exit certificate will continue to be required as proof of export 

Zero-rated services (Article 31)

Recent changes to Article 31 of the Executive Regulation clarify when services provided to non-residents do not qualify for zero-rating under UAE VAT law. The term “personal” has been removed from “personal moveable assets,” meaning any moveable assets located in the UAE at the time of service now disqualify the supply from zero-rating.

The following services supplied to a non-resident do not qualify for zero rating under this Article: 

  • Installation Services related to goods supplied by others; the place where the service is performed.  
  • Transport Services Provided to lessees who are not taxable persons; the place where the means of transport were placed at the disposal of the lessee.  
  • Hospitality Services: Restaurant, hotel, and catering services; at the location of service performance.  
  • Cultural and Educational Services; place where the services are performed.  
  • The supply of services that are directly connected with real estate located in the UAE.  
  • Transportation Services; place where the transportation begins.  
  • Telecommunications and Electronic Services; where the services are enjoyed 

Zero-rating international transportation services (Article 33)

The Public Clarification outlines the VAT treatment of international transportation services under Article 33, emphasizing conditions for applying the zero-rate. 

  • Domestic transportation of goods can be zero-rated only when it is supplied by the same entity that provides the international leg of the transport. If different parties handle each segment, the domestic portion does not qualify for zero-rating. 
  • Zero-rating applies only to services provided directly to the recipient of the international transport. Any supporting services offered to third parties (e.g., warehousing or handling provided to someone other than the transport recipient) are subject to the standard VAT rate. 

Zero-rating goods and services in connection with means of transport (Article 35)

Article 35 is hereby amended to specify that only the following services, when supplied directly in connection with a qualifying means of transport, shall be eligible for zero-rating: 

  • Repair Services: when the repair services are carried out onboard. 
  • Maintenance Services: Includes inspection, testing, cleaning, and similar services if carried out onboard. 
  • Conversion Services: Should maintain compliance with conditions of Article 34 on post-conversion. 

Tax Treatment for financial service (Article 42)

The recent amendment to Article 42(2) introduces additional categories of financial services. However, it is important to emphasize that inclusion under Article 42(2) does not automatically qualify a service for VAT exemption. 

The actual application of the exemption is determined under Article 42(3), which sets out the specific conditions that must be met. Only services that satisfy these criteria are eligible for VAT exemption, regardless of their listing in Article 42(2). 

The following newly added categories in definition of financial services has been clarified through this public clarification –  

  • Management of investment funds – Services provided by an independent fund manager to funds licensed by the UAE authority, including the management of the fund’s operations, the management of investment for or on behalf of the fund, monitoring and improvement of the fund’s performance, are exempt from VAT. 
  • Transferring ownership of virtual assets and conversion of Virtual Assets – This includes virtual currencies like bitcoin and conversion of virtual assets. These services are exempt from VAT retroactively from 1 January 2018. 
  • Keeping and managing Virtual assets – Services related to keeping and managing virtual assets (e.g., managing crypto wallets) are taxable if supplied in the UAE for an explicit fee, commission, or similar charge. Crypto currencies are a subset of virtual currencies and from a VAT perspective are not regarded nor treated as money. 

It clarifies that Investment fund management services, transfer of virtual assets/currencies and conversion of virtual assets are considered as exempt financial services from VAT. Therefore, taxable person only engaged in these supplies has to assess the recoverability of input VAT and necessity of VAT-Deregistration. 

Input VAT Recovery on Health Insurance for dependent (Article 53 - Non-Recoverable Input tax)

This article is amended to allow recovery of input VAT for health insurance, including enhanced health insurance for employees and their dependents within the limit of one spouse and three children under the age of 18. 

The public clarification has clarified that this amendment is only effective from 15 November 2024 and shall not be applied retrospectively. 

For example, if the employer paid health insurance premiums in January 2024 in respect of the full calendar year, only the VAT incurred on the portion relating to the period 15 November to 31 December 2024 may be recovered to the extent the employer incurs these costs to make taxable supplies, and provided the relevant supporting documents are retained. 

Input Tax Apportionment (Article 55)

Article 55 now clarifies that standard input tax apportionment also applies to government entities and charities. Notwithstanding the amendments introduced under Article 55(7)(a)—which clarify the “sum of input tax for the tax period”, the simplified input tax apportionment method as outlined in “VATGIT1” still be used. 

Other Key Changes

Further clarifications have been issued regarding the updated VAT Executive Regulation. Below is a illustrative list of the topics that have been addressed: 

  • Tax registration cancellation and deregistration – The authority has the right to cancel a VAT registration of a taxpayer under certain circumstances (e.g., registration requirements not met) and also now deregister entities that have applied but not completed deregistration or no longer meet VAT registration conditions. 
  •  Profit margin scheme – The definition of “purchase price” has been clarified to includes all costs and fees incurred in addition to the price of the goods. 
  • Tax invoice requirements – New timelines have been introduced to issue summary tax invoices (in case of multiple supply to same person). Now, business has 14 days from the end of calendar month to issue summary tax invoices. 
  • Tax Credit Note – FTA clarify the treatment of multiple tax credit notes issued for the same tax invoice. In such cases, the “value of supply shown on the tax invoice” in any subsequent credit note should reflect the adjusted value after accounting for the previous credit note(s). 
  • Zero-rating healthcare services- Article 41(4) of the Executive Regulation was amended to clarify that not only a supply, but also an import of the goods referred to in that Clause may qualify for zero-rating 

It is important for all taxpayers to familiarize themselves with the published changes and clarifications, and assess their impact on their business. Businesses should conduct an internal review to determine whether they are in compliance with the updated Executive Regulation and Public Clarification. 

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VAT Treatment of Barter Transactions – VATP042

VAT Treatment of Barter Transactions, VATP042

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VAT Treatment of Barter Transactions, VATP042
  • April 13, 2025

The Federal Tax Authority (FTA) has issued a Public Clarification (VATP042) to clarify the VAT treatment of barter transactions. In this clarification, the FTA outlines the tax applicability of non-monetary transactions and provide detailed guidance on methods to determine the market value of the goods or services involved in the barter.

What are Barter Transactions?

Transactions which involve the exchange of goods and/or services are known as barter transactions.

VAT Treatment of Barter Transactions

Barter transactions are treated similarly to supplies made for monetary consideration for VAT purposes, with a few key differences compared to non-barter transaction:

  1. A barter transaction involves at least two supplies, with each party making a supply to the other.
  2. Special valuation rules apply to barter transactions.

VAT Treatment of Supplies in Barter Transactions

Each party must evaluate the VAT treatment of the goods or services they are providing. A supply in a barter transaction can be:

  1. Taxable at 5%: Subject to VAT at the standard rate.
  2. Zero-rated: Subject to VAT at 0% if specific requirements are met.
  3. Exempt: Not subject to VAT if specific requirements are met.
  4. Out of Scope: If the place of supply is outside the UAE.

Valuation of Supply

  • Generally, the value of the supply is the consideration less the tax amount.
  • The value of supply within a barter transaction is the market value of the non-monetary consideration received by a supplier excluding the tax amount

Where a supplier receives both monetary and non-monetary consideration

To the extent the consideration is non-monetary, the transaction constitutes a barter transaction, and the value of the supply is the sum of

– Any monetary consideration received.

– The market value of the non-monetary consideration, excluding tax.

Determining Market Value of Non-Monetary Consideration

To the extent the consideration is non-monetary, the transaction constitutes a barter transaction, and the value of the supply is the sum of

  • Any monetary consideration received.
  • The market value of the non-monetary consideration, excluding tax.

Determining Market Value

To determine the market value of non-monetary consideration, the following principles apply:

  1. Similar supply in the UAE:

The market value of a supply of goods or services is the amount of monetary consideration it would typically fetch if supplied under similar circumstances in the UAE, between unrelated parties dealing freely and independently.

Example: A graphic designer provides logo design services valued at AED 2,000 (inclusive of VAT) to a software developer in exchange for AED 1,000 in cash and a software license worth AED 1,000. Both parties are required to account for VAT as follows:

  • The graphic designer accounts for VAT of AED 95.24 (calculated as AED 2,000 × 5/105).
  • The software developer accounts for VAT of AED 47.62 (calculated as AED 1,000 × 5/105).
  1. Alternative approach:

If the market value can’t be determined using principle 1, it’s considered to be the monetary consideration a similar supply would fetch in similar circumstances in the UAE, between unrelated parties dealing freely and independently.

Example:

An artist exchanges a painting with a photographer for photographic services. Although the specific painting isn’t sold in the market, similar artworks are sold to unrelated buyers in the UAE for AED 20,000 then the market value of the supply will be considered AED 20,000 for VAT purposes.

  1. Replacement cost:

If principles 1 and 2 don’t apply, the market value is the replacement cost of identical goods or services offered by an unrelated supplier.

Example:

A company exchanges goods for custom-made machinery. Since similar machinery is not sold in the market, the market value is determined by the cost of an unrelated supplier to build identical machinery, say AED 80,000. This becomes the market value.

Both parties to a barter transaction must apply these valuation rules to the supplies they make.

Tax Invoices

Registrants making taxable supplies, including those under barter agreements, must issue a tax invoice to the recipient. In a barter transaction where both parties are registrants and make taxable supplies, each party is required to issue a tax invoice to the other.

Example:

A VAT-registered web development firm and an advertising agency have entered into a barter agreement involving the exchange of services. Under this agreement, the web development firm will provide website design services valued at AED 30,000 (inclusive of VAT), while the advertising agency will offer social media advertising services valued at AED 20,000 (inclusive of VAT) and will pay AED 10,000 in cash.

Tax Invoice Requirements:

  1. Web Development Firm’s Tax Invoice
    • Value of supply (Net Amount): AED 28,571.43
    • VAT (5%): AED 1,428.57
    • Total Consideration (Gross Amount): AED 30,000
  2. Advertising Agency’s Tax Invoice
    • Value of supply (Net Amount): AED 19,047.62
    • VAT (5%): AED 952.38
    • Total Consideration (Gross Amount): AED 20,000

The Public Clarification offers essential guidance on the application of VAT for barter transactions. It clarifies how to determine the value of supplies in such cases and simplifies VAT obligations for non-monetary exchanges, ensuring compliance with tax regulations.

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UAE eInvoicing Model Explained: Data Dictionary

Inside-UAE’s-eInvoicing-Model-Mandatory-Fields-Explained-from-the-MoF-Consultation-Paper

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Inside-UAE’s-eInvoicing-Model-Mandatory-Fields-Explained-from-the-MoF-Consultation-Paper
  • April 13, 2025

On the introduction of e-Invoicing in the United Arab Emirates, Ministry of Finance (MoF), UAE has released an eInvoicing Programme Consultation Paper (Consultation Document) which outlines the main features of the proposed e Invoicing model, the framework of e Invoicing in the UAE and the expected Data Dictionary, along with specific use cases.

Our article has been published, covering the background of eInvoicing, the UAE eInvoicing framework, and an overview of the Data Dictionary (https://fame.ae/uae-ministry-of-finance-program-for-e-invoicing-in-uae/) .As a continuation, we now outline the contents of the Data Dictionary, providing explanations of the mandatory fields.

Decoding UAE’s eInvoicing Data Dictionary: Mandatory Fields You Must Know

Consultation paper of MoF elaborate “Data Dictionary” which forms the basis of eInvoicing and outlines the essential data elements (fields) and their attributes for the most commonly used invoice types by businesses in the UAE. It covers tax invoices, tax credit notes, self-billing, and other relevant scenarios. There are minimum required fields for issuing tax invoices (50 fields) and commercial invoices (49 fields) in XML format, including several that are not currently addressed by UAE VAT legislation. The Consultation Document also confirms the presence of additional conditional fields in the complete Data Dictionary, which is yet to be published.

The below table lists the mandatory fields when issuing a tax invoice:

Invoice Details

Invoice Details

1. Invoice Number (IBT-01)

A unique identifier for the invoice, mandatory for all invoices. The invoice number must be provided to ensure traceability and compliance with UAE standards.

2. Invoice Issue Date (IBT-02)

The date when the invoice was issued, formatted as YYYY-MM-DD. This is mandatory and must adhere to specific formatting rules for consistency.

3. Invoice Type Code (IBT-03)

A code specifying the functional type of the invoice (e.g., standard, credit note). It must follow the UNTDID 1001 code list.

4. Invoice Transaction Type Code (BT UAE-02)

A sequence of flags identifying the transaction type (e.g., Free Trade Zone, Deemed Supply). Each flag indicates applicability (1) or non-applicability (0).

5. Invoice Currency Code (IBT-05)

The currency in which all invoice amounts are given, except for the total tax amount in accounting currency. It must use ISO 4217 alpha-3 codes.

6. Payment Due Date (IBT-09)

The date by which payment is due. This is mandatory when the payment amount is greater than zero and must follow the YYYY-MM-DD format.

7. Business Process Type (IBT-023)

Identifies the business process context (e.g., billing) to enable proper invoice processing. It must follow the format urn:peppol:bis:billing.

8. Specification Identifier (IBT-024)

An identifier for the specification containing the rules for semantic content, cardinalities, and business rules. It must start with urn:peppol:pint:billing-1@ae-1.

9. Payment Means Type Code (IBT-081)

A code indicating how payment is expected or settled (e.g., bank transfer). Must use UNCL4461 codes.

Seller Details

10. Seller Name (IBT-027)

The full legal name of the seller as registered in the national registry or as a taxable entity.

11. Seller Electronic Address (IBT-034)

The seller’s electronic address for invoice delivery. It must include a scheme identifier (e.g., CEF EAS code list).

12. Scheme identifier

The scheme identifier shall be chosen from a list to be maintained by the Connecting Europe Facility. 

13. Seller Legal Registration Identifier (IBT-030)

An official identifier for the seller as a legal entity. It must occur at most once and follow specific formatting rules depending on the scheme.

14. Seller Legal Registration Identifier Type

To identify the nature of commercial registration number issued in UAE.

15. Seller Tax Identifier (IBT-031)

The seller’s tax identification number (TRN). It must be 15 alphanumeric digits, starting with 1 and ending with 03.

16. Seller Tax Scheme Code (IBT-031-1)

The scheme of the tax identifier. Default Value of VAT to be used. Must be coded using one of the ISO 6523 ICD list. 

17. Seller Address Line (IBT-035)

The main address line of the seller’s postal address. Mandatory and part of the seller’s postal address.

18. Seller City

The city, town, or village where the seller is located. Mandatory and part of the seller’s postal address.

19. Seller Country Subdivision (IBT-039)

The region, state, or province of the seller’s address. For UAE, it must be one of the emirates (e.g., DXB, AUH).

20. Seller Country Code

A code identifying the seller’s country, using ISO 3166-1. 

Buyer Details

21. Buyer Name (IBT-044)

The full name of the buyer. Mandatory and must occur at most once.

22. Buyer Electronic Address (IBT-049)

The buyer’s electronic address for invoice delivery. Must include a scheme identifier (e.g., CEF EAS code list).

23. Scheme identifier (IBT-049-1)

The scheme identifier shall be chosen from a list to be maintained by the Connecting Europe Facility. 

24. Buyer Tax Identifier (IBT-048)

The buyer’s tax identification number (e.g., TRN). Must be 15 alphanumeric digits, starting with 1 and ending with 03.

25. Buyer Tax Scheme Code

The scheme of the tax identifier. Default Value of VAT to be used. 

26. Buyer Address Line (IBT-050)

The main address line of the buyer’s postal address. Mandatory and part of the buyer’s postal address.

27. Buyer City (IBT-052)

The city, town, or village where the buyer is located. Mandatory and part of the buyer’s postal address.

28. Buyer Country Subdivision (IBT-054)

The region, state, or province of the buyer’s address. For UAE, it must be one of the emirates (e.g., SHJ, RAK).

29. Buyer Country Code (IBT-055)

A code identifying the buyer’s country, using ISO 3166-1. 

Document Totals

30. Sum of Invoice Net Amount (IBT-106)

The total of all invoice line net amounts before tax. Mandatory and must match the sum of individual line amounts.

31. Invoice Total Amount Without Tax (IBT-109)

The total invoice amount excluding tax. Must have no more than 2 decimals.

32. Invoice Total Tax Amount (IBT-110)

The total tax amount for the invoice. Must equal the sum of tax category amounts and have no more than 2 decimals.

33. Invoice Total Amount with Tax (IBT-112)

The total invoice amount including tax. Must equal the sum of the net amount and total tax amount.

34. Amount Due for Payment (IBT-115)

The outstanding amount requested for payment. Must account for paid amounts and rounding adjustments.

Tax Breakdown

35. Tax Category Taxable Amount (IBT-116)

The sum of taxable amounts subject to a specific tax category. Must align with the applicable tax rate.

36. Tax Category Tax Amount (IBT-117)

The total tax amount for a given tax category. In tax category code (IBT-118) is “Standard Rate”, Tax category tax amount (IBT-117) shall equal to Tax category taxable amount (IBT-116) multiplied by the Tax category rate (IBT-119) / 100

37. Tax Category Code (IBT-118)

A code identifying the tax category (e.g., “Standard Rate”). Must align with the invoiced item tax category.

38. Tax Category Rate (IBT-119)

The tax rate percentage for a specific category.

Invoice Line

39. Invoice Line Identifier (IBT-126)

A unique identifier for each invoice line. Mandatory for all lines.

40. Invoiced Quantity (IBT-129)

The quantity of goods or services charged in the invoice line.

41. Unit of Measure Code (IBT-130)

The unit of measure for the invoiced quantity. Must use UN/ECE Recommendation 20 codes.

42. Invoice Line Net Amount (IBT-131)

The total amount of the invoice line before tax. Must equal the invoiced quantity multiplied by the net price.

43. Item Net Price (IBT-146)

The unit price after discounts, excluding tax. Must equal the gross price minus any discounts.

44. Item Gross Price (IBT-148)

The unit price before discounts and tax. Must not be negative.

45. Item Price Base Quantity (IBT-149)

The number of item units to which the price applies. Must be a positive number above zero.

46. Invoiced Item Tax Category Code (IBT-151)

The tax category code for the invoiced item (e.g., “Standard Rate”). Must align with the tax breakdown.

47. Invoiced Item Tax Rate (IBT-152)

The tax rate percentage for the invoiced item. Must not be zero for standard rates.

48. VAT Line Amount (BT UAE-08)

The tax amount for each line item. For standard rates, it equals the net amount multiplied by the tax rate.

49. Item Name (IBT-153)

The name of the invoiced item. Mandatory for all invoice lines.

50. Item Description (IBT-154)

A description of the invoiced item. Mandatory and must occur at most once per line.

Bridging the Gap: Traditional VAT Invoice vs. Structured e-Invoice in the UAE

Tax Invoice (Current)

E-Invoice

Format

PDF/paper accepted

Structured (XML/UBL)

Mandatory Fields

  • Supplier’s name, address, and TRN (Tax Registration Number).
  • Buyer’s name, address, and TRN (if registered).
  • Invoice number and issue date.
  • The date of supply if different from the date the Tax Invoice was issued
  • Description of goods/services.
  • For each Good or Service, the unit price, the quantity or volume supplied, the rate of Tax and the amount payable expressed in AED
  • The amount of any discount offered
  • The gross amount payable expressed in AED.
  • The Tax amount charged under the provisions of the Decree-Law expressed in AED, together with the rate of exchange applied where the currency is converted from a currency other than the UAE dirham
  • Where the invoice relates to a supply under which the Recipient of Goods or Recipient of Services is required to account for Tax, a statement that the Recipient is required to account for Tax, and a reference to the relevant provision of the Decree-Law

Structured (XML/UBL)

Real-Time Reporting

No

Yes

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e-invoicing in UAE

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e-invoicing in UAE

Objectives of the Public Consultation Document on e-Invoicing in UAE

To help businesses adapt to digital transformation, the UAE Ministry of Finance (MoF) released a Public Consultation Document on February 7, 2025, which outlines the standard data requirements for e-invoices. The main goals of this effort are: 

1. Create a common understanding of E-Invoicing rules  

This means making sure everyone understands the requirements for using E-Invoicing 

2. Help businesses get ready for E-Invoicing

This will assist businesses in preparing to use E-Invoicing when they are required. 

3. Make sure invoice data is consistent and standardized

This will ensure that the information on invoices is the same across all types of documents, making it easier for everyone to use and understand. 

What is e-Invoicing in UAE

E-invoicing is the digital version of paper or PDF invoices, using a format that can be read by machines and checked in real-time. In the UAE, a system called Decentralized Continuous Transaction Control (DCTCE) is used, where invoices are first checked by approved service providers (ASPs) before being sent to buyers and tax authorities. This helps ensure that invoices are accurate, clear, and follow tax rules. 

The e-Invoicing Data Dictionary (PINT AE)

The E-Invoicing Data Dictionary (PINT AE) outlines the key data fields and their characteristics for the most common types of invoices used by businesses in the UAE. It highlights the need for standardization to make sure that different invoice types are consistent. This standardization is important for smooth integration, efficient processing, and ensuring that E-Invoicing works well across the UAE’s business system. 

Excluded Transaction: A business transaction that doesn’t require E-Invoicing exchange or reporting. 

It is important to note that E-Invoicing will be rolled out in a phased manner. 

The E-invoicing framework encompasses all Business-to-Business (B2B) and Business-to-Government (B2G) transactions, regardless of the VAT registration status of the entities involved. 

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Background: UAE e-Invoicing Program

The UAE E-Invoicing program aligns with global trends in Digital Reporting Requirements (DRR) and Continuous Transaction Controls (CTC), reflecting the increasing adoption of digital tax compliance measures worldwide. 

We the UAE 2031 vision, are as follows:

  1. VAT Compliances: – Maximize VAT compliance, tackle the shadow economy, and shrink the tax gap.  
  2. Effectiveness: Increase transparency and improve audits with a view to encouraging a long-term culture of compliance. 
  3. Taxpayer experience: Enhance taxpayer and user experiences, potentially offering new and innovative engagements.  
  4. Digitalization: Reduce human intervention in certain business and tax reporting processes with a view to making the UAE and its fiscal ecosystem more digitally enabled. 
  5. Efficiency: Optimize cost and core operations, reduce processing time and encourage a reduction in paper wastage with a view to helping meet sustainability objectives.  
  6. Economic contribution: Contribute to the growth and competitiveness of the economy and utilize big data.  
  7. Contribute for policy making and government interventions: By adopting E-Invoicing, UAE government will have access to the relevant data in near real-time which will help in providing deep insights to policy makers for identifying areas and sectors that need government support and assistance. 

Framework for e-Invoicing in UAE

The UAE e-Invoicing requirements apply to all businesses operating in the UAE, regardless of their VAT registration status, ensuring comprehensive adoption across the business ecosystem. 

The UAE has implemented a Decentralized Continuous Transaction Control and Exchange (DCTCE) model, a modern approach to electronic invoicing that leverages decentralized technologies to enhance: 

Efficiency – Streamlining transaction processing and reducing administrative burdens. 

Security – Strengthening data protection and fraud prevention. 

Transparency – Ensuring real-time visibility and compliance with regulatory requirements. 

The UAE E-Invoicing process follows a structured approach involving multiple stakeholders to ensure compliance, validation, and seamless transaction processing. Below is a step-by-step breakdown of the E-Invoicing exchange and reporting mechanism: 

Let’s break this process down with a simple example to explain it step by step: 

Example Scenario: 

  • Supplier (C1) is a business that sells products. 
  • Buyer (C4) is the business that purchases these products. 
  • Corner 2 (C2) is the service provider that helps the Supplier send the eInvoice. 
  • Corner 3 (C3) is the service provider that helps the Buyer receive the eInvoice. 
  • Corner 5 (C5) is a system that handles and validates tax-related data. 

UAE e-Invoicing Process: A Step-by-Step Overview

Step 1: Supplier sends the eInvoice 

  • Supplier (C1) creates an eInvoice in the agreed format (PINT AE format) and submits it to their service provider, Corner 2 (C2). 
  • Example: Supplier C1 is sending an invoice for 100 products sold to Buyer C4. 

Step 2: Corner 2 validates and converts the invoice 

  • Corner 2 (C2) receives the eInvoice data from C1, checks if it’s correct, and if needed, converts it into the standard UAE eInvoice XML format. 
  • Example: C2 receives the eInvoice in the PINT AE format and converts it into the XML format used in the UAE. 

Step 3: Corner 2 sends the eInvoice to the Buyer’s service provider 

  • C2 then sends the eInvoice (now in XML format) to Corner 3 (C3), the Buyer’s service provider and buyer will be able to see and approve. 
  • Example: C2 sends the invoice data to C3 so that Buyer C4 can see it. 

Step 4: Corner 2 reports Tax Data to Corner 5 

  • Corner 2 (C2) also reports the Tax Data Document (TDD) to Corner 5 (C5), which handles tax data validation. 
  • Example: C2 reports the tax details related to the eInvoice to C5. 

Step 5: Corner 3 validates the eInvoice 

  • Corner 3 (C3) checks the eInvoice received from C2 and confirms if it’s valid.  
  • If everything is correct, C3 sends a Message Level Status (MLS) back to C2, confirming the eInvoice has been successfully processed. 
  • If there’s an issue with the invoice, C3 sends a negative MLS to C2 and C5. 
  • Example: C3 checks the eInvoice and if it’s valid, it sends a message saying “Invoice approved” to C2. 

Step 6: Corner 3 sends the eInvoice to the Buyer 

  • C3 sends the eInvoice to Buyer (C4) in the agreed format. 
  • Example: C3 delivers the approved invoice to Buyer C4. 

Step 7: Corner 3 reports Tax Data to Corner 5 

  • If the eInvoice is validated successfully, C3 also reports the Tax Data Document (TDD) to C5. 
  • Example: After confirming the eInvoice is correct, C3 sends the tax details to C5 for final validation. 

Step 8: Corner 5 confirms TDD reporting to Corner 2 

  • Corner 5 (C5) sends a confirmation MLS to C2, letting them know the TDD has been successfully reported and validated. 
  • Example: C5 tells C2, “The tax data has been successfully validated.” 

Step 9: Corner 5 confirms TDD reporting to Corner 3 

  • C5 also sends a confirmation MLS to C3, letting them know that the TDD has been validated. 
  • Example: C5 tells C3, “The tax data has been successfully validated.” 

Step 10: Corner 2 sends the MLS to Supplier 

  • C2 sends both the Message Level Status (MLS) from C3 (for processing the invoice) and C5 (for reporting the TDD) to the Supplier (C1). 
  • Example: C2 tells Supplier C1, “The invoice has been processed and tax data reported successfully.” 

Step 11: Corner 3 sends the MLS to Buyer 

  • C3 sends the MLS received from C5 (confirming TDD reporting) to the Buyer (C4). 
  • Example: C3 informs Buyer C4, “The tax data for your invoice has been successfully validated.” 

Summary: 

In this process, the eInvoice is created by the Supplier, validated by the Service Providers (C2 and C3), and passed between them. Tax-related data is also reported to Corner 5 (C5) for validation. Once everything is confirmed, status messages (MLS) are sent back to everyone involved, ensuring that all parties are informed about the success or failure of the invoice processing. 

Overview of Data Dictionary (PINT AE) in the UAE e-Invoicing Framework

Data Dictionary (PINT AE) is a fundamental component of the UAE E-Invoicing framework, providing a structured and standardized catalog of all data elements involved in generating, exchanging, processing, and reporting E-Invoicing  

This includes the following: 

As a foundational reference, the Data Dictionary ensures the following: 

  1. Consistency – Standardized data fields across all E-Invoicing processes. 
  2. Interoperability – Seamless integration between businesses, software providers, and regulatory systems. 
  3. Compliance – Alignment with UAE tax regulations and reporting requirements. 

By serving as a universal guide for businesses, software developers, and regulatory bodies, the Data Dictionary plays a crucial role in ensuring a transparent, efficient, and compliant E-Invoicing system. 

While we await further guidance, the Ministry of Finance (MoF) will continue to provide updates on the types of transactions and businesses that will be included in the upcoming phases of e-invoicing implementation. 

 

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