The tax will go into force effective January 2018
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The Ministry of Finance, MoF, Monday announced that His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, signed the Executive Regulation for the Federal Decree-Law No. (8) of 2017 on Value Added Tax, VAT.
The Regulation defines VAT as the 5% tax imposed on the import and supply of goods and services at each stage of production and distribution, including what is a deemed supply, with the exception of specific supplies subject to the zero rate and what is exempted as specified in the Decree-Law.
The tax will go into force effective January 2018, and all business have to take all necessary measures to avoid the risk of non-registration by 1st January, 2018, which would entail fines as stipulated in Cabinet Decision No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.
The rent or sale of a residential part of the building shall be treated as zero-rated or exempt.
Residential units in the UAE will be largely exempt from Value Added Tax (VAT), with the exception of the first supply of a new residential building within the first three years of its construction, according to a statement by the Federal Tax Authority, FTA.
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The supply of commercial real estate, selling or leasing, will be subject to the Value Added Tax, VAT, at 5% from 2018.
The rent or sale of a residential part of the building shall be treated as zero-rated or exempt, depending on whether this is a first supply or a subsequent supply, the statement said.
The rent or sale of a commercial part of the building, however, shall be treated as subject to VAT at 5%.