Key Features and Updates on UAE VAT Amendments 2025

The Federal Tax Authority (FTA) issued Public Clarification No. 40, introducing significant amendments to the Executive Regulation of the Value Added Tax (VAT) as set forth under Federal Decree-Law No. (8) of 2017. These amendments encompass key updates concerning the documentary requirements for export transactions, the treatment of financial services, zero-rating provisions, and input tax deductions.

VAT Exemption for Government Buildings and Real Estate Assets

The issuance or transfer of the right to use, exploit, or benefit from government buildings, real estate assets, or similar projects between government entities is not considered a supply and, therefore, is not subject to VAT. The term "government buildings, real estate assets, and other projects of similar nature" shall be interpreted to include:

• Premises of government entities.
• Capital projects of governments.
• Infrastructure projects of governments.
• Real estate assets owned by government entities.
• Public utility and public use real estate assets.
• Developed government land.

Supply of More Than One Component – Article 4(4)

Article 4(4) of the Executive Regulation states that for a single composite supply to exist:

• Multiple components must be supplied by the same supplier.
• Their price must not be described or invoiced separately.

If a supplier subcontract some of the components but remains contractually responsible for the whole supply, it can still be a composite supply if these conditions are met. Even if one single price is quoted for all of the components, it will not be regarded as a composite supply if each of the components' prices is stipulated differently, i.e., if the price of every component is separately identified in the tax invoice, quote, or base contract. For example, if a campaign charge is imposed on a marketing campaign but the price of each item individually (e.g., hiring of venue, catering, promotional materials, etc.) is stated in the contract, then the supply would not be treated as a composite supply because prices for the different elements of the supply are stated separately.

Changes Relating to Export Supporting Documents VAT Zero-Rating

Evidence supporting exports has been simplified in Article 30 as it relates to zero-rated exports. Companies must retain proof at least one form from each category:

Proof Of Export: Before and After 15th November 2024

• Other commercial export documents and declarations
• Shipping documents with an official proof of export
• Suspension declaration payment declaration under the GCC Law

Application Of Value Added Tax on Certain Activities Within the Scope of Financial Services

Islamic Financial Contracts

• The term “relevant laws” is now inclusive of Islamic contracts of Ijarah, Murabaha, and Salam, with specific emphasis on VAT treatment to these laws.

Financial Services (New Categories)

• The reference to Article 42(2) is insufficient to permit the VAT exemption. Other conditions under Article 42(3) will also have to be met.

Financial Service	VAT Status
Independent fund management (UAE Licensed)	VAT Exempt
Unlicensed Fund Services	VAT taxable
Transfers of virtual assets (e.g., Cryptocurrencies)	VAT Exempt (effective Jan 1, 2018)
Management of virtual assets (e.g., crypto wallets)	Taxable if made in the UAE

Businesses that previously charged 5% VAT on Virtual Asset Transfers must issue tax credit notes to rectify mistakes.

Zero-Rated Services and Transportation

Article 31 alters the criteria for service exports and international transportation zero-rating.

• Commercial activities outside of the supply of goods and provision of services.
• Installation services on taxable goods within the UAE.
• Transport to non-taxable lessees in the UAE.
• Hospitality services (e.g., restaurants, hotels) within the UAE.
• Cultural, artistic, and educational services within the UAE.
• Real estate services within the UAE.
• Telecommunication and IT services within the UAE.

Rules of Division of Input Tax

The FTA affirms that the standard procedure for the division of input VAT remains unchanged under Article 55(7)(a).

Entity Type	Applicable Method
Government and Charities	Standard VAT Apportionment (per VATGIT1)

Non-Recoverable Input Tax

A new exception under Article 53 allows VAT recovery on employee health insurance even when not legally required.

Prerequisites for VAT Recovery:

• Applicable to premiums for January 2024 onward.
• Recovery starts for November 15 to December 31, 2024.
• Employers that are mandated to offer health insurance coverage can recover input VAT as they have previously.

Other Changes in Legislation

Category	Update
Virtual Assets	Now includes crypto assets and digital assets other than fiat currency.
Business Day	This is provided in the Tax Procedures Law.
Deadlines for Tax Invoice	Composite invoices are to be issued 14 calendar days after the month ends.
Composite and Deemed Supply	New provisions regarding value-added tax (VAT) for multi-element supplies.
Profit Margin Scheme	Property expenses are included.
Deregistration of VAT	FTA is permitted to revoke VAT registration if certain conditions are not complied with.

 

How VAT Consultants in The UAE May Assist

VAT consultants are key in supporting businesses to meet their VAT obligations in a timely and accurate manner. In the UAE, VAT consultants can assist businesses with the following:

• Interpreting newly introduced VAT legislation and providing guidance on compliance requirements.
• Assisting with the implementation and enforcement of updated VAT laws within business operations.
• Managing routine VAT compliance tasks, including filing returns, reporting, and maintaining required documentation.

Engaging professional VAT advisory services enables businesses to navigate complex tax regulations effectively and ensures compliance with UAE VAT law. Contact us today and we shall be glad to assist you.