The United Arab Emirates (UAE) has announced significant changes to its Value Added Tax (VAT) system, set to take effect on November 15, 2024. These updates, outlined in Cabinet Decision No. 100 of 2024, aim to streamline regulations, stimulate investment, and align the system with international standards. The amendments are expected to have a substantial impact on various sectors, with particular focus on investment fund management and virtual assets.
One of the key changes is the VAT exemption for services provided by fund managers to licensed funds. This exemption covers a range of services, including management of fund operations, investment management, and performance monitoring. Fund managers and the funds they serve are advised to analyze the extent to which their services qualify for this exemption and assess its impact on their VAT recovery position.
In the cryptocurrency space, the transfer and conversion of virtual assets, including digital currencies, will also be exempt from VAT. This exemption applies retrospectively from January 1, 2018, potentially requiring some businesses to file voluntary disclosures to correct historic returns.
Enhancing Business-Friendly Environment
The UAE government emphasizes that these changes aim to improve clarity and ensure a smoother experience for businesses. Younis Haji Al Khoori, undersecretary of the Ministry of Finance, stated that the amendments help minimize misunderstandings, simplify procedures, and contribute to an improved quality of life for all.
Impact on Various Sectors
While the investment and crypto sectors are expected to benefit the most from these changes, the amendments will affect businesses across all industries. Other notable changes include revisions to the rules for exporting goods and services, clearer definitions for supply-related terms, and VAT exemptions on certain in-kind donations for charitable and government entities.
Experts advise businesses to carefully review the amendments and analyze their potential impact on VAT positions. These reforms are seen as a strategic step to balance revenue collection while enhancing the UAE’s investment landscape, further solidifying its position as a global financial hub.
