UAE announces VAT exemptions under amended law

The Ministry of Finance announced the UAE Cabinet approved amendments to a Federal Decree-Law on Value Added Tax (VAT), which is set to exempt investment fund management services from VAT to stimulate growth in the investment management sector and increase the UAE’s attractiveness as a leading investment hub.

Certain services related to virtual assets will also be exempt from VAT, as part of efforts to support innovation and advanced financial technology, in addition to exemptions for in-kind donations between charitable and government entities, valued at up to AED 5 million over a 12-month period, from the provisions of legal supply. This allows donors to recover the VAT incurred on these in-kind donations in accordance with the VAT Law, aimed at easing the burden on these entities and enhancing their societal role.

The Ministry also highlighted that the changes are part of continuous efforts to refine the tax environment in the UAE, aiming to strike a balance between collecting tax revenues, boosting the investment climate, and attracting more businesses and investors to the country.

Younis Haji Al Khoori, Undersecretary of the Ministry of Finance, said: “The Ministry is committed to coordinating with relevant stakeholders from both the public and private sectors and working to update our regulations to enhance the UAE's business environment.”

“We believe these amendments will help minimise misunderstandings or incorrect applications of the law, as well as simplify procedures for taxpayers in line with international best practices, ultimately contributing to an improved quality of life for all.”

The amendments were designed per international best practices, taking into account the GCC Unified VAT Agreement, past experiences, challenges faced by the business community, and stakeholder recommendations.

Amid ongoing economic transformations, the Ministry of Finance has introduced tax plans and programs aligned with international best practices to address the challenges arising from these developments and to strengthen support for the business sector, promoting economic growth.