1. Charities guidance – Overview
1.1. Overview
1.1.1. Short brief
VAT has been introduced with effect from 1 January 2018 in the UAE. As a general consumption tax on the supply of goods and services, its effects must be understood by charities in the UAE in two contexts:
- its application to the activities of all charities; and
- the approach that should be taken by charities in the UAE when determining the amount of VAT on costs (i.e. input tax) which they are eligible to reclaim, specifically where they are engaged in both business and non-business activities (for example, such as where they provide goods or services without charging for these).
In particular, certain charities in the UAE will be treated as designated charities. Where designated in that manner, designated charities will be entitled to recovery of VAT under a special regime.
1.1.2. Purpose of this document
This document contains guidance about the characteristics of a charity which must be present in order for it to qualify as a designated charity for VAT purposes.
In addition, this document provides guidance for charities seeking to understand which of the services they provide are business activities and which are non-business activities, and in turn, the extent to which VAT recovery on costs is possible.
1.1.3. Who should read this document?
This document should be read by key stakeholders in charities who are responsible for tax matters. It is intended to be read in conjunction with the Taxable Person Guide for Value Added Tax.
1.1.4. Status of the document
In this guide, Federal Decree-Law No. 8 of 2017 on Value Added Tax is referred to as “Decree-Law” and Cabinet Decision No. 52 of 2017 on the Executive Regulations of the Federal Decree-Law No. 8 of 2017 on Value Added Tax is referred to as “Executive Regulations”. This guidance is not legally binding on the FTA but is intended to provide assistance in understanding and applying the VAT legislation as it applies to charities.
This guide is issued in accordance with Article 73 of the Executive Regulations and provides general guidance concerning the application of the Decree-Law and Executive Regulations in respect of charities in the United Arab Emirates. This guide does not deal with all the legal detail associated with VAT and is not intended for legal reference. For details in respect of the general operation of VAT, refer to the Taxable Person Guide – Value Added Tax which is available on the Federal Tax Authority (FTA) website (www.tax.gov.ae).