PC: Bazaar Times
Probably the biggest tax policy overhaul to hit the UAE so far includes exemption of investment fund management services and certain virtual asset-related services from the Value Added Tax regime. Pursuant to a new Cabinet decision, it seeks to establish the country as one of the global investment destinations, with further support from both financial and technological industries.
Investment Management Industry Boost
The exemption of VAT on management services for investment funds is a means of increasing the appeal of the sector to investors in domestic and international markets. With the removal of VAT from the service line, the UAE will become an attractive location for fund managers and investors, as it falls under the general plan of the country as a financial hub and attractive for further investment in this still-growing economy.
Virtual Asset Innovation End
The cabinet also exempted VAT on specific services relating to virtual assets. The UAE has positioned itself at the helm of the broader fintech league globally, and this was an attempt by it to encourage more companies and investors to come into the virtual asset space. Virtual assets, from cryptocurrencies to blockchain technologies, are increasingly attracting a global audience, and the UAE has interpreted the tax relief as a step toward supporting innovation and encouraging businesses to come and set up themselves in the country.
Tax Relief on In-Kind Donations
The new VAT policy exempts in kind donations by charitable institutions with government entities. To that effect, donations up to AED 5 million within any period of 12 months shall be VAT-exempt, where donors can recover the imposed tax. To this end, it shall ease the burden on those institutions and make it easier for them to finance their philanthropic endeavours.
Enhancing Tax Compliance and Management
In the same reform process, the FTA is granted the right to deregister taxpayers under certain specified circumstances. This will ensure tax compliance through the promotion of a culture where businesses abide by the tax regulations provided in the country while avoiding instances of tax noncompliance. These measures are also meant to improve the tax system hence reduce administrative burdens that businesses encounter and improve tax efficiency on the whole.
Tax Compliance
Undersecretary of the Ministry of Finance Younis Haji Al Khoori said amendments undertaken focus on improving the business climate of the UAE. According to international standards, the government hereby seeks to simplify procedures and reduce misunderstandings as it makes the law applicable.
Al Khoori further elaborated that there was a need to strike a balance between collecting the revenue of taxes and fostering a non-unwelcome investment climate. He added that these reforms would eventually make the UAE even more attractive for businesses and investors.
Such exemptions on investment fund management and virtual asset services from VAT, along with changes concerning in-kind donations and tax compliance, seal its commitment to a dynamic, investor-friendly environment. Reforms within this framework will keep shaping the growth of the UAE in the trend of the world’s leading financial hubs, constantly charging ahead to achieve even more growth in investments as well as fintech.
