Agreement 3 of 2018: All You Need to Know

On January 1, 2018, the UAE government passed a new law known as Agreement 3 of 2018. This agreement pertains to foreign businesses and individuals who choose to do business in the UAE. Here, we’ll discuss everything you need to know about Agreement 3 of 2018.

What is Agreement 3 of 2018?

Agreement 3 of 2018 is a new law passed by the UAE government that requires foreign businesses and individuals to register for VAT if their revenue exceeds a certain threshold. This law is in conformity with the GCC VAT Agreement, and it aims to increase government revenue and create a more sustainable economy.

Who is Affected?

Foreign businesses and individuals who do business in the UAE are affected by Agreement 3 of 2018. The VAT registration threshold is set at AED 375,000 ($100,000) per annum. If the foreign business or individual falls under this threshold, they are not required to register for VAT. However, if they exceed the threshold, they must register for VAT and comply with all the rules and regulations regarding VAT.

What are the Benefits of Agreement 3 of 2018?

There are multiple benefits to Agreement 3 of 2018. Firstly, it will increase government revenue, which will help to fund public services such as healthcare, infrastructure, and education. Secondly, it will create a more sustainable economy and reduce reliance on oil and gas exports. Finally, it will help to create a level playing field for local and foreign businesses by introducing VAT.

What are the Penalties for Non-Compliance?

The penalties for non-compliance with Agreement 3 of 2018 can be severe. Failure to register for VAT can result in fines of up to AED 20,000 ($5,500), and failure to submit VAT returns can result in fines of up to AED 50,000 ($13,600). Non-compliance can also result in legal action, which can be costly and time-consuming.

Conclusion

Agreement 3 of 2018 is a necessary step towards creating a more sustainable economy in the UAE. While it may seem daunting for foreign businesses and individuals, compliance with the law is essential to avoid penalties. If you’re unsure about your obligations under Agreement 3 of 2018, consult with a tax specialist to ensure that you’re on the right track.