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The Charities VAT Guide (VATGCH1) provides comprehensive guidance for charitable organisations in the UAE regarding their Value Added Tax obligations under Federal Decree-Law No. 8 of 2017. It clarifies the distinction between business and non-business activities, detailing rules for supplies, donations, and deemed supplies. A primary focus is the special VAT recovery regime available to 'designated charities', outlining the eligibility criteria and process for recovering input tax on charitable activities as per Article 57. The guide also explains the standard input tax apportionment method for non-designated charities, ensuring proper compliance with VAT legislation.

Charities

VAT Guide | VATGCH1

April 2020

1. Charities guidance - Overview

1.1. Overview
1. 1.1.1. Short brief
2. 1.1.2. Purpose of this document
3. 1.1.3. Who should read this document?
4. 1.1.4. Status of the document
5. 1.1.5. Tax procedures

2. Charities

2.1. Charities and their activities
1. 2.1.1. VAT treatment of charities
2. 2.1.2. Business activities for VAT purposes
3. 2.1.3. Donated goods and services
4. 2.1.4. Non-business activities for VAT purposes
5. 2.1.5. Deemed supplies
2.2. Designated charities
2.3. VAT registration of charities
2.4. Special situations
1. 2.4.1. VAT treatment of sales or leases of new buildings to charities

3. VAT recovery rules for charities

3.1. Overview
3.2. VAT recovery by charities which are not designated charities
1. 3.2.1. Step 1: Direct attribution
2. 3.2.2. Step 2: Allocation of the residual input tax via the standard method
3.3. VAT recovery by a designated charity

4. Cabinet Decisions - Designated charities

5. Updates and amendments

Charities guidance - Overview

Overview

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.

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.

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.

Contents

Charities guidance - Overview

Overview

Short brief

Purpose of this document

Who should read this document?

Status of the document