Selected Tax Issues on the UAE Waqf
Offprint by: Mohammad Abdullah and Roberto Scalia, La nuova Legge sul Waqf degli Emirati Arabi Uniti (Parte II), in Trusts e Attività Fiduciarie, 1(2020)
Foreword
The institution of Waqf (?????), which is frequently compared with English trust, has a well-documented history of its commendable socio-economic role among the Muslim societies. From provision of free public utilities to effectively serving the private purposes of property disposition among the progeny, Waqf has played a critical as well as a multidimensional part right from the 7th century AD.
In recent years, due to the growing interest in the legal status of Waqf and its nuances, several Muslim countries have taken initiative to streamline the Waqf application in order to match its legal and regulatory framework with the modern institutional approaches. Among the Arab jurisdictions which are at the forefront in this initiative, the United Arab Emirates (UAE) leads the way.
By introducing the Federal Law 5/2018, the UAE has provided a clear road-map for application of Waqf within the Federation. Given the paramount significance of the Federal Law 5/2018 for various local and international stakeholders of Waqf, in this short article, the authors attempts to analyse the Federal Law 5/2018 on Waqf (?????) and its taxation implications.
As far as the issue of taxation is concerned, there are several aspects to be considered both in “domestic” as well as in “cross-border” scenarios. In this short article both direct and indirect aspects of domestic and cross-border taxation of Waqf are dealt with.
With respect to direct taxes, notably, the UAE domestic tax system (even though existing at Emirates level), deserves a little attention as, in concrete terms, it is partially implemented (i.e. only the O&G and Banking sectors are effectively subjected to taxation).
Against this background, we’ll be focussing on UAE Double Taxation Conventions (“DTCs”).
Conversely, the issue of VAT will be addressed by focussing on domestic tax system (and not in a cross-border scenario).
Income Tax and Double Tax Treaties
The UAE has a wealthy DTCs’ network in place, and a treaty entitlement, in any event, is restricted to “persons” who are resident of one or both contracting States.
In principle, the first question one shall ask is, whether a Waqf, as such, is a “person” and (if the answer is in positive) whether such a person can be deemed to be “resident” for tax purposes.
However, if the response happens to be in negative (i.e., in case the Waqf is neither a person, nor a resident) one might wonder whether the endower(s), endowee(s) or the administrator can claim treaty benefit.
Waqf Treaty Entitlement as a “Person” “Resident”
Since Waqf is not mentioned in the UAE treaties, one might wonder whether it can claim treaty benefits. For DTC’s purposes, in general terms, the definition of person includes “company and any other body of persons”[1] and, accordingly, the Waqf can claim treaty benefit upon its inclusion among either (i) “companies” or (ii) “any other body of persons”.
For the Waqf to be equated to a “company” it shall be treated likewise (i.e. taxed the same way of a company)[2]. This would be the case, in general terms, where income is “accumulated” (not distributed) and taxed upon the Waqf itself. This condition shall be normally assessed against the background of the endowment certificate[3] and, in respect of endowment of family companies, considering the shareholder’s rights.
In the UAE treaty network, “trusts” are included only in exceptional cases[4] in the definition of person[5]; as is the case of the Treaty entered into with Ireland. In most cases trusts are quoted in the DTC, although not being explicitly included in the definition of persons[6].
Considering the broad scope of the treaty definition of the term “person”, one could conclude that the treaty definition of “trusts” includes the Waqf which might be considered resembling the same features of the trust, as such[7].
When it comes to “residence”, treaty entitlement is based on “liability to tax” of the person claiming treaty benefit and, in this case, notably, UAE States income taxes do not apply to individuals.
If Waqf are not deemed to be persons resident, then the UAE individuals may claim treaty benefits on their own, whereas deemed to be liable to tax[8].
Charities, Pension Funds, CIVs and REITs
Charities
Charitable and Eternal Endowments[9], can be fitted within special treaty provisions.
Charities[10], foundations[11] or other religious, educational and cultural organizations[12] are included in the UAE treaties by widening the scope of the “residence” definition. Sometimes, charities are explicitly considered in respect of “real estate” investment[13]. While in few other treaties the scope of the “charity” clause is considerably wide including “charities or religious, educational and cultural organizations”[14].
Pension Funds
Since Pension Funds are often exempted from tax in their State of establishment, their qualification as “resident” may be disputable and entitlement to treaty benefits (mainly, reduced withholding taxes) is disputable[15].
Some recent UAE treaties widen treaty entitlement as a “resident” to “pension scheme” including any[16]: “plan, scheme, fund, trust, or other arrangement established in a Contracting State, [that] is generally exempt from tax in that State and operated principally either to administer or provide pension or retirement benefit or to earn income for the benefit of one or more such arrangements”.
Other treaties straightforwardly include “Pension Funds” in the definition of “resident”[17] (although a treaty definition of pension fund is not provided for). In other treaties, conversely, Contracting parties explicitly provided that Pension Funds shall not be considered as “pension funds ... not taxable persons in either Contracting State”[18].
CIVs and Investment Funds
Collective Investment Vehicles (“CIVs”)[19] are funds that are “widely held, hold a diversified of portfolio securities and are subject to investor protection regulation in the country in which they are established”[20] and, than, also “funds of funds” and “intermediary structures” (through layers of financial intermediaries)[21].
Such as CIVs, Investment Funds are generally transparent (i.e. taxed by way of the flow-through taxation mechanism)[22].
Again, if the Waqf claims treaty benefit as a “person” (to be assessed according to the criteria adopted by the relevant contracting State)[23] one shall consider if the “residence” criterion is fulfilled too[24].
Importantly, in order to understand the UAE treaty policy, it is important to recall the OECD statement that “in negotiating new treaties or amendments to existing treaties, the Contracting States would not be restricted to clarifying the result of the application of other treaty provisions to CIVs, but could vary those results to the extent necessary to achieve policy objective”[25].
REITs
Real Estate Investment Trusts (‘REITs’)[26] take different forms according to the relevant jurisdiction providing for regulatory and tax laws. The definition of REIT adopted by the OECD is limited to those vehicles - be it a company, trust or contractual or fiduciary arrangement - deriving income primarily from long term investments in immovable property, distributing most part of its income annually and, in general terms, not being subject to tax on income related to immovable property that is distributed to investors.
For the limited scope of this part, one shall consider whether the definition of REIT includes a Waqf whose endowed assets are “immovable properties” and fulfilling the investment criteria listed above.
Consistent with general definitions under Article 3 OECD Model, the classification as a ‘person’ is conditional upon the entity/arrangement falling under one entities listed in Article 3[27].
Taxation on Waqf’s Income and Distribution of Capital
The “allocative” treaty tax rule is applicable to Waqf’s income and capital shall be divided between what is deemed to be (and taxed as) income and, conversely, what is deemed (and taxed as) capital.
Under tax treaties fitting the OECD Model, the income categories deserving attention can be grouped in the following: (i) investment income; (ii) income and capital gains from immovable property; and (iii) other income.
Investment Income
Under the UAE Federal Waqf Law, investment properties (and, namely, all such assets from which dividends, interests[28] and royalties can be derived) can be endowed[29].
As for dividends, the definition employed in UAE treaties closely resembles the one provided for in the OECD Model[30] so, in general terms, the share of trust income cannot be considered as a “dividend” for DTC’s purposes. However, in special cases, the treaty definition of “dividends” includes also “distributions on certificates of an investment fund or investment trust”[31].
Some other UAE treaties (e.g., the one signed with the UK) provide for a specific clause concerning alienation of shares by a resident of a contracting State (say, the UAE) of entities resident in the other contracting State[32].
It is pertinent stressing that the relevant clarification:
i) addresses the shares and interests that are comparable to shares;
ii) applies to the interests not falling under Article 13 (2) and derived in a bilateral scenario (hence derived from person resident in the other contracting State); and
iii) is intended to include also capital gains deriving from Government financial institutions or investment companies “of the” State.
When it comes to the point (i) above, the treaty signed with Japan has wider scope, including “interests in a partnership or trust”[33] and one might wonder whether, irrespective of such specific provision, interests in trust could be deemed to fall under the scope of the relevant treaty provision fitted along the UK Protocol one.
A key element to be considered with respect to investment income is the notion of “beneficial owner” that, notably, is not defined in the treaty itself and is quite controversial.
Few UAE treaties provide for clear-cut solution and, in concrete terms, when it comes to trusts treaty relief entitlement as per Articles 10, 11 and 12, such relief is granted - with respect to New Zealand’s ones - to trustees that are: (i) resident in New Zealand and (ii) subject to tax in New Zealand in respect of dividend, interest and royalties[34].
Immovable Property Income and CGs
A Waqf could include exclusively or mainly immovable properties and such Waqf could be considered (in the State where the real estate is situated) as carrying out an economic activity, and, to this token, the real estate would be deemed to be “of an” enterprise and falling within Article 6 (4) of the DTC fitting the OECD Model.
Some DTCs signed by the UAE provide special rules applicable in special circumstances, such as if rights in a company, trust or “any other institution or entity” entitle “to enjoy” such immovable property situated in a Contracting State and held by that company, trust, institution or entity, income derived from that “right of enjoyment” may be taxed in that State[35].
With respect to taxation of capital gains (“CGs”) on shares of so called “immovable property companies” UAE treaties follow the OECD Model approach[36] but, in some cases,[37] UAE treaties apply[38] to both the “capital stock of a company” and, also, to “interest in a partnership, trust or estate”[39].
UAE treaties provides for special rules when investments in an immovable property situated in one State are undertaken by the other State (or other Governmental entities), e.g., holding that[40]:
“the provisions of this Article shall not apply if the beneficial owner of the income is the Government itself, political subdivisions, local governments, local authorities and their financial institutions”.
Other Income
Notably, all items of income “not dealt with” in the other articles of a DTC fall within Article 21, dealing with “other income”.
As for the personal scope, the Other Income Article may apply to income from Estate and Trusts, as clearly set forth in specific treaties providing that with respect to: “income from a trust which is a resident of a Contracting State, other than a trust to which contributions were deductible, the tax [charged in the State of source] shall ... not exceed 15 per cent of the gross amount of the income”[41].
VAT
In January 2018, the UAE introduced a Value Added Tax (the “VAT”) in furtherance of an international commitment with the other five GCC States (Bahrain, Kuwait, Oman, Qatar and Saudi Arabia)[42].
Precisely, VAT is a (i) general tax on consumption; (ii) that applies at each and any stage of production and distribution of goods and services; (iii) at a 5% rate; (iv) on taxable persons.
VAT applies on “Taxable Persons” engaged in a “Business Activity” and one might wonder whether a Waqf fulfils either or both of these requisites. This is a key issue, since any “taxable person” engaged in a “business activity” is required to register[43], issue invoice on “taxable supplies” and pay the “output” VAT to the UAE Federal Tax Authority.
Aside this issue, another key topic is if, and to what extent, the UAE VAT provides selected rules for the Islamic Finance sector.
Waqf as a “Taxable Person” [...]
Article 1 of UAE Federal Decree Law No. (8) of 2017 on Value Added Tax (hereinafter the “UAE VAT”) includes in the definition of “Person” both “natural or legal person”, the definition of “Taxable Person” includes “[a]ny Person registered or obligated to register for Tax purposes under this Decree-Law”[44].
Registration of a Waqf entails the attribution of “legal entity” status[45]. Accordingly, there shall be few, if any doubt that Waqf fits within the definition of “Person” for VAT purposes.
However, since Waqf is neither a “natural” nor “legal” person, one might wonder whether it can be fitted within the definition of “taxable person”.
In the authors’ opinion, there is a solid ground for assuming that the definition of Taxable Person might include also Waqf since the Federal Tax Authority (“FTA”) clearly held that:
i) “all types of persons - including individuals, companies, partnerships, clubs, associations, and so forth - may be able, or be required, to register for VAT and charge tax on their supplies”[46]; and
ii) “persons” can be “an individual ... or a legal person ... or another form of entity (e.g. an unincorporated body such as a charity or a club, a partnership or a trust) [emphasis added]”[47].
This is, also, clearly consistent with the GCC VAT Agreement definition that is apparently wider, including “[a]ny natural or legal person, public or private, or any other form of partnership [emphasis added]”[48].
[...] Engaged in “Economic Activities”
In the GCC VAT context, taxable persons shall be engaged in an “economic activity” as defined.
An economic activity is deemed to occur if such activity is “conducted in an ongoing and regular manner including commercial, industrial, agricultural or professional activities or services or any use of material or immaterial property and any other similar activity”[49].
Being engaged in an “economic activity” is key in assessing many issues such as: (i) the obligation to register and deregister, (ii) the deductibility of input VAT,[50] (iii) whether a “deemed supply” is at a stake; (iv) the right to obtain VAT refund for non-residents; (v) assessing when an asset is a “capital asset”; etc.
Accordingly, if a Waqf is engaged in an economic activity, such activity will need registration for VAT purposes and all related duties (issuance of the invoice for taxable supply, pay the VAT, etc). It is immaterial, in this respect, if the Waqf’s is a Charitable Endowment as per Article 4 (1) (b) UAE Federal Waqf Law since, for VAT purposes, “[t]he definition of ‘business’ is very broad and includes any regular or ongoing activity conducted independently by a person”[51] so also “charitable endowments” may be engaged in a “business”.
Supplies made by “Charities”[52] in the context of “charitable activities”[53] will not face any consequence for VAT purposes, assuming such supplies are for free (i.e. not for consideration)[54].
In case a Waqf is engaged both in business and non-business activities, VAT treatment will be different[55]. VAT paid (i.e. Input VAT) in the course of a business activity, will be recoverable under normal rules, deducting it from Output VAT, or being refunded. The other way round, VAT paid in a non-business context (i.e. in charitable activities) will not be recoverable, unless the Charity is a “Designated Charity”.
“Designated Charities” are all such “[s]ocieties and associations of public welfare not aiming to make a profit”[56] listed in UAE Cabinet Decisions[57] that are entitled to claim, upon fulfilment of certain pre-requisites, VAT refund of full amount of Input VAT.
VAT on Islamic Finance dealings
The importance of Islamic Finance was not underestimated in drawing the VAT rules, paying attention at creating a level playing field with “traditional” finance.
In principle, “Financial services” are exempt for VAT purposes[58] and in the context of Islamic Finance two main groups come into consideration: (i) Islamic Finance products; and (ii) Islamic Finance Arrangements.
Islamic Finance “products” are defined as “financial products under contract which are certified as Islamic Shariah (???????) compliant, which simulate the intention and achieve effectively the same result as a non-Shariah compliant financial product, will be treated in a similar manner as the equivalent non-Shariah financial product for the purpose of applying exemption from Tax [emphasis added]”[59].
For the limited purpose of this article, three elements shall be highlighted:
1st - “Certification”: an Islamic Finance product, as such, shall fall within the relevant rule to the extent that it has been “certified” as Shariah compliant;
2nd - “Similarity”: the relevant product shall be similar to traditional financial products in stimulating “the intention” and achieving “the same result”[60]; and
3rd - “Limited effect”: similarity is relevant for the limited purposes of granting the relevant exemption.
A wider approach is taken in respect of Islamic Finance arrangements[61] that shall be treated in such a way as “to give an outcome” comparable to “that which would be the case for their non-Islamic counterparts” and, apparently, not limited to VAT exemption.[62]
The same approach (aiming at creating an equality of VAT treatment for Islamic and non-Islamic products and arrangements) is clearly provided for in the Insurance sector whereby the Takaful (?????) Waqf model is one of the most common alternative for family insurance[63].
Conclusion
This paper endeavoured to examine the conceptual as well as the practical premises and paradigms of Waqf (?????) within the tax framework of the United Arab Emirates (UAE).
As far as the issue of taxation of Waqf is concerned, there are several aspects to be considered in different scenarios.
In a tax treaty context, the first issue is whether the Waqf can claim treaty benefits. An analysis through the UAE treaty network lead to conclude that the Waqf can be deemed to be a “person”, especially with respect to some selected DTCs. In general terms, for DTC’s purposes, since the definition of person includes “company and any other body of persons”, the Waqf might claim treaty benefit upon its inclusion among either (i) “companies” or (ii) “any other body of persons”. For this purpose, the Waqf can be equated to a “company” if treated likewise (i.e. taxed the same way of a company) and this would be the case, in pretty wide and general terms, where income is “accumulated” (not distributed) and taxed upon the Waqf itself. This condition shall be normally assessed against the background of the endowment certificate and, in respect of endowment of family companies, considering the shareholder’s rights.
The entitlement of Waqf as a person that is “resident” is also conditional upon the Waqf being “liable to tax” and depending upon whether or not special principles applicable to CIVs, REITs and Charitable entities can apply.
An analysis through allocative rules fairly shows that employment of Waqf in holding and management of movable (shares, certificates, etc) or immovable assets, might be easily fitted within specific allocative rules of selected DTCs and regulated accordingly.
In the tax ambit, another key issue to be considered is the impact of VAT in any “economic” activity.
The UAE VAT rules, regulations and interpretations put forth by the FTA lead to conclude that supplies provided in carrying out economic activities shall fall under VAT rules. This implies that, in principle, the Waqf itself is deemed to be a Taxable Person, which one can infer from the FTA stance in this respect. The relevant rules to be applied in respect to VAT refund shall, first, consider whether the relevant Waqf is a Designated Charity or not. Remarkably, the UAE VAT system provides rules concerning Islamic Finance products and arrangements, with an aim to treat such instruments and arrangements equally with conventional financial products
[1] Article 3(1)(a), OECD Model (2017).
[2] The term “company” means “any body corporate or any entity that is treated as a body corporate for tax purposes [emphasis added]” (Article 3(1)(b) OECD Model (2017)).
[3] See Article 25(1) UAE Federal Waqf Law.
[4] Unless one can rely upon treaty partners’ practice (such as Belgian) practice, whose treaty policy lead to conclude that “[t]he definition of ‘person’ in the Belgian Model should be further supplemented - as in the 2006 US Model - to also include ‘a trust’ and ‘an estate’ so that fiscally transparent trusts and estates are clearly covered” (L. De Broe, Belgium’s Tax Treaty Policy and the Draft Belgian Model Convention, in Bull for Intl Taxn., 8/9(2008), p. 324).
[5] Article 4(1)(d) Ireland-UAE DTC (2010).
[6] See Article 3(1)(g) Albania-UAE DTC (2014).
[7] Liability to tax (as further expressed below in footnote 19) does not entail an “actual” subjection to taxation, as recently held in Income Tax Appellate Tribunal (ITAT) Rajkot, Martrade Gulf Logistics FZCO-UAE v. ITO, 29 Nov. 2017 (case ITA Nos. 7 to 9/Rjt/2011).
[8] The UAE has clearly reserved “the right to adopt its own definition of residence in its bilateral conventions and not necessarily follow Article 4” (see Non-OECD Economies Positions on the OECD Model Convention, Position on Article 4, par. 2). Noteworthy, UAE individuals are not liable to tax and other’s “[c]ountry practice is varied in this area but ... the prevailing view has been that such a taxpayer would be treated as liable to tax” (as held by Belema Obuoforibo, Roy Rohatgi on International Taxation - Volume 1 Principles (IBFD: 2018) par. 10.1) and tax treaties frequently take into account such situation. See, e.g., J. Bürgisser, Switzerland, in The notion of Tax and the elimination of International Double Taxation and Non-Taxation, in Cahiers de droit fiscal international, Vol. 101b, 2016, p. 824 and K. Brooks, Canada, in Residence of Individuals under Tax Treaties (IBFD: 2009) par. 13.3.1.1.
[9] As per Article 4(1)(b) and (2)(a) UAE Federal Waqf Law.
[10] See Article 4(2)(e) Albania-UAE DTC (2014).
[11] Article 4(2)(b) Azerbaijan-UAE DTC (2006) limited to “governmental institution created in that Contracting State under public law”.
[12] See Article 5(2)(e) Georgia-UAE DTC (2010).
[13] Protocol (ii)(b) with respect to Article 30 Albania-UAE DTC (2014).
[14] See Article 5(2)(e) Barbados-UAE (2014).
[15] See R. Prokish, Artikel 1, in Vogel/Lehner, Doppelbesteuerungsabkommen der Bundesrepublik Deutschland auf dem gebiet der Steuern vom Einkommen und Vermogen - Kommentarauf der Musterabkommen (C.H. Beck: Munchen, 2015), m. no. 53a.
[16] See Article 3(1)(g) Albania-UAE DTC (2014); Article 4(1)(g) Barbados-UAE DTC (2014) and Protocol 1 With reference to Article 3 to the Greece-UAE DTC (2010).
[17] Article 5(2)(d) Georgia-UAE DTC (2010).
[18] Protocol 2. With reference to Article 5 paragraph (2) subparagraph (b) to the Hungary-UAE DTC (2013).
[19] Since 2010, the OECD Model Commentary has been addressing the issue, aiming at putting an end to worst treatment to investors that invest through CIVs as compared with those investing directly. See OECD, The Granting of Treaty Benefits with Respect to the Income of Collective Investment Vehicles, 2010, par. 36.
[20] See G. Fibbe, The 2010 Update of the OECD Commentary on Collective Investment Vehicles, in H. Vermeulen (Editor), The Tax Treatment of Collective Investment Vehicles and Real Estate Investment Trusts (IBFD: Amsterdam, 2013) p. 48.
[21] The notion is not so wide so as to include private equity funds and hedge funds.
[22] The treaty between the State of residence of the investors (State A) and the State of Source (State B); the treaty between the State where the CIV is organized (State C) and State A and the treaty between State A and State B. See, in this respect, H. Vermeulen, General Report: The Tax Treatment of CIVs and REITs, in H. Vermeulen (Editor); The Tax Treatment of Collective Investment Vehicles and Real Estate Investment Trusts (IBFD: Amsterdam, 2013) pp. 7-8.
[23] The OECD considers that, roughly, four alternatives are at stake: (i) the CIV itself is entitled to treaty benefit; (ii) CIV is owned by “equivalent beneficiaries”; (iii) investors are resident in the CIV State; and (iv) CIV benefit “on behalf of” investors.
[24] See P. Brown, Fifty Years of Tax Uncertainty: The Problem of International Neutrality for Collective Investment Vehicles, in H. Vermeulen (Editor), The Tax Treatment of Collective Investment Vehicles and Real Estate Investment Trusts (IBFD: Amsterdam, 2013) pp. 38-39.
[25] See paragraph 6.18 of the OECD Commentary on Article 1.
[26] Recently, the OECD released a Report dealing with REITs addressing all the elements that created for uncertainty in cross-border context, namely: (i) definition, (ii) treaty entitlement; (iii) treaty rules applicable to distribution from REITs; (iv) treatment of capital gains on interests in REITs; etc.
[27] See, among the others, L. Nouel, The Tax Treaty Treatment of REITs - The Alternative Provisions Included in the Commentaries on the 2008 OECD Model, in H. Vermeulen (Editor), The Tax Treatment of Collective Investment Vehicles and Real Estate Investment Trusts (IBFD: Amsterdam, 2013) p. 114.
[28] Due to the limited scope of this article, the authors are not focussing on the issue that interests bearing investment or loan is prohibited under Sharia Law.
[29] Article 7(1) UAE Federal Law on Waqf holding that the following can be endowed “specified funds, movable or immovable, Sukuk, shares, securities, trade name, intellectual property right or any other fund to be benefited from”.
[30] The definition provided for in Article 10(2) Austria-UAE DTC (2003) clearly upholds the OECD Model approach.
[31] Article 10(3) last part Germany-UAE DTC (2010).
[32] See Protocol With respect to Article 13 (Capital gains) UK-UAE DTC (2016).
[33] Protocol 6. With reference to Article 13 of the Convention to the Japan-UAE DTC (2013).
[34] See Protocol 3. With reference to Articles 11, 12 and 13 of the New Zealand-UAE DTC (2003).
[35] See Article 8(4) Panama-UAE DTC (2012) and Article 6(4) Lithuania-UAE DTC (2013).
[36] See e.g. Article 13(2)(a) Ukraine-UAE DTC (2003) and Article 13(4) Turkmenistan-UAE DTC (1998).
[37] That refers exclusively to “shares” hence disregarding (interests in) partnerships.
[38] See Article 14(4) Venezuela-UAE (2010).
[39] Article 13(4) Vietnam-UAE (2010). Article 13(4) Uruguay-UAE DTC (2014) in the original Spanish text reads “acciones o de otras participaciones en una sociedad o fideicomiso”. See, also, Article 14(4) Montenegro-UAE DTC (2012). See also Article 13(4)(b) Canada-UAE DTC (2002).
[40] See Article 7(5) Barbados-UAE DTC (2014); Article 6(5) Bulgaria-UAE DTC (2007); Article 7(5) Fiji-UAE DTC (2012); Article 7(5) Georgia-UAE DTC (2010); Article 6(5) Greece-UAE DTC (2010) and Article 6(5) Kosovo-UAE DTC (2016) (not yet in force).
[41] The relevant clause is consistent with Canadian practice. See Alexander Bosman, Other Income under Tax Treaties (Wolter Kluwer: Alphen aan den Rijn, 2015) p. 141, footnote (238).
[42] Among the few authors dealing with this “new” tax in the GCC region, see G. E Zubeldia, GCC: The New Kid on the VAT Block, 28 Intl. VAT Monitor 4 (2017); T. Vanhee & M. Aldheem, The Challenges of Drafting Tax Legislation and Implementing a VAT in the GCC, 88 Tax Notes Intl. 6(2017); R. F. van Brederode & M. Susilo, The VAT in the Arab Countries of the Gulf Cooperation Council, 28 Intl. VAT Monitor 6(2017); Y. Alkafaji & O. Khanfar, The New VAT Regime in the Gulf Cooperation Council, 71 Bull. Intl. Taxn. 10(2017); H. R. Hull & R. Scalia, GCC VAT: International Goods, 29 Intl. VAT Monitor 2(2018); H. R. Hull & R. Scalia, GCC VAT: International Services, 29 Intl. VAT Monitor 3(2018); T. Vanhee & G. Thomas, VAT on Real Estate Transactions - A Comparative View of Saudi Arabia and the United Arab Emirates, 29 Intl. VAT Monitor 6(2018); and R. Scalia, VAT in United Arab Emirates, Saudi Arabia and Bahrain - Transitional Rules, in 30 Intl. VAT Monitor 1(2019).
[43] Upon fulfilment of certain pre-requisites.
[44] See Article 1 UAE VAT and, accordingly, Article 1 of UAE Cabinet Decision No. (52) of 2017 on the Executive Regulations of the Federal Decree-Law No (8) of 2017 on Value Added Tax (shortly, the “UAE VAT Exec. Regs.”).
[45] See Article 10(1) UAE Federal Waqf Law.
[46] UAE FTA, Taxable Person Guide for Value Added Tax - Issue 2, June 2018, p. 11, par. 4.2.
[47] See UAE FTA, VAT User Guide (Registration, Amendments & Registration), Nov. 2018, p. 30.
[48] Article 1 GCC VAT Agreement.
[49] Article 1 GCC VAT Agreement. The UAE approach is widely consistent with GCC approach.
[50] That is the VAT paid to the supplier of goods and services and that can be offset from “output VAT” (that is VAT to be charged to the customer, in addition to the consideration asked - and to be paid to - the FTA).
[51] UAE FTA, Taxable Person Guide for Value Added Tax - Issue 2, June 2018, p. 19, par. 5.2.3.
[52] Worth to underline that although Charity is a wider concept than Waqf, the latter can be fitted within the wider category of Charity.
[53] That are activities consistent with “charitable purposes and objectives include, for instance, advancing health, education, public welfare, religion, culture, science and similar activities” as defined in Article 38(2) last ind., UAE VAT Exec. Regs.
[54] See UAE FTA, Charities VAT Guide, Oct. 2018, pp. 4-5, par. 2.1.4.
[55] That could be the case for “Common endowments”.
[56] See Article 1 UAE VAT Law.
[57] See the list of Charities that may recover Input VAT (as per Article 57 UAE VAT Law) in: Cabinet Decision No. 55 of 2017 on Charities That May Recover Input Tax of 28 Dec. 2018; Cabinet Decision No. 15 of 2018 on Amending the List of Charities Annexed to the Cabinet Decision No (55) of 2017 on Charities That May Recover Input Tax of 5 April 2018; and Cabinet Decision No. 46 of 2018 on Amending the List of Charities Annexed to the Cabinet Decision No (55) of 2017 on Charities That May Recover Input Tax of 14 Oct. 2018.
[58] Article 46(1) UAE VAT Law, in consistency with Article 36(1) GCC VAT Agreement.
[59] Article 49(5) UAE VAT Exec. Regs.
[60] Accordingly, “the purpose, structure and pricing of the Islamic product will be considered” (as stated in UAE FTA, Financial Services VAT Guide, Feb. 2019, p. 13, par. 4.2.1.).
[61] That are “written contract which relates to a supply of financing in accordance with the principles of Shariah” as per Article 49(1)(d) UAE VAT Exec. Regs.
[62] Importantly, the FTA has been clarifying the treatment of Islamic Finance dealings so that, in concrete terms, the relevant products shall be fitted within one of the cases dealt with by the FTA.
[63] The case of family Takaful and Re-Takaful products is specifically dealt with by the UAE FAT, Insurance VAT Guide, Sept. 2018, p. 14, par. 4.2.2.