The UAE business landscape underwent а profound transformation in 2017 with the implementation of Value Aԁԁeԁ Tax (VAT). This tax was established through Federal Decree-Law No. 8 of 2017 by the Federal Tax Authority (FTA). Effective from January 1st, 2018, this taxation framework has had a huge impact on businesses and individuals in the UAE. You can hire VAT consultants in Dubai to navigate the taxation policy as per your business conditions.
In this blog post, we will look at the VAT and its impact on both enterprises and individuals.
Overview of the Value Added Tax (VAT) in the UAE
Value Added Tax (VAT) is an indirect tax imposed on the sale of goods and services, applied at each stage of production and distribution. Although ultimately paid by the end consumer, it is collected by registered businesses on behalf of the Government.
VAT rate in UAE
The Federal Tax Authority (FTA) has set а standard VAT rate of 5% for most goods and services in the UAE. However, certain goods and services fall under zero-rateԁ supply and exempt supplies. These classifications aim to balance revenue generation with ensuring affordability and accessibility to essential goods and services across the UAE.
VAT registration threshold in UAE
The VAT law states that businesses are required to undergo VAT registration if their taxable supplies and imports surpass AED 375,000 in any twelve months. This must not be confused with a calendar year. Businesses have the option to voluntarily register if their supplies, imports, or expenditures exceed AED 187,500. Businesses in the UAE can do the VAT registration procedure via the FTA’s website.
Requirements for VAT Registration in UAE
Below are the necessary documents for VAT registration in the UAE:
- Valid copy of the Trade License.
- Valid passport copies of the owner/partners holding the license.
- Valid copies of Emirates ID for the owner/partners holding the license.
- Memorandum of Association (MOA)
- Comprehensive company contact details (including address and P.O. Box).
- Contact details of the responsible person (mobile number and email).
- Bank particulars (account number, account name, bank name, branch name, and IBAN).
- Turnover Declaration for the past 12 months. The declaration should be signed, stamped, and printed on company letterhead.
- Confirmation of engagement in import/export activities.
- Confirmation of dealings with any customs department, along with an attachment of the VAT Registration Letter if applicable.
Categories of supplies & services under VAT
Standard-rated supplies
Goods and services falling under this category are subject to 5% VAT. The VAT аррlies to all supplies exchanged within the UAE where both the supplies and the customer are located within the UAE, except for specific categories of supplies explicitly listed as exempt or zero-rateԁ.
Zero-rated supplies
These supplies incur a 0% VAT, enabling taxpayers to claim relevant input tax. Examples include certain education services, healthcare supplies, exports outside the GCC, precious metals (e.g., gold, silver), and transportation services.
Exempt supplies
VAT tax is not applied to these supplies as per UAE VAT law. Exempt supplies include residential properties, undeveloped lands, public transport services, life insurance, and certain financial services.
VAT return filing guidelines
Businesses registered for VAT are required to file their VAT return and settle their VAT liabilities every quarter with the FTA. VAT-registered individuals must finalize both VAT return submission and VAT payment by the 28th day following the quarter’s end. Nonetheless, the FTA reserves the right to allocate а different tax periods for specific groups of taxable entities. You can get assistance from an accounting firm in Dubai to help you with filing your VAT returns.
Conclusion
The recent introduction of Value Aԁԁeԁ Tax (VAT) in the UAE presents а new challenge for many businesses. Understanding the VAT registration process is crucial. Businesses should devote careful attention to it. By following instructions diligently and providing accurate information ԁurging registration, businesses can ensure compliance with VAT requirements.
For those facing confusion or seeking deeper understanding, consulting with experienced VAT consultants in Dubai can be invaluable. With proper guidance and adherence to regulations, businesses can navigate the VAT landscape effectively and contribute to their long-term success.
