Questions and Answers Regarding VAT in UAE

What are supplies that are considered as zero-rated in UAE?

  • First rent or sale of residential buildings;
  • Means of public transportation;
  • International transport of passengers and goods;
  • Export of products and services;
  • Certain precious metals for investment;
  • Vessels such as aircraft that are designated for assistance and rescue by sea or air;
  • Healthcare services as well as related products and services;
  • Educational services and all related products and services

What are the VAT exempt supplies in UAE?

  • Bare land
  • Transport of local passenger
  • Financial services including reinsurance and insurance of life and the financial services that aren’t provided for a discount, rebate, commission, explicit fee, or any similar kind of consideration

Is VAT paid as well with imports?

VAT is taxation that is due for products and services including those that are purchased from other countries. In the case of the recipient is a registered taxable person for VAT purposes in UAE, then the VAT due on the imports will be used with a reverse charge mechanism.

In the case of the recipient being a non-taxable person, the VAT paid will be if the import was from any place that’s outside GCC. The VAT will be paid prior to the imports being released to the buyer.

Is there tax grouping in UAE?

Businesses in UAE will be able to satisfy the requirements covered by taxation laws in the UAE by registering as a VAT tax group. Such requirements include being related to associated or related parties and having business premises in the country. For certain businesses, a tax group would prove to be beneficial as a tool in simplifying the process of VAT accounting in UAE.

Are goods and services that are exempt from VAT also customs duty-exempt?

Not necessarily. Customs duty and VAT are independent levies. They are separate, which means even when customs duty has been considered as exempt for specific goods, the imports may still be subject to VAT in UAE.

Can a UAE national be able to claim VAT?

A scheme will soon be introduced in the UAE wherein a UAE national is allowed in reclaiming VAT that is paid on certain goods and services that are related to a new residence construction which would be used privately for the UAE national’s family. The UAE national can be one that’s not registered for VAT. The scheme can allow VAT recovery on expenses such as building materials and services of the contractor.

What are the requirements for VAT in UAE?

A business that is established in the UAE and performing economic activities has to be registered for VAT when taxable supplies per year reach the mandatory threshold for VAT registration. The business that hasn’t reached the mandatory threshold for VAT registration can choose to undergo voluntary registration if and when it is eligible. This is when it is within the voluntary threshold. In UAE, the voluntary VAT registration threshold is AED 187,500 while the mandatory VAT registration threshold is at AED 375,000.

When should a taxable person utilize the tax registration number?

A tax registration number will be required as it enables goods or services supplier to provide an invoice. Every invoice with a VAT charge has to include the TRN of the supplier or taxable person supplying goods/services.

What is the language that is used with VAT registration in UAE?

The registration form will be both in English and Arabic.

Why is there a need to register for VAT?

VAT registration often proves to be beneficial for businesses in the UAE as it allows them to claim input tax that is paid on their expenses and purchases compared to non-registered businesses that are not entitled for VAT reclaims. If you are running a business and you are not registered for VAT, that means you are losing input VAT, allowing your business to absorb all input tax costs. This can result in an increase in the selling price of goods and services, stagnant business growth, and/or loss of competitiveness in a highly competitive UAE market.

Apart from that, a business that has not been registered for VAT can attract administrative fines and penalties which are levied by tax authorities in the country when the business reaches fail in undergoing mandatory VAT registration as per the country’s tax laws.

What’s a reverse charge mechanism?

This mechanism is when a recipient of products or services is mandated by authorities to account for Value Added Tax rather than the service provider or supplier. This is often when the service provider or supplier isn’t a taxable person where the supply was made e.g. imports from outside the UAE and imports that are from any GCC member country.

We know you have more questions regarding VAT in UAE as it can be a complicated subject. Call us here in VAT Registration UAE for more information!