Frequently Asked Questions about VAT in UAE

The VAT was introduced in UAE in 2018. even though it has been 2 years, There are still some doubts on the minds of people in UAE. Here we list some of the frequently asked questions about vat in UAE.

What Supplies are Zero Rated in UAE?

  • Newly constructed residential buildings which are on sale for the first time within 3 years of its construction;
  • Means of transportation such as aircraft and ships;
  • International GCC transport of passengers and goods;
  • Export of products and services to outside the GCC;
  • Certain precious metals for investment such as gold, silver, and platinum;
  • Aircraft or vessels used for rescue and assistance by air or sea;
  • Healthcare services and products;
  • Covid-19 related products such as disposable suits, hand sanitizers, face masks, respirators for fair, gloves, etc;
  • Certain educational services and all related products.

What are the VAT exempt supplies in UAE?

  • Bare land.
  • Transport of local passengers.
  • Financial services such as life insurance that aren’t provided for a discount, or any similar kind of consideration.
  • Residential buildings except for those buildings which are specifically zero-rated.

Should I pay VAT for Imported Goods?

VAT is due for products and services including imported goods and services. The recipient has to pay vat under the reverse charge mechanism.

Is there Tax Grouping in UAE?

Businesses will be able to satisfy the taxation law requirements by registering as a VAT tax group in UAE. Such requirements include similar business types and having business premises in the country. For certain businesses, a tax group would be beneficial as it simplifies the vat accounting process in UAE.

Is VAT Applicable for Customs Duty Exempt Goods?

Not necessarily. Customs duty and VAT are independent levies. They are separate, which means customs exempt goods may be subjected to vat in UAE.

Can a UAE National be able to Claim VAT?

UAE may introduce a scheme wherein a UAE national can reclaim VAT on goods and services related to residential construction.

What are the Requirements for VAT in UAE?

If the taxable supplies per year for business reach the mandatory VAT threshold. then they have to register for VAT. 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 is 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 Language is used in the VAT Registration Form in UAE?

The registration form is available in both English and Arabic.

Why Should Businesses Register for VAT?

Vat registration will help businesses in UAE to claim back input tax paid on their business expenses and purchases. If your business is not vat registered, then it means you are losing 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 UAE market.

Apart from that, businesses that haven’t registered for VAT even after reaching the mandatory threshold may face vat fines as per the country’s law.

What’s is Reverse Charge Mechanism for VAT?

The reverse charge mechanism for VAT is applied to imported goods and services in UAE. Under this, the supplier need not pay the vat whereas the recipient is responsible to pay the vat which he can claim back under input vat returns.

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!