The Implementation of UAE Value Added Tax (VAT)

The UAE government constantly implements frameworks and mechanisms across several different government departments as part of their key initiatives in boosting economic health. Among them is VAT implementation in UAE, which was declared by the Federal Tax Authority. For the public, Value Added Tax implementation meant higher prices for food, entertainment, and other consumer goods and services. For businesses in the country, it meant levying the current VAT rate of five percent on goods and/or services that are taxable.

The UAE government also introduced a decreased VAT rate and exemptions for specific goods and services. As not all products and services are taxable, it is best to consult with regulated tax agents in Dubai regarding VAT implementation in UAE.

What is VAT?

Value Added Tax in UAE is tax that’s applicable to all products and/or services; hence why it is also known as a consumption tax. The taxation is indirect as it’s applicable to final consumers who buy or acquire products/services.

Reduced rates for VAT in Dubai

The following products and services are considered zero-rated:

  • International transportation services;
  • Exports;
  • Investments in precious minerals and materials;
  • Sea and aircraft transportation services;
  • Supply or lease of residential properties;
  • Education services;
  • Medical or health care services

There are also other categories of products and service that are considered exempt from VAT in UAE, and they are as follows:

  • Land plots sale;
  • Residential properties sale by a realtor;
  • Local passenger transport;
  • A host of financial services

In order for a business to collect Value Added Tax, it has to register with FTA, UAE’s tax authority.

Are businesses required to undergo VAT registration?

VAT is a relatively new kind of tax introduced; however, the government already made crucial progress when it comes to clarifying those that are required to registered for VAT. VAT registration does not apply to all businesses in the country; however, it is mandatory for businesses that meet certain conditions. Here are some important points to remember about VAT registration in UAE:

  • Companies and natural persons that make taxable supplies within the country can register for VAT voluntarily;
  • Legal business entities that import goods which are subject to the indirect tax can also voluntarily register for VAT in UAE;
  • Companies that import goods which has a total that exceeds Dh187,500 annually can choose to undergo VAT registration in UAE;
  • Foreign companies that sell taxable goods or services within the country are required in implementing VAT in their businesses;
  • Companies that import and/or sell goods and services which has a total that exceeds Dh375,000 annually are required in implementing VAT within their organizations starting with VAT registration

Companies in the UAE that are registered for VAT can impose and collect VAT from final consumers. They will then pay VAT to the government. Businesses are to file VAT returns regularly, which enables them in recovering amount of VAT paid. It’s useful to know foreign companies which are registered for VAT may also claim VAT refunds.

If you are considering of opening a business in the country, then opt to register for VAT from the start. Fortunately for you, our regulated tax agents in Dubai can assist you.

What are the needed documents UAE VAT registration?

There are several requirements which are to be furnished to the FTA for VAT registration, and they include the following:

  • Copy of the business license/permit of the company
  • Copies of owners’ passports (for companies, shareholders’ passport copies are needed)
  • Articles and Memorandum of Association
  • Information regarding the company’s appointed representative and the person’s contact details
  • Information regarding the company’s bank account including IBAN
  • Proof of registered address of company within the country
  • Income statement of the business for the past twelve months if available
  • Estimation of business’ expected revenue, expenses and turnover for the following thirty days following VAT registration
  • Information regarding the export and import activities of the business if applicable
  • Customs code of the business and Custom Code Certificate copy if applicable
  • Information regarding GCC countries wherein the company is trading with
  • Detailed description of business experience of the company for the past five years if applicable
  • Information regarding intention of business to register as a tax group if applicable
  • Identification papers copies with necessary visas for natural persons

Even if registration for VAT may be completed without the help of experts, it is extremely crucial to seek their help as they can help increase the likelihood of the business completing the procedure of VAT registration successfully.

Take note: the process can be lengthy and time-consuming, plus it involves the furnishing of complete and accurate details. Should you wish to talk to our regulated tax agents in Dubai, call us today to book a consultation! We would love to hear from you and understand your specific needs and requirements.