Implementing VAT for restaurants in UAE

In UAE, VAT Law has been passed that mandates the restaurants to implement VAT charges on the goods or services delivered. The main idea behind the implementation of VAT is to increase the number of sources of revenue flow, bring a stable position for all business in UAE. For restaurants in UAE, getting the VAT Registration is one of the important aspects that have to be addressed. If you are a business investor or an entrepreneur who wants to set up a restaurant business in UAE, you need to be aware of certain essentials.

Also Read: Applicability of VAT for Goods Supplied to Designated Free Zones

Criteria to register for VAT for restaurants

• If the value of taxable supplies and imports exceed AED 375,000, a business is required to register for VAT.
• If taxable supplies are between AED 187500 and AED 375,000, then a business can undergo voluntary VAT registration.

If you want to know more about the threshold limits or unsure about whether to register for VAT, you can seek the advice of a VAT expert in UAE

How do restaurants implement VAT?

Restaurants have 2 options to display prices in their menu

• To display prices inclusive of VAT
• To display the prices in the menu with a footnote on each page mentioning applicability of 5% VAT on items.

To understand both scenarios seek the help of VAT experts in UAE.

VAT paid on input credit

The Restaurants can obtain input credit on the VAT paid on expenses incurred. Here are the general Input Tax Credit that can be availed by a restaurant in a regular scenario:
• For purchase of ingredients
• Rent for the restaurant
• Delivery vehicles
• Fixtures and furniture of the restaurant
• Kitchen equipment
• Office equipment
• Stationary items

Maintaining books of records

Any taxable person is required to retain VAT invoices issued (to customers) and received (and taken credit for) for a minimum of 5 years. This will enable the Federal Tax Authority to identify the details of the business’ activities and review transactions from tax invoices, debit or credit notes and import / Export records as determined by the Law. Restaurants can seek the help from VAT experts to meet the invoice requirement as per the FTA guidelines.

VAT return filing for restaurants

Each taxable person shall:
• Submit the tax return to the authority in accordance with the provisions of VAT law
• Settle any payable tax as specified in the tax return within the time frame specified in the tax law.
Hiring a tax expert can help restaurants to file VAT returns on time and can avoid penalties caused due to delay in filing of tax return in UAE.

Penalties for noncompliance with VAT laws

In case of noncompliance, the FTA may issue a tax assessment. The authority shall issue an administrative penalties assessment and notify the business within five working days for various indicators that may have been committed. Such administrative penalties shall not be less than 500 dirhams for any violation and shall not exceed three times the amount of tax in respect of which administrative penalty was levied.
Restaurants should consult with a of tax agent in UAE in advance to avoid incurring penalties and implement VAT successfully.
Hiring a vat expert will enable restaurants to prepare and implement for tax policy in UAE.

VAT registration services in UAE

It is advisable to take expert opinion while dealing with the implementation process. Vat registration UAE is a tax consultancy firm in UAE that provides its clients with valuable assistance in understanding the VAT regulations in the country. Our experts can help in simplifying the VAT regulations and its provisions. To take a step forward, do contact us today as we would be glad to assist you.