The Federal Tax Authority introduced Federal Decree-Law No.8 of 2017, which took effect on January 1, 2018, governing the Value Added Tax (VAT). The fundamental principles of VAT and its application have remained consistent since its inception. However, the FTA has periodically announced a few rule changes and updates. Each year, amendments to the UAE VAT law are commonplace. This article aims to highlight key aspects of the new VAT rules in the UAE for the year 2024, essential for businessmen to comprehend. For ensuring compliance with UAE VAT laws, opting for VAT registration in the UAE through a team of seasoned tax professionals is highly recommended.

Purpose of Value Added Tax in the UAE Taxation System

Value-added tax (VAT) is a taxation system that applies at each stage of a product’s development or consumption. The tax burden ultimately falls on the final consumer, with registered traders collecting it on behalf of the government. The primary aim of implementing this tax was to broaden the government’s revenue sources, thereby promoting higher standards of living in the UAE. In the UAE, there exists a standard VAT rate of 5%, with goods classified as either zero-rated, exempt, or standard-rated. For comprehensive information on any aspect of VAT laws and regulations, it is advisable to seek guidance from VAT advisors in Dubai.

Rule #1: VAT Registration Threshold

Businesses must register under VAT if the total amount of taxable supplies it makes exceeds AED 375,000 over the past 12 months, or expects to exceed within the next 30 days.

Additionally, voluntary registration is permitted for companies whose annual supply and import values surpass AED 187,500. The registration process can be completed through the Emaratax portal of the FTA by the businesses who are to register for VAT.

Voluntary registration brings several benefits, learn about them in the following bolg: Advantages of UAE Voluntary VAT Registration.

Rule #2: Goods Categories Under VAT Law

The Goods and services in the UAE are classified into four major categories. These categories are explained in detail below:

VAT treatment	Description
Standard rated (5%)	These products and services will be subject to a 5% VAT rate.
Zero- Rated	Zero-rated Supplies are subject to 0% VAT. Examples are a few services related to education, healthcare, exporting goods and services beyond GCC, precious metals, international transportation, etc.
Exempt	These supplies are not subject to firms’ input tax claims or VAT charges. You cannot recoup the input tax when selling or delivering exempt goods or services. Examples include residential real estate, undeveloped land, public transportation, life insurance, and specific financial services.
Deemed	These are goods that don’t fit the definition of a supply, yet companies have to charge VAT on them. They are: 1. Business assets that were sold for no money 2. Goods used for non-business purposes on which input tax is claimed, transfers of business assets from the United Arab Emirates to other GCC Implementing States, or vice versa, etc. 3. Out-of-scope materials These supplies were excluded from the scope of VAT regulation by the FTA

If you want to ensure that the categorization has been done properly under the VAT rules, then you must contact VAT experts in the UAE for assistance.

Rule #3 Issuing Tax Invoice for All Taxable Goods

The businesses that are required to make taxable supplies are supposed to issue an original tax invoice and deliver the same to the recipient of goods and services. the tax invoice must have mentioned the following data:

At the top of the invoice “tax invoice” must be mentioned clearly.
The name, address, and the Tax Registration number of the business shall be clearly mentioned.
The name, address, and tax registration number of the receiver shall also be clearly mentioned.
The serial number of the tax invoice or the tax identification number shall be also be mentioned. This helps in identifying the tax invoice and its number in any number of invoices.
Supply date, in the case where it is different from the date of issue.
Details of the goods.
The unit price, size, and quantity of the supplies, payable VAT, and the amount payable.
Any discounts rates that have been given.
The total sum is payable in AED.
Payable tax in AED with the exchange rate that is applicable at that time.
If the recipient of the tax invoice wants to know the tax calculation, the same must be mentioned on the invoice.

Rule #4: Mandatory records that are to be maintained

Whether registered for VAT or not, the following documents are required to be kept by the businesses in the UAE:

Balance sheet.
Profit and loss statement.
Fixed assets records.
Records of payrolls, inventory, and accounting. All details like expenses, sales payments and receivables must be maintained in this.
The above-mentioned records are to be maintained by the VAT registered firms for a minimum of 5 years period.

Rule #5: Filing VAT Returns And Making Payments

Quarterly returns are mandatory for businesses registered under the VAT scheme. The VAT obligations must be paid to the FTA every quarter. These VAT returns must be completed before the 28th day of the quarter end. FTA, however, may assign a distinct tax term to certain taxpayers. To file your returns in a timely manner, you must get the help of VAT experts in the UAE.

You may need: A Complete Resource To VAT Filing in UAE for 2024

VAT effects in the UAE on people and enterprises in the UAE

The introduction of VAT has affected the people and businesses of the UAE. The consequences of VAT have been as follows:

For individuals, depending on their lifestyle and spending habits, the cost of living increases slightly. Even if the purchases are primarily for VAT-exempt items, their cost will stay the same.
For businesses, on the other hand, the companies that are VAT registered are supposed to charge and collect VAT at the prescribed rate from each client. This indicates the importance of maintaining all records for the business in the UAE so that they remain compliant in their financial audits. Therefore, companies must keep appropriate records of all kinds of transactions like purchases, expenses, sales, etc.

Any clarifications that you may need must be addressed to VAT consultants in the UAE.

Engage the Expert Services of VAT Registration UAE

VAT Registration UAE, a reputable Tax Consultant in the UAE is committed to assisting Taxable Persons in registering for VAT and ensuring compliance with the rules and regulations stipulated by the FTA. Thus, contact us today and we shall be glad to assist you.