As of January 1, 2018, the UAE Value Added Tax (VAT) was applied to goods and services provided by companies outside of the UAE. This new tax law was set to impact both businesses and consumers in the Emirates, so it’s important to understand what VAT is and how was it decided to be applied. In this blog post, we’ll take a closer look at the new VAT law and explore some of the changes that businesses and consumers can expect.
Is VAT Applied to Export Services?
The UAE currently has a VAT of 5% applied to most goods and services. However, there are some exceptions, including export services.
This means that if you provide a service that is exported outside of the UAE, you will not have to pay VAT on that service. This can be a significant advantage for businesses that export services, as it can save them a considerable amount of money. There are a few conditions that must be met in order for a service to qualify for the VAT exemption, including the following:
- The service must be exported outside of the UAE.
- The customer must be located outside of the UAE.
- The service must be provided to a customer who is not registered for VAT in the UAE.
If all of these conditions are met, then the service will be exempt from VAT. This can be a big benefit for businesses that provide export services, as it can save them a significant amount of money. If you are thinking about starting or expanding your export business in the UAE, make sure to take advantage of this opportunity by ensuring that your services meet all of the requirements for the VAT exemption.
VAT On Services Provided Outside UAE
The United Arab Emirates (UAE) has a value-added tax (VAT) system in place that applies to the majority of goods and services sold within the country. However, there are a few exceptions, one of which is services provided by businesses that are not established in the UAE. This includes businesses that are based outside the UAE but provide services to customers in the UAE. Given that many businesses operate internationally, it’s important to be aware of how VAT works on services provided outside the UAE.
Generally speaking, businesses that provide services to customers in the UAE are required to register for VAT and charge VAT on those services. The amount of VAT charged depends on the rate set by the UAE government, which is currently 5%. Businesses can recover any VAT they have paid on their inputs, such as office rent or business travel, by offsetting it against the VAT they have charged on their outputs. This process is called a ‘VAT refund‘.
However, there are a few exceptions to this rule. One exception is for businesses that are not established in the UAE but provide services to customers in the UAE. In this case, the customer is responsible for paying VAT on the service, rather than the business. The customer can then claim a VAT refund from the UAE authorities. Another exception is for businesses that are based in the UAE but provide services to customers outside the UAE. In this case, no VAT is payable either by the business or the customer.
As you can see, there are different rules for businesses depending on where they’re based and where their customers are located. It’s important to be aware of these rules if you’re operating a business that provides services internationally. By understanding how VAT works on services provided outside the UAE, you can ensure that you comply with all relevant regulations and avoid any penalties.
Services Exempt from Vat in UAE
There are a number of services that are exempt from VAT in the United Arab Emirates. These include educational services, healthcare services, and certain financial services. Additionally, a number of exports are also exempt from VAT. Some of the other services that are exempt from VAT include the following:
- Transportation services
- Government services
- Services related to the construction of certain public infrastructure projects
- Services provided by religious organizations
- Services related to gambling and betting activities
- Services provided by charities and non-profit organizations
Overall, there is a wide range of services that are exempt from VAT in UAE. This provides considerable flexibility for businesses operating in the country and helps to create a level playing field for all businesses.
In conclusion, the UAE government has clarified that services exported from the UAE to nations outside the GCC shall not be subject to VAT in UAE. This indicates that there is no tax on exports, and the supplier is therefore eligible to claim an input tax credit on the materials used to produce the exported service. For more details on VAT on services in UAE, contact an experienced VAT consultant in Dubai to guide your service business with a deeper knowledge of VAT registration in UAE.
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