FAQs About UAE VAT

    VAT refers to Value Added Tax system in which the tax is levied on each stage of the supply chain, and the end consumers bear the tax. VAT registration has been accepted worldwide, with over 150 countries have implemented the tax structure. The UAE implemented VAT on January 1, 2018.
    The VAT system is widely accepted in 180 countries. All the OCED countries, which comprises 38 members, have implemented the VAT, except the USA, which has a similar Tax system with some variations in place.
    A 5 % standard VAT applies across the GCC to most of the goods and services in the UAE. Else, they fall into the 0% tax category or the exempted category.
    0 % goods and services category comprises the healthcare and the education sector, enabling citizens to avail services at the lowest possible charges.
    Goods not subjected to VAT are categorised as exempted. Some examples of the VAT are local transport, Bare land, renting of residential and commercial properties, financial services that offer life insurance services. Businesses providing these services don’t have to apply for VAT registration, nor do they have to file a VAT return.

    If a  company purchases goods worth AED 10,000 inclusive of the 5% VAT, the same products are sold to the end consumers at a VAT inclusive price of AED 20,000. 

    The input tax is collected at the standard rate of 5 % of  AED 10,000, i.e., AED 500. 

    The output tax is collected 5 % of the AED 20,000 that will amount to, i.e., AED 1000. 

     The business’s tax liability is the difference between the input and output VAT: – AED ( 1000-500) = AED 500.

    As a business resident in the UAE, you are eligible to apply for voluntary registration if –

    Your turnover with supplies of taxable goods and services or expenses was more than AED 187 500 in the last 12 months. 

    The turnover or expenses is expected to be more than AED 187,500 in the next 30 days. 

    The turnover is calculated based on the total value of the taxable supplies ( including both the Zero VAT and exempted category supplies). Expenses are calculated based on the full value of the purchase subject to VAT.
    A business resident outside the GCC states is dealing in supplies of goods and services in the UAE, and there’s no other person responsible for the VAT on behalf of the business; it needs to register for VAT.

    Taxable businesses collect VAT from the end-consumers on behalf of the government. The consumers pay for goods with a standard 5 % tax inclusive of the price of the goods. 

    As per the VAT Laws in the UAE, a standard rate of 5 % VAT is applicable on the taxable supplies on tax-registered businesses. The 5 % tax is applied to the taxable supply of goods and services at each supply chain step. 

    Tourists in the UAE are required to pay for the VAT at the point of the sale.
    A tax group can be created between two or more associated legal persons, and each of them must be a resident in the UAE and meet the specific control criteria.

    Below is defined a quick navigation process of the site. The taxpayers have to visit the official FTA website and visit the eServices section. 

    Signup for an e-services account/ Login to an existing e-services account.

    Verify the services account by receiving and taking the appropriate action on the email received on the registered email address 

    Click on the button- Register for VAT.

    Eight sections need to be filled in the VAT registration form. Users can move from one area to the next only after completing all the required fields; otherwise, a pop-up message will prompt the user to achieve the same.

     Save the progress by clicking on Save as Draft

    Click on Save and review button on the form.

    Click on Submit for Approval button. 

    After submitting the form, the status of your profile on the Dashboard will change to Pending. 

     The FTA will send an email confirming the receipt of the application. 

    If further information is required for verification, the FTA will email asking to furnish the required details. 

    As a taxable business in the UAE, you should file for VAT registration within the stipulated time; otherwise, the FTA will impose a late registration administrative penalty of AED 20,000.

    Supplies refer to goods and services or transactions that are subjected to any VAT categories- the 5 % standard rate, the Zero tax, or fall under the tax exemption category as per the VAT Law.  

    What are Goods and Services?

    Goods are defined as any tangible product that is sold for cash or consideration. Services are non-tangible, e.g., beauty services, home cleaning services, etc. 

    Covid-19 prevention products- sanitizers, Masks, Disposable suits, gloves, etc.

    Some educational services and allied products.

    Precious metals like Gold, Silver, and Platinum bought for investment purposes.

    Healthcare services and products.

    Newly Constructed buildings are put on sale for the first time within three years of the construction.

    Aircraft and ships

    Means of transport such as aircraft, vessels used for rescue operations.

    International GCC passenger and goods transport services.

    Export outside the GCC.

    Rent accrued from the residential building except those that have been subjected to the Zero % Vat category. 

    Transport of local passengers.

    Financial services such as life insurance are included that are not provided at a discounted rate. 

    Bare land. 

    If your business is eligible for VAT registration, you should get VAT registration as you would be unable to claim the input tax resulting in a loss for your business. A business should claim the unclaimed input tax from the government as it can increase the selling price of the goods, and the company can lose a significant share in the market and not compete with other businesses. Most importantly, if your turnover has crossed the mandatory threshold of AED 375,000 described by the VAT law and you do not get VAT registration, the FTA will impose a penalty, and the taxable business is liable to pay for the penalty. However, a company can choose to register for Voluntary VAT registration, for which the threshold is AED 187,500.
    The VAT registration form is available both in the English and Arabic languages.
    A taxable business should charge VAT on the goods and services they deal in. It can file for the VAT return on the Vat they have paid on the taxable supplies. It needs to maintain VAT-related records that need to be furnished to the FTA. The formal submission is made online on the FTA portal either by the taxable business/ entity or tax agents on behalf of the business. The VAT Return process summarises the VAT they have charged to the end consumers and the VAT they have paid to the government as per the deadline set up by the FTA.

    A tax period is a particular period during which the payable tax has to be calculated and paid. 

    Every business must submit online the VAT return to the FTA- Federal Tax Authority which provides the required information about the value of supplies and purchases made during the tax period and the tax liability.

    The FTA has described different deadlines for taxable businesses. The standard rule is to file the VAT returns within 28 days at the end of the tax period. The tax period has been defined for each business. 

    • Businesses with an annual turnover below AED 150 million will have to file VAT returns quarterly.
    • Businesses with more than AED 150 million annual turnovers have to file the VAT return monthly. 

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