VAT in UAE

The UAE VAT law categorizes supplies into three main types:

1. Taxable Supplies

Standard-rated supplies taxed at 5%. This applies to most goods and services.

2. Zero-rated Supplies

Supplies that are taxable but at 0%. Examples include international transportation and the export of goods and services.

3. Exempt Supplies

Supplies that are not subject to VAT. Examples include residential property leases and financial services.

4. Out of Scope Supplies

Goods and services that are outside the scope of VAT, such as certain financial services and real estate transactions.

VAT is calculated as a percentage of the taxable supply value. Businesses registered for VAT collect VAT from their customers and remit it to the Federal Tax Authority (FTA). They can also claim input VAT credits for VAT paid on purchases related to their business activities. This system ensures that businesses only pay VAT on the value they add to goods and services.

Example:
A business sells a product for AED 100, with a 5% VAT rate, the customer pays AED 105.
If the business paid AED 50 to purchase the product (plus AED 2.50 as VAT), the business owes the FTA only the difference: AED 2.50 (AED 5 collected – AED 2.50 paid).

Given their significance and contribution to the social fabric and economy of the UAE, several types of companies or organizations are exempt from corporate tax. So, these are referred to as Exempt Persons and consist of:

Automatically Exempted: 

Government entities Government-controlled entities specified by the cabinet decisions.

Exempted if notified to the Ministry of Finance (subject to certain conditions) 

Extractive Business Non-Extractive Natural Resource Business.

Exempt if listed in a cabinet decision

Qualifying Public Benefit Entities (PBE)

Exempt if applied to and approved by the Federal Tax Authority (subject to certain conditions) 

Public or private pension and social security funds. Qualifying Investment Funds Wholly owned & controlled UAE subsidiaries of a government entity

Government entities, government-controlled entities, and extractive and non-extractive natural resource businesses may be exempt from corporate tax filing, compliance, and registration requirements unless involved in taxable activities per the Corporate Tax Law.

Businesses must register for VAT in the UAE if:

• Mandatory Registration: The taxable turnover exceeds AED 375,000 in the past 12 months.
• Voluntary Registration: Businesses with a turnover between AED 187,500 and AED 375,000 can voluntarily register for VAT.

Failing to register when required can lead to significant penalties.

Registering for VAT is straightforward but requires attention to detail. Businesses can register through the FTA portal. Here’s a quick step-by-step guide:

1. Create an account on the FTA website.
2. Fill in the VAT registration form: Provide business details, turnover, and financial information.
3. Submit the required documents: Trade license, passport copies, Emirates ID, and financial statements.
4. Receive TRN (Tax Registration Number): Once approved, you will receive a TRN, confirming your registration.

Our team at Shuraa Tax can assist you through every step of the VAT registration process to ensure accuracy and timely submission.

Businesses can claim a VAT refund on the input tax they paid on purchases. If the input tax exceeds the output tax in a given tax period, the difference is refundable. VAT refunds are subject to certain conditions, and businesses must file VAT returns quarterly or annually depending on their revenue.

We assist our clients in preparing and filing VAT returns, ensuring compliance with FTA regulations and maximizing refund opportunities.

Understanding UAE VAT laws can be complex and time-consuming. A professional VAT consultant in Dubai ensures that:

• Your business remains compliant with the latest tax regulations.
• You avoid penalties for late filings, incorrect returns, or non-registration.
• You optimize your VAT recoveries and minimize costs.
• You receive assistance with VAT audits and resolving disputes with the FTA.

At Pro Services Tax, our VAT experts are here to help you with VAT registration, return filings, compliance, and refunds, making the process seamless and stress-free.

The FTA has strict penalties for non-compliance with VAT regulations. Some common penalties include:

• AED 10,000 for failure to register within the deadline.
• AED 1,000 to AED 50,000 for failure to file VAT returns or incorrect VAT return submissions.

By working with Shuraa Tax, you can avoid these penalties and ensure your business stays complaint with UAE VAT laws.

At Pro Services Tax, we offer comprehensive VAT services in the UAE tailored to your business needs, including:

• VAT registration and de-registration
• VAT return filing and compliance
• VAT refund claims
• VAT consultancy and audit support
• Assistance with VAT disputes and FTA communication

If you are looking for comprehensive tax management along with VAT accounting and advisory services, then Pro Services Tax Accounting & Auditing have to be the ultimate solution to all your problems. Speak to our agents and get quick assistance with your financial dealings and this way you’ll be able to increase your company’s productivity and overall efficiency.