VAT in the UAE: Guidelines for UAE Businesses

UAE is a business hub. Many people from around the world come here to establish their businesses. What is the reason for this? The major credit goes to the benefits UAE has in store from businesses. We will uncover those in this blog gradually.

As a business owner in UAE or as someone willing to set up business here, the first and foremost element to understand is the business laws of the UAE. One of the most important aspects of this is the Vale Added Tax (VAT) which was rolled out in UAE and had come into effect from January 1, 2018. It was levied at a standard rate of 5%. Also, there have been some recent changes revolving around the VAT in UAE that must be paid attention to. 

Many questions will be answered revolving around VAT. Here is summing up everything you need to know about VAT as a business owner in UAE.

What should businesses do with regard to VAT?

This goes without saying that you must ensure that the financial records of your business are up to the mark, as a first step. The next step is thoroughly examining those records. Upon examination, if you find out that your company exceeds the minimum annual turnover, then you have to go for VAT registration. 

This means that the businesses whose taxable supplies/imports go beyond the threshold of AED 375,000 must register for VAT. A voluntary registration threshold is AED 187.500.

If you are a VAT registered business, then you definitely should -

• They must charge VAT for taxable goods/services that they supply.

• You can claim the VAT that you paid for business-related goods/services.

• Report regularly on the VAT they have collected and the amount of VAT that was paid.

Does your business fall under the tax-exempt category?

There are some categories exempt from VAT - 

• Some financial services

• Residential properties

• Bare land

• Life Insurance 

• Local passenger transport

Along with the exempt goods and services, there are zero-rated goods and services as well. Tax cannot be levied on their sales. These include - 

• Healthcare and Educational services,

• Few medicines/medical equipment

• Investment gold, silver, and platinum.

Calculation of VAT in UAE

As mentioned above, the VAT rate in UAE is at 5%. The way of calculating VAT is by multiplying this 5% by the cost price of your goods/services. 

How do I obtain a VAT Refund?

To get a refund you need to log on to the E-service portal of FTA.

Click on the VAT tab, then on VAT refunds, and then select the VAT refund request.

You will now have to complete the request form. After this, you will receive an email from the FTA which will carry the details of your application result. 

The Provisions

The law requires that businesses keep records to allow the Federal Tax Authority to identify details of business activities and review transactions. This includes tax invoices, debit or credit notes, import or export records, as well as tax invoices. Non-compliance is punishable by severe penalties and there are clear appeals procedures that align with international best practices.

The law includes tax procedures, transitional laws, audits, and objections to refunds, collection, and obligations. These include tax registration, return preparation, submissions, and payment, as well as general provisions and tax evasion.

As an ending note, make sure that your business maintains proper financial records and you comply with the laws of the UAE.