UAE VAT – Things You Should Know

VAT is an indirect consumption tax applied to products and services that come under taxable items. There are a number of products and services exempted from tax and it varies as per member countries in GCC. VAT in UAE has been implemented from January 1, 2018 and rate is set as 5% throughout GCC countries.

The introduction of VAT will burden consumers as the end buyers are the tax payers. Cost of living is expected to rise. Given the lowest VAT rate, cost of living may vary and will greatly depend on one’s spending habit and life style. There are taxable and nontaxable goods and services. If people mainly spend on goods and services that are exempted from VAT, they will benefit greatly. GCC countries have unanimously agreed to impose 5% VAT and tax exempted goods and services may vary according to the member countries.

Effects of VAT on Businesses

Businesses have great responsibilities in this VAT regime. They have to carefully document their profit, cost and VAT charges. A business that has the annual turnover of AED 187,500 should register for VAT. Those companies below the required turnover also should maintain clear records of their income for authorities to verify at any time. Federal Tax Association has the power to impose penalties on businesses that do not comply with VAT laws. A business in UAE should register for VAT if the previous year annual turnover exceeds the mandatory registration limit or if the voluntary registration limit will exceed in next thirty days.

There are some mandatory documents required for the registration of VAT. When a business plans to register for VAT, it should get ready with some of the documents required. Official documents are required for business to receive VAT registration. All the registered businesses for VAT are issued with a VAT certificate. Every certificate is issued with a unique VAT number. The VAT number is required in all the VAT related transactions in UAE.

The process of VAT registration is conducted online. The following documents are required for VAT registration in UAE.

1.      Trade License copy

2.      Owner’s passport copy

3.      Copy of Emirates ID of the owner

4.      MOA (Memorandum of Association)

5.      Address of the Company

6.      Details of the concerned persons

7.      Email address

8.      Bank account details including IBAN

9.      Owners any other entities

10.  Statement of income of the company for the last twelve months

11.  Anticipated income and expenditure for the next thirty days after the VAT implementation

12.  Nature of business – export/import?

13.  If dealing with custom departments, what is the code?

14.  Any businesses with other countries under GCC?

15.  If they own other business entities, how they need to be taxed? Separate/together?

16.  Previous business experience of owners

Registration is an online procedure. Once the registration is complete and required fees are paid, documents are submitted. VAT certificate is issued soon after the documents are scrutinized.

The following supplies incur 0% VAT:

Exports of goods and services outside GCC, transportation through ships and aircrafts, investments on precious metals, newly constructed buildings, education and health care supplies.

The following supplies are exempted from VAT:

Supply of financial services, buildings of residence, barren land and local transporting services are exempted from VAT.