Our knowledgeable accountants will help you understand and comply with UAE VAT regulations. We will examine your purchase orders, contracts, and invoices to determine whether your business requires mandatory or optional VAT registration.
Essential Knowledge
You are not yet eligible for VAT registration if your company’s revenue is less than AED 187,500.00. You have 20 working days to submit the application if your business exceeds the required threshold.
To make the registration process easier, you must have a corporate bank account.
Did you know that the Middle East does not impose personal income tax? Rather, taxes are primarily imposed on foreign banks and oil companies.
This makes Dubai a desirable location for business for entrepreneurs. Dubai did, however, impose value-added tax (VAT) on the majority of goods and services on January 1, 2018.
VAT must be charged on almost every transaction as a business owner, including retail purchases and meals at restaurants. For a comprehensive guide to VAT compliance in Dubai, continue reading if you’re new to VAT and would like more information
Dubai’s booming economy and government-backed funding initiatives are just two of the many benefits it provides to entrepreneurs. But the tax structure is the biggest advantage.
There is no corporate or personal income tax in the United Arab Emirates.
The low VAT rate of 5% is applied to taxable goods and services.
Companies operating in free zones benefit from 100% profit repatriation, zero corporate tax, and no customs duties.
At every stage of production and distribution, goods and services are subject to the consumption-based VAT tax. Businesses are in charge of collecting and remitting VAT, which is levied on purchases in contrast to income taxes.
The European Union, Canada, and New Zealand are among the more than 150 nations that have made VAT a common taxation system.
On January 1, 2018, Dubai became the first Middle Eastern country to implement a VAT system. The Federal Tax Authority (FTA) was created by the UAE government to oversee and collect VAT revenue.
By diversifying the government’s revenue streams and lowering its dependency on oil profits, VAT was implemented to finance waste management, infrastructure, and healthcare. .
It is crucial to comprehend VAT obligations prior to launching a business in Dubai. Serious penalties, including interest equal to up to 300% of the outstanding VAT liability, can result from missing VAT payments.
The majority of taxable goods and services, including imports, are subject to 5% VAT in Dubai. Any exchange of goods or services for payment within Dubai is referred to as a taxable supply.
VAT must be collected and remitted by companies in industries like retail, hospitality, and entertainment.
Certain goods and services are exempt from VAT, such as:
exports from countries outside of the Gulf Cooperation Council (GCC).
services for international transportation.
Natural gas, crude oil, and investment-grade precious metals (99% pure gold and silver).
services for education and healthcare.
newly constructed homes (provided within three years of construction).
Although they charge 0% VAT on their transactions, zero-rated VAT businesses are still required to register for VAT and issue invoices.
financial services, including insurance, loans, and banking.
sales or leases of residential real estate.
sales of vacant land.
Public transportation in the area (buses, metro, taxis, domestic flights).
Companies that provide VAT-exempt services are exempt from VAT registration, in contrast to zero-rated supplies.
If a company’s taxable imports or supplies total more than AED 375,000 per year, they must register for VAT.
VAT registration is optional but advised for companies with taxable supplies between AED 187,500 and AED 375,000.
Input Tax Credits allow businesses to recoup VAT paid on purchases. This implies that businesses only pay VAT on the value they add to goods and services.
For instance, a business can deduct the VAT paid on purchases from the VAT collected from customers if it pays 5% VAT for raw materials and then collects 5% VAT on finished goods.
Businesses that want to register for VAT must:
On the Federal Tax Authority (FTA) portal, register for an e-service account.
Send in a VAT registration application along with your bank account information, financial records, and business details.
After being approved, you will be assigned a distinct Tax Registration Number (TRN).
Every registered company is required to keep track of taxable supplies and update their VAT status as needed.
Within 28 days following the conclusion of the tax period, businesses are required to submit their quarterly VAT returns online via the FTA portal.
Revenue under AED 150 million → Submit quarterly VAT returns.
Over AED 150 million in revenue → Submit monthly VAT returns.
Penalties for late submissions:
The first missed deadline is worth AED 1,000.
For further late filings, AED 2,000.
penalty of 2% on unpaid VAT for the first seven days, followed by a monthly penalty of 4% (up to 300% of unpaid VAT).
Online VAT payments can be made through:
A credit card.
eDebit transactions.
bank transfers, domestic or foreign.
Make sure your company complies with all legal requirements now that you understand VAT compliance in Dubai.
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