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Your Ultimate Guide to VAT in the UAE 2022
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Here’s an ultimate Guide to VAT in the UAE: VAT (Value Added Tax) is an indirect tax, VAT was introduced across the UAE on 1st January 2018 at a standard rate of 5%. It is charged and collected at each…
Here’s an ultimate Guide to VAT in the UAE: VAT (Value Added Tax) is an indirect tax, VAT was introduced across the UAE on 1st January 2018 at a standard rate of 5%. It is charged and collected at each stage of the supply chain by businesses that meet the requirements to be registered for VAT. Final consumers generally bear the VAT cost while businesses collect and account for the tax.
The Federal Tax Authority (FTA) was established under Federal Law by Decree No. 13 of 2016. The authority takes charge of managing and collecting federal taxes and related fines, as well as distributing tax-generated revenues and applying tax-related procedures in the UAE.
What is VAT?
There are mainly two types of taxes, Direct tax, and Indirect tax. The main difference between direct and indirect taxes is that the direct tax is collected by the government and goes directly to the government. On the other hand, indirect taxes are collected by intermediate mediums from the citizens.
There are two VAT rates applicable within the UAE:
- The standard rate of VAT – is 5%; and
- The zero rate of VAT – 0%
In addition, a certain category of supplies will be “exempt” from VAT.
- What are the Zero-rated sectors?
- Exports of goods and services outside the GCC
- International transportation, and related supplies
- Supplies of certain sea, air, and land means of transportation (such as aircraft and ships)
- Certain investment-grade precious metals (e.g., gold, silver, of 99% purity)
- Newly constructed residential properties, that are supplied for the first time within three years of their construction
- Supply of certain education services, and supply of relevant goods and services
- Supply of certain healthcare services, and supply of relevant goods and services
What are the VAT-exempt sectors?
- The supply of some financial services
- Residential properties
- Bare land
- Local passenger transport
Who should register for VAT?
You are required to register for VAT Mandatorily if:
The total value of your business’s taxable supplies and imports made within the UAE exceeds the Threshold of AED 375,000 over the previous 12-month period; or
You anticipate that the total value of your taxable supplies or imports will exceed AED 375,000 in the next 30 days.
You can register for VAT Voluntarily if:
The total value of your business’s taxable supplies and imports made within the UAE is less than the mandatory registration threshold but exceeds the voluntary Threshold of AED 187,500 over the previous 12-month period; or
You anticipate that the total value of your taxable supplies or imports will exceed AED 187,500 in the next 30 days.
How to register for VAT?
Registration can be carried out simply using the -24hour online service portal via the FTA website.
How is VAT collected?
VAT-registered businesses collect the amount on behalf of the government; consumers bear the VAT in the form of a 5% increase in the cost of taxable goods and services they purchase in the UAE.
UAE imposes VAT on tax-registered businesses at a rate of 5% on a taxable supply of goods or services at each step of the supply chain.
Tourists in the UAE also pay VAT at the point of sale.
How to File a VAT return on time?
A VAT return summarizes the value of the supplies and purchases a taxable person has made during the tax period and shows the taxable person’s VAT liability.
The FTA usually allocates three-month tax periods (quarterly) to a registrant, however, it may specify shorter or longer tax periods for registrants, if it deems it necessary.
A registrant is required to submit their tax return no later than the 28th day from the end of each tax period, or on the following working day if the corresponding date falls on an official holiday or a weekend.
Frequently Asked Questions (FAQs)
- Is VAT applicable for businesses in the free zone?
Yes, VAT is applicable for businesses in the free zone.
- Is there a penalty if you don’t register for VAT?
Yes, if you don’t register for VAT after meeting the mandatory threshold within the specified time frame by FTA, you will incur hefty fines.
- How to file a VAT Return?
You can file tax returns electronically through the FTA portal: eservices.tax.gov.ae. Before filing the VAT return form on the portal, make sure you have met all tax return requirements.
Since the implementation of the Value Added Tax (VAT) in the UAE, Bizzmosis has provided professional guidance to businesses related to correct tax implementation and compliance. We also provide our clients with the right information pertaining to all tax updates that need to be adopted to ensure their accounting systems and processes remain compliant with the relevant requirements.
Bizzmosis has designed a variety of business support packages to help business owners in the UAE advance and succeed. To learn more, contact us
📧 hello@bizzmosis.com ☎️ +971 4 568 6522 📞 +971 52 979 8169
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