Value Added Tax

On 1st January 2018, VAT was implemented in the United Arab Emirates. The enterprises within UAE must be registered to VAT if their imports and supplies are greater than AED 375,000 annually. However, it is optional for those with AED 187,500 annually. No registration threshold applies to non-resident businesses making supplies on which the UAE VAT is required to be charged. Majority of goods and services are subject to the 5% standard VAT rate. However, some goods and services are excluded from VAT or are entitled to a 0% charge if they fulfil certain criteria.

0% VAT:

0% VAT is subject to the goods and services exported outside the Gulf Cooperation Council member states implementing VAT, international transportation, the supply of crude oil and natural gas, the first supply of residential real estate, and some specific areas, such as health care and education sectors.

Furthermore, in accordance with the Cabinet Decision (No. 46 of 2020) declared on June 4, 2020, if a person is only temporarily present in the state for a brief time i.e. less than a month and their presence is not associated with the supply, they will be deemed to be “outside the state” and subjected to 0% rate for export of goods and services.

VAT Exemption:

As far as VAT exemption is concerned, certain financial services and the consequent supply of residential properties qualify for exclusion from the VAT. Additionally, VAT is not applied to dealings involving bare land or domestic passenger transportation.

VAT may not apply to certain goods transactions between businesses based in Designated (Free) Zones (DZs) in the UAE. However, as per the general implementation of the UAE VAT law, the provision of services within DZs is subject to VAT.

The grouping of VAT is only permitted if certain requirements are fulfilled. These requirements include specific documents and registrations like the need to generate tax invoices and file VAT returns. This can be executed on a monthly and quarterly basis. However, this depends on issuance by the Federal Tax Authority (FTA).

In case of excess input VAT, a procedure must be followed to request a refund from the FTA. The other way is to carry VAT credits forward for subtracting from subsequent output VAT.

Companies and businesses failing to abide by the VAT obligations are subject to fines and penalties. The penalties might be fixed or tax-related.

AKA Services:

AKA is delivering VAT-related services. It comprises a team of experts that have expertise on both local and international issues and are ready to assist you and your business. AKA helps to identify and reduce tax risks, meet compliance obligations, implement tax strategies supplementing the business’ operational objectives, manage tax accounting and reporting issues, and design best tax practices. The following services are offered at AKA:

  • VAT Advisory
  • VAT Implementation
  • Vat Return Filling

AKA has been successfully managing and providing services to its clients for years. The consultancy team will help you with every query related to VAT.

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