VAT Guide: All About VAT in UAE

What is VAT in UAE?

VAT or Value Added Tax in UAE was introduced on 1 January 2018, making UAE the 2nd country in the Gulf Cooperation Council group of countries. The UAE government has decided to implement VAT at a rate of 5%.

VAT is providing the UAE government with a source of income that is being utilized to provide high-quality public services. It is also helping the government in moving towards a vision of reducing dependency on oil and other hydrocarbons as a source of revenue.

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Impact of VAT in Dubai, UAE

At the start of the new VAT rule in UAE, several negative & positive impacts, challenges, and considerations were raised for the businesses & companies. Some of the major impacts of VAT in Dubai, UAE, are:

• Cost of goods increased
• Business structure changed
• Being accountable by keeping a record of all the transactions
• Uncertainty about the future
• Better infrastructure
• Enhancement to government reserves
• Improved business efficiency

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VAT Rates in UAE

With the introduction of VAT in the UAE, a VAT rate of 5% was decided to be applicable to the delivery of goods and services in the country. Registered businesses in UAE are responsible for paying VAT @ 5% to the government. The general VAT Tax structure for the purpose of the levy is divided as follows:

VAT Rate Type in UAEVAT Rate

Standard Rate on Goods & Services5%

Zero-Rated & Exempted Supplies0%

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VAT Registration in Dubai, UAE

A business in UAE must register for VAT if the taxable supplies and imports exceed the mandatory registration threshold of AED 3,75,000. Furthermore, a business may choose to voluntarily register for VAT where the total value of the taxable supplies and imports (or taxable expenses) exceeds the voluntary registration threshold of AED 1,87,500.

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VAT De-Registration in Dubai, UAE

VAT De-Registration is the provision for a registered taxable person to cancel their VAT registration. It means the deactivation of a taxable person’s registration and VAT number. VAT de-registration can be requested by a person registered under VAT or done by the FTA upon finding that a person meets the conditions for cancellation of registration.

A person registered under UAE VAT can request VAT De-Registration in the following 2 ways:

• The person stops making taxable supplies and does not expect to make any taxable supplies over the next 12-month period OR
• The person’s taxable supplies or taxable expenses incurred over a period of 12 consecutive months is less than the voluntary registration threshold (AED 187,500), and they do not anticipate crossing this threshold in the next 30 days

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VAT Penalty in UAE

Administrative penalties are additional amounts payable by a person for breaching the provisions of the VAT Law in the UAE. The UAE cabinet has approved a list of administrative penalties that will be imposed on businesses for tax violations. Each fine or penalty will not be less than 500 AED and not more than three times the amount of the tax on the business in question.

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All About VAT Refund in UAE

It is mandatory for all the registered businesses in UAE to file a VAT return providing the details of sales, purchases, output VAT & input VAT paid during the given tax period, where:

• The output VAT is the amount collected on sales
• Input VAT is paid to the supplier towards purchases/expenses.

And, when the input tax is greater than the output tax on a VAT return, the taxpayer can request a VAT refund after filing their VAT return.

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Tax Registration Number

A TRN or Tax Registration Number is issued by FTA when you register for tax as a sole trader, trust, partnership, or company. It gets automatically sent to the registrant after the completion of UAE VAT registration.

TRN is a 15-digit unique number that an entity obtains after making VAT registration in the UAE. TRN number is issued once for a business, so even a company with different activities or branches will have only one TRN.

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What is Excise Tax in UAE?

Excise tax is a form of indirect tax levied on specific goods which are typically harmful to human health or the environment. These goods are referred to as “excise goods.”

Below are the goods which are considered excise goods & applicable tax on those:

Excise GoodsRate of Excise Tax

Carbonated Drinks50%

Energy Drinks100%

Tobacco & Tobacco Products100%

Electronic Smoking Devices & Tools100%

Liquids used in Electronic Smoking Devices100%

Sweetened Drinks50%

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What is Input Tax in UAE?

Input tax in UAE is the tax paid by a person when they buy any goods, avail of any services, or conduct an import under VAT. For example, when retailers purchase goods from wholesalers, they pay tax for the goods procured. The tax paid for the procurement of goods is known as input VAT.

A major VAT element in UAE can be recovered from the tax paid on inputs. This means a person can reduce the input tax eligible for recovery from the tax payable and only pay the balance amount as VAT.

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VAT Registration Consultant

Businesses or Companies need to choose the right VAT Consultancy Firm in Dubai, UAE, based on a slew of factors, including the experience of the VAT tax consultant, expertise in accounting & finance, VAT computation, VAT refunds, and filing VAT. An expert VAT consultant can smoothly verify reports, claim refunds, fill out forms, or handle any complex VAT-related issues.

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