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VAT in UAE: What You Need to Know

VAT in UAE: 

Value Added Tax (VAT) is a tax imposed by the UAE government on taxable supplies of goods or services at each step of the supply chain. It works similarly to Sales Tax.

Rate of VAT is 5 per cent.

VAT will increase revenue for the UAE government, and it will be used to provide quality services to the public. Additionally, it will help the government to reduce its dependence on oil and other hydrocarbons as a revenue source.

VAT registration is required for businesses that control or own more than AED 375,000 worth of taxable supplies and imports. The tax is optional for businesses whose supplies and imports exceed AED 187,500 per year. 

Tax-registered businesses in the UAE mainland and free zones are both subject to VAT. However, the UAE Cabinet may define certain free zones as designated zones and they are treated as outside the UAE for tax purposes. Goods that cross between designated zones are tax-free.

VAT is collected by VAT-registered businesses on behalf of the government. Consumers pay the VAT as a 5 percent increase in the price of taxable goods and services they purchase in the UAE.

Registering for VAT can be done through the eServices section of the FTA website. Read the VAT registration User Guide (PDF) for more information. [Source: UAE Government Portal

Once the registration process is completed through the eServices portal, a unique Tax Registration Number is assigned that can be used to access the VAT Tax portal.

VAT returns can be filed on this portal, which give details of all income and expenses, as well as how Input and Output Taxes are calculated. Generally, taxable businesses must submit VAT returns to FTA on a regular basis, within 28 days after the end of the ‘tax period’, depending on the type of business. The term ‘tax period’ refers to a specific period of time for which tax is calculated and paid. 

The standard tax period for businesses with an annual turnover under AED150 million, is quarterly and monthly for businesses with a turnover of AED150 million or more.

The FTA may, at its discretion, assign a different tax period to certain types of businesses. By failing to file a tax return within the specified time frame, the violator will be liable for fines as per the provisions of Cabinet Resolution No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE.

Contact us on + 971 45 80 9986 for any general inquiries about VAT registration or drop us an email info@yabs.ae

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