{"id":2275,"date":"2023-02-25T11:20:19","date_gmt":"2023-02-25T11:20:19","guid":{"rendered":"https:\/\/ares-accounting.com\/?p=2275"},"modified":"2023-03-13T06:19:26","modified_gmt":"2023-03-13T06:19:26","slug":"vat-in-dubai-united-arab-emirates","status":"publish","type":"post","link":"https:\/\/ares-accounting.com\/en\/vat-in-dubai-united-arab-emirates\/","title":{"rendered":"VAT in Dubai, United Arab Emirates"},"content":{"rendered":"

In the UAE, VAT (Value Added Tax) was introduced in January 2018 at a rate of 5%. It applies to a wide range of products and services, such as consumer goods, hotels, restaurants, transport and telecommunications. Businesses must register with the Federal Tax Authority to be authorised to collect and declare VAT.<\/p>\n

The VAT system in the UAE is similar to the system in France or Belgium for example with the principle of output VAT and deductible VAT.<\/p>\n

The 4 different VAT systems in Dubai<\/strong><\/h2>\n

In the United Arab Emirates there are 4 different VAT regimes.<\/p>\n

Mandatory<\/strong><\/h3>\n

Companies registered in the mainland or in the freezone are obliged to register for VAT if their sales for the past year or the next month exceed AED 375,000.<\/p>\n

Please note! If you exceed the AED 375,000 limit, you must register for VAT within 20 days to avoid penalties.<\/p>\n

Once registered, you will be able to reclaim the VAT on your purchases.<\/p>\n

Note:<\/p>\n

In Dubai, penalties for not registering for VAT can include financial penalties and legal action. Businesses that fail to register may be exposed to penalties such as administrative penalties, penalties for failure to file and penalties for failure to pay. Penalties may vary depending on the severity of the violation and the duration of the non-compliance.<\/p>\n

Voluntary (Volontary) <\/strong><\/h3>\n

The amount of your profit for the past year or the next month is between AED 187,500 and AED 375,000.<\/p>\n

Voluntary VAT (Value Added Tax) registration in Dubai is a process where a business can choose to register with the Federal Tax Authority to be allowed to collect and declare VAT. This process is optional for companies with a turnover of between AED 187,500 and AED 375,000, who still wish to collect and declare VAT for business reasons.<\/p>\n

Voluntarily registered businesses have the same VAT obligations as compulsorily registered businesses, such as keeping accurate financial records and submitting periodic VAT returns. Businesses are advised to consult a chartered accountant to determine whether voluntary VAT registration is an appropriate option for their business.<\/p>\n

Exception<\/strong><\/h3>\n

The registration exception applies to businesses that operate exclusively outside the UAE and outside the GCC countries, and do not intend to have any.<\/p>\n

Please note! If the threshold of AED 375,000 is exceeded, the VAT registration must be done within 20 days. The company will not receive a VAT number, which will prevent it from reclaiming VAT on its purchases. It is not necessary to make a quarterly return in this case, but registration is mandatory if you wish to reclaim VAT. Only businesses operating in the service sector need to register to benefit from the exemption. Businesses engaged in import-export activities outside the UAE do not need to register to benefit from the exemption.<\/p>\n

Exemption<\/strong><\/h3>\n

VAT exemption in Dubai refers to the process by which a business can be exempted from collecting and paying VAT on certain goods and services it provides. Examples of goods and services that may be exempt from VAT include basic foodstuffs, medical supplies and educational services, oil and gas, real estate and transport. To qualify for VAT exemption, a business must apply to the FTA for VAT exemption and provide evidence to support the application<\/p>\n

If your business meets the mandatory turnover threshold, then registration will be required (to be ticked on the registration form if you are concerned with VAT exemption).<\/p>\n

Who needs to register for VAT in the UAE?<\/strong><\/h2>\n

All businesses located in Dubai and other emirates that have generated a turnover of more than AED 375,000 in the last 12 months or plan to do so, must register for VAT within 20 days.<\/p>\n

The VAT registration thresholds are as follows:<\/p>\n

– Mandatory VAT registration threshold = More than AED 375,000<\/p>\n

– Voluntary VAT registration threshold = Between AED 187,500 and AED 375,000<\/p>\n

Non-Emirates based businesses can only apply for VAT exemption if they meet certain criteria.<\/p>\n

VAT rates applicable to goods and services<\/strong><\/h2>\n

0% VAT<\/strong><\/h3>\n