UAE VAT Value added Tax

VAT Value Added Tax

Between 2012 and 2014, the UAE economy showed a growth rate of 5.4%, making it one of the highest growing economies in the Middle East and North Africa region. Since then, the UAE has continued to expand at a rate of around 3% per year. The introduction of Value Added Tax (VAT), effective 1 January 2018, is expected to positively impact consumer demand over the short and medium term. The VAT in Dubai and the UAE is a simple tax that can be paid to clients or invoiced separately. The standard VAT rate is 5%. However, there are also reduced rates and exemptions for certain products and services. Some of these reduced rates are zero, 2%, and 5% for purchases such as food, education services, books and packaging materials. UAE has managed to keep the VAT at the lowest levels possible in international standards.

One of the most important pillars of the UAE economy is a Free Trade Zone. It is a special area in a country, which allows tax-free importation of goods and manufacturing without paying customs duties. Emirate of Abu Dhabi is one of the most developed Emirates and an important part of it is founded on this Free Trade Zone. The VAT is applicable to all business-to-consumer sales of goods and provision of services, except for those made to: the government, the United Arab Emirate (UAE) armed forces, the federal and local police authorities. It also does not apply to businesses that engage in industrial and manufacturing activities. These will, therefore, be exempt from the VAT as well as from Value Added Tax registration. There are certain sectors which are exempted from paying or collecting VAT and is zero rated Tax )% VAT. This list comprises off:-

Dubai is a fast-paced business hub that offers many great opportunities for entrepreneurs and business people. But it is also a tax free zone – and this means that many small business owners may be unsure of what they need to do in order to register with the government for VAT in Dubai. This article aims to clear up some of the confusion by explaining exactly what VAT is, what businesses require a VAT number and how they can apply for one.

Some of the mandatory requirements which are implemented by Federal Tax Authority (FTA) with regards to VAT registration in UAE are as below:- 

  • Residents and companies making VAT-taxable supplies in Dubai can register for VAT on a voluntary basis
  • Residents and legal entities purchasing goods subject to VAT in Dubai can also register for VAT on a voluntary basis.
  • companies importing goods worth more than 187,500 AED per year can choose to register for VAT.
  • Businesses in Dubai must register for VAT if their annual taxable turnover is more than AED375,000 (around USD$95,000). Businesses with a taxable turnover of less than AED375,000 are exempt from VAT.

 

Whether an SME or large corporation, one should be well aware of the rules and regulations regarding the VAT, as well as its implications. The UAE authorities have made it clear that businesses, especially new ones, should take steps towards the registration for their tax obligations and other related duties. In case of refund of the value added tax for companies registered for VAT in Dubai, an enterprise must file a VAT refund claim form. Please note that it is different from case to case. Simply said, it would be hard to recover VAT amount if business has been registered abroad or has no legal entity here in UAE and has purchased goods for resale purposes only. Many of the corporate entities operating in Dubai are foreign companies which are registered for tax purposes. The system is simple. Foreign firms which do business in the emirate are entitled to claim a refund on all tax paid here . If your company carries out trading activities, it will be classified under the category of ‘Commercial trading’ and if it is involved in non-trading activities, it will be classified as ‘Non-commercial’. In both cases, you can file a VAT refund claim at any time during the course of the year. Dubai-registered companies selling goods or services in the UAE that also fall under the scope of VAT will have to register for VAT with their respective Emirate and submit quarterly returns. If a company is registered in a free zone, they should contact chambers of commerce.

Some of Key questions are addressed below:-

1- What is the VAT rate in Dubai and VAT rate in UAE?

5% is the Value added tax on all the goods and services sold within the UAE.

2- Is your income or salary subjected to this tax?

This system will show you how to legally and permanently protect 100% of your income from taxes in Dubai, given that you have no other income obligation to any other country. You can benefit from 100% tax exemption in Dubai if you are a non-Emirati individual and the government of Dubai's tax resident, or a company established in the emirate with a minimum paid-up registered capitals of AED 1 million, or an Emirati individual and its sponsor or prospective employer are.

3- Can people who come for Toursim claim their VAT back?

The UAE Ministry of Finance has launched an electronic solution to facilitate visitors' refund on VAT. By using this new 'Tax Refund for Tourists Scheme', tourists will be able to claim refund on VAT-paid purchases by presenting them at UAE ports of entry and exit. This system is fully integrated into the Electronic Immigration System (EIS) that links ports of entry and exit with immigration centres across the country enabling tourists to receive instant refunds on VAT paid at participating stores. The 'Tax Refund for Tourists Scheme' which was launched in April 2007, has become the most appreciated tourism initiative in the Middle East region. The feedback received by both tourists and retail outlets have been very positive.

4- What is the process of getting VAT registration and how does it work?

Available from our office in Dubai, Vigor Business Setup and Company Formation provides the most competitive rates for obtaining a VAT number in Dubai. We are experts at helping businesses obtain the tax identification number they need to do business in Dubai. Our company directors have been dealing with VAT matters for over 10 years and are very familiar with the tax laws. We will provide you with a friendly and professional service, and ensure your application is processed as quickly as possible. The tax identification number or TIN is an alpha-numeric code that you will use to fill out documentation and apply for your VAT certificate because as a resident of Dubai, the UAE will not let you register for UAE VAT without one. It also acts as a tax registration code, identifying the business concerned for any company and the relevant fiscal authorities. Basic Documentation Required to quickly get your TRN number are as below:- 

  • the company’s business license (copy after the trade or commercial license);
  • copies after the passport of the owner and other shareholders in the case of companies;
  • the Memorandum and Articles of Association of the company;
  • information about the representative of the company and contact information;
  • proof of the registered address of the company in the UAE;
  • information about the corporate bank account (IBAN included);
  • an income statement for the last 12 months (where available);
  • an estimation of the expected revenue, turnover and expenses for the following 30 days after VAT registration;
  • information about the import-export activities of the company (where applicable);
  • the company’s customs code and copy of the Dubai Custom Code Certificate (where available);
  • information about the Gulf Cooperation Council countries in which the company trades;
  • a detailed description of the company’s business experience for the last 5 years (where available);
  • information on whether the company will be part of a tax group;
  • copies after the identification papers with the necessary visas in the case of natural persons.

A foreign company can register for VAT in Dubai within 4 weeks of their initial application. Clients can also make use of the UAE VAT Advocate service, our team will discuss your business needs with you and compile the required documents to be submitted to the authorities on your behalf. You will be supported during all stages of the registration process by UAE VAT Advocates specialists. If you are looking to register for VAT in Dubai our team of tax specialists can help. Our advisers are fluent in English and Arabic, have many years experience of dealing with the Dubai VAT authorities and will ensure that your application is processed efficiently.

5- When can VAT be filed and what are its accounting perspectives?

The Ministry of Finance in Dubai announced a series of new regulations of the VAT tax returns in UAE. The deadline for companies registered for VAT in Dubai to file their Q1 2015 VAT return was extended to May 31, 2015, instead of April 30, 2015. This measure is taken to help companies meet the deadline and avoid penalties. The tax period under the Value Added Tax (VAT) Law in Dubai applies to any VAT Taxpayer who files the returns / VAT Return by 30 th of June or 20 th of December depending on the type of trade/ business . In a few cases, the due date for VAT return filing falls on the weekend or public holiday. This means that the tax return cannot be filed on time, and by no means on the due date itself. In those situations, companies in Dubai are allowed to file their tax returns a few days in advance. Some of the key points to note are as follows:- 

  • All legal and registered entities have 28 days to file their VAT returns after the end of the tax period;
  • Incase you fail to file these returns, the government has levied fines between 10,000 and 50,000 AED;
  • businesses with an annual turnover above 150 million AED are required to register for VAT;
  • companies must impose a 5% VAT rate on most of the goods and services supplied in Dubai be it service, professional, commercial or any other unless they are located in the freezone. 

A local representative is required for all foreign investors who intend to register for VAT in Dubai and our consultants can act on their behalf when dealing with authorities. Our focus is on the UAE and we have been operating for over 15 years helping foreign investors register for VAT in Dubai. We're familiar with all the ins and outs and will make sure your paperwork runs smoothly.

6- Why choose Vigor Business Setup for VAT filings, Vat Application, TRN registration?

We are a professional company that can simplify the process of registering for VAT in Dubai and help you make sure that you stay in line with the law. Our consultants will take care of all your VAT registration applications and ensure that you don't get hit with any penalties. With our well established network of contacts, we can keep you informed of any recent changes to the laws and ensure that you are up to date with all the latest developments. If you are setting up a new company, getting started with zero-rated VAT importations for your business, or have never heard of VAT before at all - you've come to the right place. Learn the facts on VAT and get further insight on how to make VAT registration in Dubai work within your business model and how our expert business consultants can help you through it.  If you are unsure if you are required to register for VAT, we have prepared a free guide to show those companies in Dubai that are required to register. The full range of services provided by Tax Consultants in Dubai includes; provide a VAT registration certificate, renew a VAT certificate and provide the services of an accountant. We at Vigor Business Setup and Company Formation Services provide the best team of professionally knowledgeable business consultants to meet your needs as a business owner. VAT registration is relatively a new tax which has made it compulsory for all those businesses who are holding goods & or services and operating in the United Arab Emirates.

Dubai is a fast-paced business hub that offers many great opportunities for entrepreneurs and business people. But it is also a tax free zone – and this means that many small business owners may be unsure of what they need to do in order to register with the government for VAT in Dubai. This article aims to clear up some of the confusion by explaining exactly what VAT is, what businesses require a VAT number and how they can apply for one.