Vat in UAE – Key Highlights

Coverage:

  • Taxable Person – anyone doing an economic activity for gain.

  • Applicable to all businesses with a annual turnover of over AED 375,000

Registration:

  • Compulsory registration for turnover over AED 375,000. Voluntary registration for turnover over AED 187,000

  • Registration opens from Oct 1 2017 and deadline is Dec 31st 2017. Voluntary/early registration allowed from July 1st 2017.

Vat Rates:

Exempt

  • Residential Property Old

  • Foodstuff

Zero Rate:

  • Education

  • Healthcare

  • Residential Property New (after Jan 1 2018)

  • Investment & Precious Metals (bullion)

  • Local Transport – mix rates

Standard Rate: The standard rate is 5%

  • Jewelry

  • Second hand cars – margin scheme

  • Financial services – standard rate on Fee income. Margin based income is exempt. Islamic banking products to be treated same as equivalent conventional products.

  • Insurance premium except Life insurance is taxable.

Goods & Services:

  • Goods – Place of supply rules apply. Where goods are physically present when sold.

  • Goods for export will be zero rated. Export has to be done within 3 months and BL/ documentary evidence required.

  • Import of goods – no VAT but Reverse Charge applies. Has to be accounted for on the VAT return.

  • Import & transshipment to other GCC countries – Pay VAT and UAE will transfer it to the other GCC country.

  • Services – based on where the Business is based. Alternatively, a Consumption based rule will apply. E.g. telecom or software services will be taxed where services and used and enjoyed.

Free Zones: Rules are still not clear but VAT may apply in a non-fenced free zone and not apply in a customs controlled free zone like Jebel Ali.

VAT Returns:

  • The return will include only summary data of purchases and sales, Input & Output tax and which Emirate the sale has been done.

  • Returns will be quarterly and must be filed and tax paid within 28 days of quarter end.

  • All returns and tax payment will be fully electronic.

Accounting and Audit:

  • Proper accounting records to be kept.

  • Time of supply rules will determine when to account for output VAT. Goods – when goods are made available to customers and Services – earlier of issuance of Invoice or receipt of payment.

  • VAT is a rules based law and accounting principles of accrual or cash basis do not apply.

  • Minimum data requirements defined to be included in Invoices. TRN No, Date of sale, Emirate of sale, clear description and quantity of goods, amount of sale etc.

  • All accounting records to be kept for minimum of 5 years.

  • No action can be taken by Federal Tax Authority after 5 years but no limit in case fraud is found.

  • External Audit of accounts is not mandatory.

Appeals Process:

  • Level 1 – FTA reconsideration

  • Level 2 – Disputes Resolution Committee

  • Level 3 – Federal Courts litigation

Infographic: VAT in UAE

PDF File : VAT in UAE