Enjoy Seamless Business Operations in the UAE With Professional Value-Added Tax (VAT) Consulting Services
Value Added Tax is an incremental taxation process implied on goods and services. VAT, also known as Goods & Services Tax or General Consumption Tax, is assessed in most countries in different forms on various goods and services used by businesses and consumers.
In the UAE, VAT was introduced at a flat rate of 5% on 1st Jan 2018 to generate a new source of income, which can help the country provide better public services to its citizens. Previously, the UAE observed a major dependency on oil and other hydrocarbons. Therefore, VAT was the most suitable option to diversify the country’s economy from oil.
Which companies must register for VAT in UAE?
The UAE has a mandatory threshold of AED 375,000 for VAT. Businesses with imports and supplies worth AED 375,000 must mandatorily register for VAT. A company with a revenue flow lower than AED 375,000 can voluntarily register for VAT if the imports and supplies are worth more than AED 187,500. So, the cut-off limit for voluntary registration is AED 187,000, and the max limit is AED 375,000 in the UAE.
What are the basic responsibilities of a VAT-registered company in the UAE?
Any business registered for VAT must maintain an accurate record of its financial transactions every year. The record must be correct and up-to-date so that the authorities can verify the data whenever needed. However, this rule applies to all businesses in the UAE. Even for businesses with a revenue flow less than the mandatory registration threshold, maintaining an accurate record of financial transactions helps during auditing and verification processes.
How VAT Works?
Every registered business must follow all the rules and regulations implied by the government of the UAE. Here’s how VAT taxation works.
- A registered company must charge VAT on all taxable goods and services.
- The tax calculation and amount charged must be visible on the bills.
- The business must maintain a verifiable track record of all transactions within the business structure.
- A business can reclaim the VAT charged on business-related services and goods purchases via the FTA e-services portal.
Any VAT-registered company must regularly report the VAT transactions to the authorities via the government online portal. Businesses must report the amount of VAT charged and paid, and they must pay the difference amount to the government If the charged value is more than the VAT paid. Similarly, if the VAT paid is higher than the charged amount, the company may submit a reclaim form to get a refund for the difference amount.
VAT For Real Estate
The government of UAE charges a flat 5% VAT on all commercial properties, whereas residential properties are exempt from VAT. To further provide convenient recovery, the government allows residential property owners to recover the VAT paid on the first supply of the building if the supply was done within three years of completion.
VAT Zero-Rated and Exempted Sectors in UAE
VAT is implied at a rate of 0% for the following sectors-
Exports outside the GCC region
- International transportation and supplies related to certain sea, air, and land modes of transportation
- Investment-grade metals such as gold and silver with 99% purity
- Residential properties that are newly constructed and supplied within three years of completion
- Supply of educational services, healthcare services, and relevant goods and services in the same sector
The following sectors are exempt from VAT in the UAE-
- Financial services
- Residential properties and Bare land
- Local transport facilities
What is a Partial Exemption?
A partial exemption is when a registered business owner only receives VAT exemption for a part of goods and services. For instance, if a business pays VAT for a non-taxable supply, it may not receive the recovery for the paid taxes. Similarly, some organizations may deal partly in taxable supplies and partly in non-taxable. In such conditions, a partial exemption is observed, according to the approval of the Federal Tax Authority.
Contact Us for Further VAT-related queries
Are you wondering whether you must register your business with FTA for VAT? Or do you have any other concerns related to VAT assessment? If yes, get in touch with us now at Xenia Consulting.
At Xenia, we have years of experience and a highly active team of experts providing professional consultations and support to businesses across the UAE. So, don't worry anymore about taxation and other regulations. Contact us now, and we'll be glad to help.
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