United Arab Emirates VAT
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UAE VAT Guide for Businesses
Value-added tax (VAT) is a relatively new phenomenon in the United Arab Emirates, implemented by the UAE government on January 1, 2018, to help raise funds for public projects and services. The VAT scheme also serves a dual purpose, allowing the country to move away from a reliance on oil and gas revenue.
Although the UAE’s VAT program is in its infancy, the country’s Federal Tax Authority has made the process as simple as possible, with easy-to-use online services and an E-Learning portal.
While most UAE nationals will need to pay VAT at each step of the supply chain, foreign businesses and tourists can apply for refunds on a case-by-case basis.
What is the Standard VAT (AED) Rate
in United Arab Emirates?5%
Number of returns per year: 6
The VAT UAE implementation is required for a certain taxable supply of goods and services. Unlike the many countries with several tiers of VAT rates, the UAE’s system contains only two rates:
- Standard (5%) – The vast majority of goods and services are subjected to the standard VAT rate.
- Zero (0%) – Zero-rated supplies include education and healthcare services, certain precious metals, international transportation, and exported goods.
While you’ll have to pay the standard VAT rate on most goods and services in the UAE, you may be able to claim a VAT refund if your business is not registered in the country. Before you can receive your VAT refund, UAE officials will have to review your application form. If all the information is correct, you’ll receive your refund within four months.
Requirement to Register for VAT
Being registered under the VAT law means that a business is acknowledged by the government, as a supplier of Goods and Services and is authorized to collect VAT from customers and remit the same to the government. Only VAT registered businesses will be allowed to do the following:
- Charge VAT on the taxable supply of goods and services
- Claim Input Tax Credit on VAT paid on their purchases, which will be deducted from VAT liability on sales
- Payment of VAT to the government
- Periodic filing of VAT return
Apart from the above, all registered businesses have to align their business reporting structure in line with the compliance requirements such as accurate and updated books of accounts, tax paid documents such as Tax invoice, credit notes, debit notes, records to all inward supplies and outward supplies etc. are required to be maintained.
Therefore, understanding the fundamentals of VAT will be one of the important steps for your VAT preparation and obtaining VAT registration will be the first step towards transiting your businesses to the VAT era.
Are all businesses liable to register under VAT? No, only those businesses crossing the defined annual aggregate turnover threshold are liable to register under VAT. Based on the registration threshold, a business will either be mandated to register or as an option, a business can apply for registration or can seek exemption from VAT registration
On this basis, VAT registration in UAE can be classified into the following:
- Mandatory VAT Registration
- Voluntary VAT Registration
- Exemption from VAT Registration
VAT Filing Return Frequency
and Deadlines
If you’ve completed UAE VAT registration, you need to file your VAT return no more than 28 days from the end of your tax period. Tax periods in the UAE are either monthly or quarterly.
- If your business has an annual turnover below 150 million Emirati dirhams (40,838,500 USD), you’ll have to file every quarter.
- If your business has an annual turnover of 150 million Emirati dirhams (40,838,500 USD) or more, you’ll have to file every month.
To file your VAT return in the UAE, you must first create an account with the UAE Federal Tax Authority (FTA). From there, you can use the eServices section on the FTA website to register.
Once VAT registration is completed, you can pay your bill for VAT and excise tax online using one of four methods:
- eDirham or credit card (same-day payment)
- eDebit (same-day payment)
- Local bank transfer (two to three days)
- International bank transfer (two to three days)
Invoicing Requirements
Whenever the business supplies standard-rated or reduced-rated goods or services it must issue a VAT invoice. However, there is no need to issue a VAT invoice if the customer is not VAT registered, for zero-rated supplies, if the customer operates self-billing arrangements or for gift of goods on which VAT is due.
For detailed Tax invoice in UAE
Under UAE VAT legislation, detailed tax invoices are to be issued by VAT-registrants for assessable goods or services supplied to other VAT-registered businesses. This is provided that the provisions surpass Dhs10,000. A detailed VAT invoice is often for merchants and wholesalers managing higher amounts of taxable supplies.
A VAT invoice in UAE must contain this information in English/Arabic:
- A unique invoice number (sequential, for identification purposes)
- The date on which a tax invoice was issued, plus the date of supply (if they’re different)
- Legal name, tax registration number, and address of the taxable person
- Legal name, tax identification number, and address of the customer
- Description, quantity, and type of sold goods or description of provided services
- To unite price for goods/services goods, excluding the VAT charge
- Rebates or discounts provided (not added in good/service’s unit price)
- Total VAT amount payable (must be in AED)
- Method for calculating the profit margin
- Method for calculating VAT (standard, exemption, or zero rates)
- The label “Tax Invoice” presented visibly on the tax document
For simplified Tax invoices in UAE
Simplified tax invoices are for supplies that are less than the Federal Tax Authority’s predetermined amount of AED 10,000. They are issued when clients or customers are retail buyers without any Tax Registration Number (TRN). A simplified VAT invoice in the UAE is for the retail industry, including supermarkets.
Simplified VAT invoices have to contain the following information:
- The label “Tax Invoice” presented visibly on the tax document
- The tax registration number, name, and address of the tax-registered business supplying goods/services
- The date wherein goods/services are supplied by the taxable person as per VAT Regulations Article 25
- Description of products/services supplied as per UAE VAT Law Article 27
- Total VAT amount charged
VAT Regulations Article 59 provides a guide on the complete format for UAE VAT invoices. A supplier can plan the tax invoice, as well as organize it in accordance with the prerequisite. However, there have to be systems in place that can guarantee tax invoices contain all the information listed above. FTA Public Clarification (VATP006) Re: VAT Invoices
The Federal Tax Authority of the UAE issued Public Clarification VAT P006. It addresses the requirements for the issuance of tax invoices. This includes the following points:
- It’s not acceptable for taxable persons to offer only the option of giving an invoice. A tax invoice has to be given in any circumstance wherein a supply is made.
- Simplified tax invoices don’t need to show net value or value before tax for every line item.
- Rounding on VAT invoices should be in the nearest Files (for line-item basis).
- When tax invoices are issued in foreign currencies, they must show tax amounts in AED.
- Full or detailed tax invoices have to show tax value, including net value, for every line item.
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