VAT for Businesses in the UAE

Which companies should register for VAT?

Firms whose annual taxable goods and supplies’ value is over AED 375,000 must compulsorily register for VAT. Companies whose annual taxable goods and supplies’ value is less than this limit, but over AED 187,500, may register for VAT on a voluntary basis.

How would VAT be collected?

Businesses should document their earnings and expenditures related to VAT. Registered businesses should:

  • Charge a VAT of 5% to their customers
  • Pay a VAT on goods and services that they receive from their suppliers

The difference between these two amounts shall be paid to or reclaimed from the government, as may be the case.

When should registered businesses file VAT returns?

Business taxpayers should file VAT returns with the Federal Tax Authority (FTA) within 28 days from the end of the tax period, as per the procedures mentioned in the VAT legislation.

Which sectors will be exempted from VAT?

VAT will not be levied on the following categories of supplies:

  • Residential properties
  • Bare land
  • Margin based financial services
  • Local transport for passengers

Does a non-resident need to register for VAT?

A non-resident making taxable supplies within the UAE needs to register for VAT and pay tax unless any other registered UAE resident is already paying VAT for such supplies.

How long should businesses keep VAT invoices for?

Businesses must maintain tax invoices, received and issued, for at least 5 years.

Can businesses offset customs duty against VAT payments?

VAT is payable over and above the customs duty paid by an importer. VAT shall be computed on the price of the good/service including custom duty.

What if a business doesn’t follow VAT?

In case of non-compliance, penalties would be imposed. Non-compliance could refer to:

  • Not registering for VAT despite falling in the taxable category
  • Not submitting VAT returns or not paying the VAT within the due time
  • Not maintaining the records required according to VAT legislation
  • Evading VAT

VAT would be introduced in the UAE from the 1st of January 2018. Businesses with an annual revenue of more than AED 150 million are urged by the authorities to register for VAT before 31 October, 2017. Businesses with an annual revenue of more than AED 10 million are advised to register before 30 November, 2017.

We at Business Setup Worldwide are there to assist you with corporate tax consultancy services. Feel free to contact us for any help or clarification on VAT, or tax consultation in general, in the UAE.