Value Added Tax(VAT) in UAE


What is Tax?

Tax is a compulsory contribution levied on each person by the government to increase the revenue. All persons must pay the tax to the government and return the government will provide us with the public services like roads, bridges, metro, public schools, hospitals etc.. There are 2 kinds of tax i.e. 1) Direct Tax 2) Indirect Tax

What is VAT?

VAT is an indirect tax levied on the consumption of goods and services. This tax is levied upon the final consumer to avoid double taxation. It is also called as Goods and Service Tax (GST) in some of the countries. It is considered a most advanced approach to taxation where a businessman collects the tax from his customers and pays to the government. Here he acts as a representative of the government who collects the tax and pays back to the government. This helps in reducing the tax evasion.

Reason Behind Implementing VAT in UAE

The main objective behind introducing VAT in UAE by the Federal Government is to increase the revenue for providing advanced support to the citizens and residents by enhancing various types of public services, including Roads and Transport, medical facilities, metro services, public schools, parks, waste control etc.. This will provide the UAE government to provide its citizens and residents with the high-quality public services in the future which will enhance the lifestyle of the public.

Cost of Living

The cost of living of an individual will slightly increase once the VAT is imposed in UAE. This depends on the individuals spending patterns and lifestyle.

Registration for VAT

  • The UAE is considering levying Value Added Tax (VAT) from January 2018. The VAT is likely to be 5 percent. Companies should register for VAT-
  • Before 31st October 2017: for those companies with a turnover exceeding UAE Dirhams One Hundred and Fifty Million (AED 150,000,000.00) per annum.
  • Before 30th November 2017: The companies with annual turnover of AED Ten Million (AED 10,000,000.00) should register with the authority.
  • Before 4th December 2017: All companies falling within the purview of the VAT Law should submit their application for registration and have to be registered by 1st January 2018. The annual turnover of AED 375,000 or above should compulsorily register under VAT law.
  • Registration is optional if the annual turnover is below AED 180,000.

What Services are included

  • Commercial Property Sales and leases
  • Retail Purchases
  • Car Sales and Rentals
  • Hotels and Restaurants
  • Repairs and Maintenance Services

Zero Rated

  • Health Care
  • Medicines and Equipment
  • International Transport
  • First Sale of Residential
  • Education
  • Investment in Gold, Silver, and Platinum
  • Exports
  • Crude Oil and Natural Gas

Services Exempted from VAT

  • Bare Land
  • Residential Property Leafs
  • Residential Property Second Sale
  • Local transportation Metro, Bus, Taxi etc..
  • Certain Financial Services

Once the company is successfully registered to VAT a) it is entitled to charge on taxable goods or services, b) may reclaim any VAT they have paid on business, c) Keep all the business records to submit to the government. It is mandatory to maintain all the records since the authority may ask all the documents to calculate the VAT.

It advisable to all the companies to register under VAT well in advance. If you need any further information, our law firm will guide you in registering your company under VAT. 

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