We are here to help you navigate the UAE Federal Tax system

Overview

​Value Added Tax (VAT) was introduced in the UAE on 1 January 2018. 

VAT creates a new source of income for the UAE and helps government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue. The system is a standard fully-fledged VAT that applies at 5%. The system is based on a destination principle according to which VAT is charged at import and on local supplies of goods and services, and exports are subject to 0% (zero-rated).
 
As businesses matures, they need to start adopting VAT and Excise Tax compliant strategies to ensure they abide by updated regulations.

About VAT

VAT is a tax on consumption. It is a transaction based tax levied at each stage in the chain of production and distribution. VAT is charged on supplies and is deducted on purchases, exception when exemptions apply. It is collected by business on behalf of the VAT authority, and businesses submit a periodic VAT return to the Tax Authority in which they calculate the net VAT amount to be paid or refunded.
 
VAT is a broad based tax and is charged on most supplies of goods and services. Traditionally, few sectors or supplies would be exempt, zero-rated or subject to special schemes, e.g. education, basic food, medical services, financial services, real estate sector. The VAT treaty should provide clarity around the treatment of these sectors by the GCC Member States and this will depend on several factors, including the local economic and social context and government objectives.
 
Registration is mandatory for taxable persons in the UAE that exceed annual turnover of AED 375,000, whereas taxable persons with a turnover between AED 187,500 and AED 375,000 have the option to register voluntarily for VAT.
 
Accordingly, registered businesses will be required to charge VAT on their supplies, and will be entitled to deduct VAT incurred on their purchases, including capital assets and imports. Some countries introduced VAT Grouping provisions, allowing separate legal persons to act and be treated as a single taxable person for VAT purposes, subject to certain conditions being met. VAT Grouping may be seen beneficial for businesses (and authorities), mainly through reducing administrative burden as well as disregarding intra-group supplies for VAT purposes.

---

Compliance Requirements

 VAT registered businesses will be required to comply with a number of VAT obligations, including:

• To keep VAT books and records for a specific period of time, on paper or electronically, that must be accurate, complete and readable
• To issue VAT invoices for their supplies and keep VAT invoices obtained from their suppliers as a requirement for deducting VAT
• To compute their VAT liability and submit a VAT return on a periodical basis (monthly or quarterly)
• To report all VAT on sales and purchases made in the period, including intra-GCC transactions, and calculate the net VAT amount to be paid or refunded

---

How can we help? ​

Clients will have to assess impact of these taxes on their businesses and make necessary changes to adopt these changes into their system. We have the people that have requisite knowledge and experience to assist clients in timely preparation of tax returns so that the impact is smoothly absorbed into their business.

We can assist our clients with following;

• VAT health check up:
  • Assessing the impact of VAT on your business;
  • How to deal with above and communicate to your clients and suppliers;
  • How to integrate this cost into your existing long term contracts;
  • Any other implications and solutions;
• Accounting System and software:
  • Automate bookkeeping, make it more systematic;
  • Make necessary changes in software and test them for VAT compliance;
  • Documentation and filing;
• Understanding VAT rules and regulations & conducting training for accounting teams;
• Cash flow management:
  • VAT obligations to government have to be paid on time – we can advise on how you ensure that VAT portion of sales collection is not utilised for working capital requirements etc. by creating a system that enables the company to always have sufficient cash to meet this obligation.

---

LEARN MORE ABOUT OUR OTHER SERVICES