In the present taxation system, what is VAT in UAE? Rate, Types, law has to be understood by the business owners in the UAE. This article will explain in detail about the VAT implementation in UAE and the applicable rates, types and the laws concerning the same. The rules may vary from one business to another and this is the reason Farahat & Co. tax consultants in UAE are your partners for VAT related queries and consultations.
Explaining What is VAT in UAE? Rate, types, Law
The cost is incurred by the end consumer though Value Added Tax is charged and paid by the registered taxpayers on behalf of the government. In connection with public utilities, it is also necessary to focus on the major business services required by the population that already exists in the UAE government and comprises public transport, social services, healthcare, and education. The government can diversify its revenue streams thanks to the adoption of VAT. Furthermore, the UAE’s high level of living is guaranteed by this significant source of income. FTA declared a 5% standard VAT rate. Nonetheless, a few products and services were classified by the FTA as zero-rated supplies and exempt supplies, meaning they are free from taxes. There are standard rated, zero rated and exempt VAT transactions in the UAE as per the law. The same will be discussed further.
Categories of goods covered under UAE VAT law
In the UAE, there are various supply categories covered by VAT. The type of the goods or services determines the VAT rates.
- Standard-rated materials: There will be a 5% VAT rate on these products and services.
- Supplies that are zero-rated are charged zero for VAT. Taxpayers may, however, deduct applicable input tax. Education, healthcare, exporting goods and services outside GCC. International transportation etc are some of the supplies that are included in this.
- As per the rules of UAE VAT law, some supplies are not subject to input tax claims or VAT charges by firms. Residential real estate, undeveloped land, public transportation, life insurance, and specific financial services are exempt supplies. So, recouping of VAT is not allowed in such cases.
- Deemed supplies: These are goods that do not fit any of the criteria of a supply, but still companies are supposed to charge VAT on them. In the UAE, deemed supplies consist of
- Business assets that have been sold for no profit or monetary value.
- Goods used for non-business purposes on which input tax is claimed, transfers of business assets from the United Arab Emirates to other GCC Implementing States, or vice versa, etc.
- Some of the items have been declared as out of scope for the UAE VAT laws by the FTA.
The procedure for VAT registration in UAE
It is now mandatory for any business in the United Arab Emirates to be registered under VAT if the cumulative value of goods that have been imported and supplied for the following services or goods is over 375,000 UAE dirhams within a period of twelve consecutive months. Also, companies that are located in the United Arab Emirates have a chance to register optionally if they meet the values of supply and imports within a year, exceeding AED 187,500. Through the FTA website, businesses in the UAE can finish the VAT registration UAE process. The documents should be in place before you proceed for VAT registration in the UAE as per the law.
What is VAT returns in the UAE
As per the laws laid down by the UAE government, the businesses that are registered for VAT are supposed to file their VAT returns and fulfill their VAT responsibilities to the FTA within the quarter periods. However, the concept of completeness of the VAT returns and VAT payments by the registered taxpayers must be implemented by the end of the 28th day after the end of the quarter. Nevertheless, one or a group of taxable individuals may be provided by the FTA with a unique tax term for that type of tax.
As for the violators of VAT legislation in the UAE, certain penalties are provided for the legislator.
According to Article 9 of the law that created the FTA, the body has the right to prosecute and fine tax offenses and violation of the VAT laws.
The nature of the offense and the associated punishments are explained in the table below:
Nature of Offense | Penalty or Fine |
Not displaying price list in the business place | AED 15,000 |
Failure to notify FTA regarding the charge of tax based on the margin | AED 2,500 |
Failure to issue a tax invoice, credit note or an alternative document during a supply | AED 5,000 for each tax invoice, credit note or alternative document
|
Not keeping goods in a Designated Zone or moving them to another Designated Zone | Between AED 500 to 300% of the tax involved
|
Tax evasion | 300% of the tax evaded
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vat registration UAEĀ can help you in understanding what is VAT in UAE? Rate, types, law
The tax consultants at vat registration UAE. can help you understand the intricacies of what is VAT in UAE? Rate, types and law. We can help your business get registered for VAT and hence make your business VAT compliant in all means by following the set standards of the FTA in terms of accounting and book-keeping. Therefore, call us today and we shall be happy to assist you in all your concerns related to VAT in UAE.