Value Added Tax (VAT) in UAE

Eligibility, Registration, and Compliance

VAT came into existence in the UAE on the 1st of January, 2018 introduced by the Federal Tax Authority (FTA). The companies are since then liable to tax accounting and maintain a healthy tax record. The VAT applies to various industries across the UAE dealing in taxable goods and services. Although the business enterprises are not concrete targets, as the consumers have to bear the taxation charges. For instance, the business is accountable to collect and account for the tax from the extended goods and services. Hence, VAT Registration is a big part of running a business in the UAE.

The business, therefore, is the agent to acquire are the account of the indirect taxation payable to the government. Furthermore, the VAT regulations are directed by the FTA and the audit authenticity is under the jurisdiction of the Federal Audit Authority (FAA).

VAT is relatively new in the country, although this form of taxation is prevalent in more than 150 countries across the globe for a long period. Thus audit of the same is a rising endeavour in the country.
As per FTA Norms, the normal VAT rate comes to around 5%.


VAT Eligibility:

The implemented VAT system contains certain guidelines that make a few businesses liable to the taxation, while others are exempt. The criteria are essentially based on the turn-over generated and a few other rules that resonate with the Double Taxation Treaty (DTT).

  • 1) Companies whose import and taxable articles exceed 375,000 AED must pay VAT.
  • 2) Companies whose supplies and imports surpass 187,500 AED can decide what to do on the same.
  • 3) The government recompenses a company on the funds that the company remunerated to its dealers and traders. This ensures a rather welcoming business milieu.
  • 4) Although the Free Zone License comes with a varied amount of benefits, the establishments in the zone are still liable to the payment.
The concept of Output Tax and Input tax governs the scenario of a company that is liable. Also, the Output tax indicates the VAT charged on the goods and services of the establishment which is owed to the government within the stipulated tax period. Meanwhile, the Input tax indicates the VAT charged on the procurement made by the establishment within the same tax period.

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