Value Added Tax in the United Arab Emirates

What Is Value Added Tax?

Value Added Tax is a consumption tax collected at different stages of the supply chain. The final burden is normally borne by the final consumer, while registered businesses collect and pay VAT in accordance with the applicable laws and regulations.

VAT Registration in the UAE

VAT registration depends on the value of taxable supplies or imports made by the business during 12 consecutive months, or the expected taxable supplies or imports during the next 30 days.

Less Than AED 187,500

If the value of taxable supplies is less than AED 187,500, the business is generally not entitled to register for VAT, unless a special case is permitted under the law or regulations.

Incorrect registration without meeting the registration requirements may expose the business to tax issues, penalties, or the need to apply for VAT deregistration.

From AED 187,500 to Less Than AED 375,000

If the value of taxable supplies or taxable expenses exceeds AED 187,500 but does not reach AED 375,000, the business may apply for voluntary VAT registration if the required conditions are met.

AED 375,000 or More

If the value of taxable supplies or imports reaches or exceeds AED 375,000 during 12 consecutive months, or is expected to exceed this threshold within 30 days, VAT registration becomes mandatory.

When Should VAT Deregistration Be Considered?

If a business is registered for VAT and the value of taxable supplies falls below the voluntary registration threshold of AED 187,500, or if the business stops making taxable supplies, its VAT position should be reviewed and a VAT deregistration application should be submitted where the conditions are met.

Delaying VAT deregistration when it is required may expose the business to penalties or unnecessary tax obligations.

VAT Services

We provide VAT services to help companies and businesses comply with VAT requirements and reduce tax risks.

VAT Registration

• Reviewing the business position.
• Reviewing taxable supplies.
• Determining whether registration is mandatory or voluntary.
• Preparing the VAT registration application.
• Following up until the Tax Registration Number is issued.

VAT Deregistration

• Reviewing VAT deregistration conditions.
• Determining whether deregistration is mandatory or voluntary.
• Preparing the VAT deregistration application.
• Reviewing accounts before deregistration.
• Following up with the Federal Tax Authority.

VAT Return Preparation and Filing

• Reviewing sales and purchases.
• Reviewing tax invoices.
• Reviewing input tax and output tax.
• Preparing and filing VAT returns.
• Reviewing differences and potential errors.

VAT Review

• Reviewing the tax treatment of transactions.
• Reviewing tax invoices and tax credit notes.
• Reviewing previous VAT returns.
• Identifying potential VAT errors.
• Providing solutions for VAT-related issues.

VAT Refund

• Reviewing VAT refund cases.
• Preparing the required supporting documents.
• Preparing VAT refund applications.
• Following up refund applications with the Authority.

Tax Audit Support

• Reviewing accounting records and supporting documents.
• Preparing the required tax audit files.
• Providing support during tax audit procedures.
• Responding to enquiries related to the tax audit.

Reconsideration Requests and Tax Objections

• Reviewing tax decisions and penalties.
• Preparing reconsideration requests.
• Supporting tax objections.
• Providing appropriate solutions for VAT-related problems.

VAT Rate in the UAE

The standard VAT rate in the UAE is 5% on taxable supplies, while certain supplies may be zero-rated or exempt subject to the conditions specified under the law.

Taxable Supplies

Taxable supplies include many goods and services supplied within the UAE in accordance with the VAT Law and its Executive Regulation.

Zero-Rated Supplies

Certain supplies are subject to VAT at 0% where the legal conditions are met. Zero-rated supplies should be distinguished from exempt supplies and outside-scope supplies.

Exempt Supplies

Certain supplies are exempt from VAT under the VAT Law and Executive Regulation. Exempt supplies are not treated in the same way as zero-rated supplies.

VAT and Free Zones

Some VAT rules for designated zones differ from other areas in the UAE, especially in relation to the movement of goods and transactions between designated zones, the UAE mainland, and other countries.

Due to the importance of this topic, we have a separate page dedicated to VAT and Free Zones, including designated zones, outside-scope supplies, movement of goods, import and export transactions, VAT registration for free zone businesses, and VAT deregistration.

VAT Law in the UAE

VAT in the UAE is governed by a number of laws, regulations, decisions, and guidance issued by the relevant authorities, including:

• Federal Decree-Law No. 8 of 2017 on Value Added Tax.
• The Executive Regulation of the VAT Law.
• Relevant Ministerial Decisions.
• Public Clarifications issued by the Federal Tax Authority.

Required Records and Documents

VAT compliance depends heavily on accounting records and supporting documents for transactions.

• Tax invoices.
• Tax credit notes and debit notes.
• Sales records.
• Purchase records.
• Bank statements.
• Contracts and supporting documents.
• Inventory records.

Tax Audit and VAT

The Federal Tax Authority has the authority to review accounting records and documents to verify VAT returns and tax compliance.

Properly organized accounts, invoices, and records are important to reduce tax risks during VAT audits.

VAT Penalties and Violations

VAT penalties may arise from incorrect registration, late registration, late return filing, late payment, tax errors, failure to maintain records, or delay in deregistration when required.

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