VAT LAWS IN UAE – Frequently Asked Questions

VAT - Value Added Tax - is a tax levied on sale goods and services. Think of it as a tax on the value you add to products and services.  (Difference between what you've paid and what you charge for a product/Service. - Also, on the price difference)
VAT will be introduced in the UAE by 01 January 2018.
Mandatory Registration - Businesses with taxable Goods and services are more than AED 375,000 for a Previous year need to register for VAT. Voluntary Registration - Businesses with taxable Goods and services between 1, 87,500 to AED 375,000 for a Previous year can register for VAT
  • a) Business should register under UAE VAT if they are liable to be registered for VAT based on turnover.
  • b) Registered Business should maintain proper records of their business transactions and ensure that all financial records are accurate and up to date. Also those records should available for the government scrutiny when it is called for.
  • c) Registered business should charge VAT on taxable goods or services they supply.
  • d) Registered business must report the amount of VAT they collected and the amount they paid to the government in a Form called “VAT Returns”.
  • e) If VAT charged on customers is more than the amount charged by the supplier and service providers, then the excess amount collected has to be paid to the VAT authority. Similarly, if the amount of VAT on the purchases and service providers are more than the amount charged on customers, the refund can be claimed for the difference.
  • 1. Sales register.
  • 2. Purchase register.
  • 3. Invoices issued or received.
  • 4. Credit notes and debit note.
  • 5. General ledger.
  • 6. Annual accounts
  • Above documents may be in Psychical or electronic mode.

Any taxable person must retain VAT invoices issued and received for a minimum of 5 years. A VAT invoice should have the following minimum details:

  • 1. Unique identification number.
  • 2. Name, address and registration number of selling dealer.
  • 3. Name and address and TRN of the purchasing dealer.
  • 4. Description, quantity and price of the goods sold.
  • 5. The amount of tax charged is to be shown separately.
VAT Assessment and Implementation. Every organization has to make necessary changes to their existing financial management and accounting system, Changes to the software’s used for accounting, operation style and Human resource Mix.
All the contracts which are signed before VAT implementation needs to be revised with the note or clause that additional amount of VAT will be charged on all the future invoices.
Total amount of VAT collected by the registered business and after adjusting the VAT paid on purchases, which on a periodical basis to be notified to government.
Refund can be claimed by filing the VAT returns to the Government. Which will be notified with Tax procedure.
As per Article (8) of Federal Law No. (7) Of 2017 on tax procedures VAT returns can be filed with the help of online portal enabled by Ministry of Finance.
As per the information available bare land, local transport, sale of residential property (second sales onwards), residential lease rent etc. are exempted from VAT in the UAE.

VAT will be charged at 0% in respect of the following main categories of supplies:

  • Exports of goods and services to outside the GCC;
  • International transportation, and related supplies;
  • Supplies of certain sea, air and land means of transportation (such as aircrafts and ships);
  • Supply of certain healthcare services and supply of relevant goods and services.
  • Supply of certain education services, and supply of relevant goods and services;
  • Certain investment grade precious metals (e.g. gold, silver, of 99% purity);
  •  Newly constructed residential properties, that are supplied for the first time within 3 years of their construction ;
Output VAT is the value added tax to be charged on own sale/Service of goods and services.
Input VAT charged is the tax on the purchase of goods and services used in the business activity.
It is expected that businesses will need to complete additional information on their VAT returns to report revenues earned in each Emirate. It will be straight forward rules for most of the transactions.
  • Registered business failing to register when required to do so;
  • Registered business failing to submit a tax return or make a payment within the required period;
  • Registered business failing keep the records required under the issued tax legislation;
  • Any tax evasion and performs a deliberate act or omission with the intention of violating provision tax laws will lead to applicability of penalty.
Any Non – Residents who involves in business activity of sales/services which are above threshold required to register for VAT. In case of person is responsible for accounting VAT on behalf of non – resident then the non –resident will be exempt from registering for VAT.
Yes the working capital management needs to be keenly looked into to understand its effect on the business due the VAT applicability.
Registered Business falls under fully exempt business activity are exempt from registering for VAT. Expense spent for the sales or service cannot be claimed as inputs. Registered Business falls under Business falls under Partly Exempt goods/Services activity need to register them for VAT. Expense spent for the sales or service cannot be claimed as inputs might be apportioned.
All free zones dealing with main land needs to register compulsorily; Detailed executive regulations need to be awaited for the further clarification.
Yes VAT Assessment and Implementation will help to assess how the VAT will affect on business processes, Procedures, Business Contracts.
All the Above Details are mentioned are details and information captured by Ministry of Finance website.

Links for the Laws.

https://www.mof.gov.ae/EN/Pages/default.aspx.

https://www.mof.gov.ae/En/Media/News/Pages/2882017.aspx – Decree Law

https://www.mof.gov.ae/En/Media/News/Pages/3092017a.aspx – Tax Procedures

In case of any clarification Contact:

Gopu Rama Naidu phone + 971 568778858 email Gopi@kgrnaudit.com

Manjunath Murthyphone +971 565563049 email Manjunath@kgrnaudit.com