VAT ASSISTANCE FOR YOUR BUSINESS
VAT AND TAXATION IN THE UAE
What is the first thing that comes into your mind when you hear the term “why start your business in the UAE?” No taxes! Do you agree?
A TRUSTED PARTNER FOR TAX CONSULTING
Understanding VAT (Value-Added Tax)
UAE is a country where businesses do not have to pay a large share of their income in taxes. This has always been a major attraction for foreign investors to start their companies in the country.
Individuals are not subject to income tax in the UAE. However, it imposes corporate taxes on foreign banks and energy firms. So, VAT is a tax included at every stage of the production and delivery of the product where the company has contributed value.
VAT was introduced in 2018 in the UAE. The consumer contributes VAT, and the business must collect VAT and send it back to the government. If the business is not doing so, then it could lead to serious penalties. Currently, a 5% VAT is charged at the point of sale in UAE.
Who is Exempted from VAT?
Financial services
- Most financial services are free from VAT. This can involve currency exchange, extending credit or loans, or opening business or personal accounts.
Real estate
- Residential properties are exempt from VAT excluding mobile homes, and RVs. Whereas, hotels and motels are subject to VAT.
Transportation
- Furthermore, any local transportation by land, water, or air is considered an exemption.
Is your Business Eligible to Pay VAT?
VAT of 5% equally applies to businesses conducting operations on the mainland or free zones in the UAE. Typically, VAT-registered businesses:
- Keep a variety of business records that will enable the government to verify that they are doing things correctly. They must charge VAT on taxable goods or services they supply.
- They may be eligible to refund any VAT they have paid on company-related items or services.
- Businesses that have registered for VAT are required to regularly report to the government the amount of VAT they have collected and levied
Criteria for VAT
Here are the two pointers that need to be understood if you are eligible for paying VAT in the UAE
01
If a company’s annual taxable imports and supplies total more than AED 375,000 in a year, it must register for VAT. For companies with annual supplies and imports of more than AED 187,500, it is optional.
02
A company pays the government the tax it receives from its clients. The government also reimburses it for the tax it paid to its suppliers at the same time. Additionally, foreign companies can get their VAT back when they travel to the UAE.
VAT for Free Zone Companies
When you start a business setup in Dubai free zone, the VAT taxations are a little different with their own set of laws, these are:
- If you are dealing inside a designated free zone, then your company is exempted from paying VAT.
- Secondly, if you sell your products and services inside the UAE then your free zone company has to charge VAT.
- Thirdly, if your company in the free zone deals with exporting outside of the UAE, then there is no VAT applicable.
Frequently asked questions
FAQ
The applicant who wants to register for VAT must file an application with the FTA online and complete all the required procedures.
5% VAT is applicable along with the cost of taxable goods and services in the UAE.
If you deal in financial services, residential buildings, supply of bare land, and local traveling services then you are not liable to pay VAT.