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What is VAT?

Value added tax (VAT) is a type of tax that is applied to the goods or services produced. It is also known as a multi-stage tax. The UAE government has decided to implement this tax to have an additional source of revenue to provide a better service to the citizens of UAE.


Who should register for VAT?

As per the criteria released by the Federal Tax Authority, all businesses with taxable supplies worth more than AED 375,000 need to register for VAT.


Which businesses can voluntarily register for VAT?

All businesses with taxable supplies worth more than AED 187,500 and less than the mandatory registration threshold of AED 375,000 may opt for voluntary registration for VAT. This option is developed to give the opportunity for startup businesses to register for VAT whilst they still haven’t generated any revenue


When is the VAT registration and VAT implementation date?

Starting on 1 January 2018, VAT will be implemented in the UAE. All businesses that are operating in the UAE are expected to be registered by then or penalties will be faced.


What will be the VAT rates?

The standard VAT rate of 5% is agreed to be charged on certain goods and services in the UAE. Non-taxable goods and services will not be charged, such as health, education, and local transport, etc.


Does VAT Registration make non-residents reliable?

Non-residents or tourists will pay VAT at the point of sale. 5% VAT will be applied to perfumes, makeup, luxury bags, and big-ticket items additional of the sale price. There can be an exemption wherein there is a requirement for a certain business to use a reverse charge mechanism for the purchases from any non-resident when accounting for VAT


What if I did not register my business for VAT?

With the Cabinet Decision No. 40’s release, the violations for non-compliance and respective penalties are all listed in its provisions. Consumers may also lose confidence in the business that does not comply with the laws of the land, hence the impending sinking of the business.


In the case that my business falls in all the exempted categories, what is the impact of it?

All businesses that have exempted supplies as goods shall not charge from their customers. VAT cannot be claimed as well on purchases made.
However, all businesses that have partially exempted supplies as goods shall register for VAT. The VAT incurred can be claimed as well on taxable supplies

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