VAT or Value Added Tax has been introduced in UAE from January 01, 2018. The VAT rate happens to be 5 per cent in total. With VAT, it will offer UAE a source of income that will be utilized to offering some high-end public services accordingly. It will even help the government to move towards the vision of reducing the dependence on the oil as well as other hydrocarbons as the source of its revenue.

What are the Criteria to Register for VAT?

Businesses should register for VAT in UAE in case the taxable supplies & imports exceed to AED 375,000 on an annual basis. It happens to be optional for the businesses which supplies & imports see an exceeding figure of about AED 187,500 every year.

The business should pay the government the required tax which it collects from the customers. And at the same time, it also receives the refund from government on the tax that it is supposed to pay to the suppliers. A foreign business can even recover VAT which they can incur while visiting UAE.

How will you be Able to Register for VAT?

A business can even register for VAT via eServices section on FTA site. Nevertheless, they also require creating account in the first place. For the general inquiries about the tax registration, one can even contact the FTA or Federal Tax Authority via the form of enquiry or even send email!

How does VAT get Collected?

The VAT-based businesses collect amount on government’s behalf and consumers are the ones who bear VAT in form of 5% increase in cost of the taxable goods as well as services that they buy in UAE. As a matter of fact, UAE imposes the VAT on the tax-registered business at rate of about 5% on the taxable supplies of the goods or the services at every step of supply chain. The tourists in UAE even pay VAT.

Businesses where VAT is Applied

VAT is applied on the tax-registered businesses equally and is managed on UAE mainland. Nevertheless, in case UAE Cabinet mentions free zone as the ‘designated zone’, then it should treated as outside of UAE for the tax purposes. As a matter of fact, transferring goods between the designated zones are even tax-free.

How to Fill a Return for Value added tax?

In end of every period of tax, the VAT-registered businesses should submit the ‘VAT return’ to the FTA or Federal Tax Authority. The VAT return summarizes the total value of purchases and supplies that a business makes during tax period and shows the VAT liability of the business.

What is VAT Liability?

VAT liability is nothing but the difference between input tax or VAT that is incurred on a purchase and output tax payable or VAT charged on the supplies for a tax period. When output exceeds input tax figure, its difference is paid to Federal Tax Authority or FTA. When input exceeds output tax amount, the business has the excess tax recovered.

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