Value Added Tax (or VAT) & Excise Tax

It is important to understand any potential obligations you or your business may have under the UAE Tax Law.

Businesses will be responsible for carefully documenting their business income and costs and associated Tax charges. We helps to mechanize and makes life easy to handle tax conditions, so businessman can focus to their business.

Through us.., Know your business any time any where!

FTA, UAE: “Every business will need to maintain proper books of accounts and will need to incorporate VAT into their account system. They will need to keep accurate records to demonstrate that they have correctly applied the VAT rules.”

All persons that intend to produce, import or stockpile excise goods (“Taxable Activities”) in the UAE will be required
to register for Excise Tax.

Currently, excise goods are defined as:

  • Tobacco and tobacco products;

  • Carbonated drinks; and

  • Energy drinks.

Even if you are not a producer or importer of excise goods, you may still be required to register. This will be the case
where you stockpile excise goods prior to the introduction of the tax, or if you release excise goods from a Designated
Zone and you are not already registered for Excise Tax.

Documents required during the application process include

    • Trade License(s) (if applicable)

    • Certificate of Incorporation (if applicable)

    • Customs number(s) issued by Customs department(s) (if applicable)

    • Passport, Emirates ID of the manager, owner and senior management

    • Authorized Signatory documents

    • Articles of Association/Partnership Agreement/Club or Association Registration/Law or Decree (if applicable)

    • Bank Account details

Concerned businesses will have time to prepare before VAT will come into effect in January 2018. During that time, businesses will need to meet requirements to fulfill their tax obligations. Businesses could start now so that they will be ready later. To fully comply with VAT, We believe that businesses may need to make some changes to their core operations, their financial management and book-keeping, their technology, and perhaps even their human resource mix (e.g., accountants and tax advisors).

It is essential that all businesses in the UAE will need to record their financial transactions and ensure that their financial records are accurate and up to date. Businesses that meet the minimum annual turnover requirement (as evidenced by their financial records) will be required to register for VAT. Businesses that do not think that they should be VAT registered should maintain their financial records in any event, in case need to establish whether they should be registered.

VAT-registered businesses generally:

  • must charge VAT on taxable goods or services they supply;
  • may reclaim any VAT they’ve paid on business-related goods or services;
  • keep a range of business records which will allow the government to check that they have got things right

If you’re a VAT-registered business you must report the amount of VAT you’ve charged and the amount of VAT you’ve paid to the government on a regular basis. It will be a formal submission and it is likely that the reporting will be made online.

If you’ve charged more VAT than you’ve paid, you have to pay the difference to the government. If you’ve paid more VAT than you’ve charged, you can reclaim the difference.

A business must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000.

Furthermore, a business may choose to register for VAT voluntarily if their supplies and imports are less than the mandatory registration threshold, but exceed the voluntary registration threshold of AED 187,500.

To enable businesses to prepare for introduction of VAT and comply with this registration obligation in time, the electronic registrations will be open for VAT from the third quarter of 2017 on a voluntary basis and a compulsory basis from the final quarter of 2017 for those that choose not to register earlier. This will ensure that there is no last minute rush from businesses to register for VAT before the deadline.

Everyone is urged to fully comply with their VAT responsibilities. The government is currently in the process of defining the exact fees and penalties for non-compliance.

Administrative penalties for violations will be decided by Cabinet and announced after issuance. There will be further penalties decided by Courts in the case of tax evasion.

Penalties will be imposed for non-compliance.

Examples of actions and omissions that may give raise to penalties include:

  • A person failing to register when required to do so;
  • A person failing to submit a tax return or make a payment within the required period;
  • A person failing to keep the records required under the issued tax legislation;
  • Tax evasion offences where a person performs a deliberate act or omission with the intention of violating the provisions of the issued tax legislation.

VAT Slabs

VAT will be introduced across the UAE on 1 January 2018 at a standard rate of 5%.

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);
  • 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 ;
  • Supply of certain education services, and supply of relevant goods and services;
  • Supply of certain Healthcare services, and supply of relevant goods and services.

The following categories of supplies will be exempt from VAT:

  • The supply of some financial services (clarified in VAT legislation);
  • Residential properties;
  • Bare land; and
  • Local passenger transport