News: What you need to know about VAT in the UAE?

The VAT is a value-added tax. Value-added arises in the production and sale of goods and services. Therefore it is included in the sales price of products (services) at each stage of production and sales in the form of a premium to the amount.

The VAT is calculated according to the interest rate of the regulating country. The final consumer (legal/physical person) pays VAT on the purchase of goods. The VAT rate in the UAE is 5%.

A company in the UAE pays the difference between the VAT that is charged to consumers and the VAT that it pays when buying a product/service. Registration in the tax is voluntary and mandatory.

Voluntary registration - Art. 17 - 187 500 dirhams (about 50 000 USD).
Mandatory registration - art. 13 - 375 000 dirhams (about 100 000 USD).

If the total value of goods and services sold and purchased in the past 12 months, as well as in the next 30 days, is expected to turn, which exceeds 375,000 dirhams, there is a mandatory registration in the FTA for the payment of VAT. If the total value of goods sold and purchased will be from 187,500 dirhams to, but not more than 375,000 dirhams, then there is a voluntary registration in the FTA.

It is necessary to register the residents of the UAE and the SSPFH countries, as well as non-residents who sell/produce goods/services in the UAE and no one except for them,  pays VAT if the importer does not have the obligation.

To be taxable to persons in the UAE, certain conditions are necessary:

1. The person to whom the obligation to pay VAT applies is a person who independently conducts business activities and makes a profit from this business activity. This person must register with the FTA tax authority for VAT purposes.
2. This person must sell goods and services subject to taxation:

• 1. Products/services may be exempt from taxes and financial services, following the requirements of local law. Providing residential real estate (selling or renting, except when residential real estate is taxed at a rate of 0%). Providing land without buildings on it. Provision of local passenger transport.
• 2. Goods/services may be taxed at a rate of 5% - the standard scale;
• Products/services may be taxed at a rate of 0% used for direct and indirect export from the UAE outside the GCC countries. International passenger transfer and transportation of goods that start or endpoint is the UAE, transit through the UAE. Passenger air transportation, in cases, stipulated in the Warsaw Convention of 1929. Provision of air, sea and land modes of transport for the transportation of passengers and goods. The supply or import of precious metals to invest. After identifying the signs on which metals will be subject to VAT at a rate of 0%. Providing built residential real estate for three years from the time the building is commissioned and selling such residential real estate or renting out with the option to purchase. Supply of crude oil and natural gas Provision of educational services and products for kindergartens, preschool institutions, primary schools, and higher educational institutions - only funded from the state budget. The provision of goods or services in the field of primary health care and health prevention).

3. Place of sale - to pay VAT, the Emirates should be recognized.

• The place of provision of services is the country of residence of the supplier.
• Exceptional rules: international deliveries and online services.
• Delivery of goods takes place in the UAE;  the products are subject to VAT in the UAE.
• Delivery of goods occurs outside the UAE;  the products are subject to VAT outside the UAE.

Law and Trust International provides an opportunity to register a company in the UAE. To learn about the cost and features of registration, please contact our lawyers.