VAT Consultants in Dubai, UAE

VAT is usually added to your selling price, so customers pay it. However, market conditions may affect whether you can pass the cost fully to customers or need to absorb part of it.

No. You can only claim VAT back on purchases related to making taxable supplies, and you must have a valid tax invoice. Some expenses, like certain entertainment costs, are not eligible.

You could face significant fines and penalties, and the Federal Tax Authority can backdate your registration, meaning you’ll owe VAT for past periods as well.

Keep accurate, up-to-date records, issue proper tax invoices, file returns on time, and work with a VAT consultant to avoid errors and penalties.

In UAE, VAT was introduced/made effective from January 1, 2018. Value Added Tax (or VAT) is an indirect tax. VAT is charged at each step of the ‘supply chain’. Ultimate consumers generally bear VAT. A business pays the government the tax that it collects from the customers while it may also receive a refund from the government on tax that it has paid to its suppliers. The net result is that tax receipts to the government reflect the ‘value add’ throughout the supply chain.

The standard rate of VAT in the UAE is 5%.

VAT is applied at 5% to all transactions of goods and services unless specifically exempt or subject to a rate of 0%, as per Federal Decree-Law No. (8) of 2017 on Value Added Tax.

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

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

Similarly, a business may register ‘voluntarily’ if its expenses exceed the voluntary registration threshold. This opportunity to register voluntarily is designed to enable start-up businesses with no turnover to register for VAT.

Penalties will be imposed in cases of non-compliance with tax legislation.

Examples of actions and omissions that may trigger penalties include:

A person failing to register when required to do so;

A person failing to submit a tax return or to 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 on expenses that were incurred by a business can be deducted in the following circumstances:

The business must be a taxable person.

VAT should have been charged correctly (i.e. unduly charged VAT is not recoverable).

The business must hold documentation showing the VAT paid (e.g. valid tax invoice).

The goods or services acquired are used or intended to be used for making taxable supplies.

AT input tax refund can be claimed only on the amount paid or intended to be paid before the expiration of 6 months after the agreed date for the payment of the supply.

VAT-registered businesses generally:

must charge VAT on taxable goods or services they supply;

may reclaim any VAT they have paid on business-related goods or services;

keep a range of VAT related business records (e.g. Tax invoices);

report their taxable supplies and purchases in periodic VAT Return

Failure by a Taxable Person to submit a registration application within the timeframe specified is AED 10,000 [USD 2,725 equiv.]

In the UAE, the businesses or individuals that are covered by the below criteria are required to register for VAT. Based on their turnover the VAT Registration can be under any of the below two categories:

Mandatory Registration: This registration type is mandatory for businesses that meet the following criteria:

Businesses with an annual turnover (over the previous 12 consecutive months) exceeding AED 375,000  [USD 100,000 equiv.

Businesses that expect to exceed this threshold within the next 30 days.

Businesses that provide taxable supplies or imports (goods and/or services).

Non – resident businesses that make taxable supplies in the UAE and their customer is not obligated to account for VAT in UAE.

Voluntary Registration: This registration type is optional for businesses that do not meet the mandatory registration criteria but wish to register for VAT voluntarily. Businesses that register voluntarily can benefit from being able to reclaim the VAT they pay on their business purchases/ expenses. The Voluntary Registration threshold shall be AED 187,500 [USD 50,000 equiv.], whether on the basis of supplies (turnover) or purchases/expenses.

It is important for businesses to determine which type of registration they need to apply for based on their business activities and turnover.

Once registered, businesses must comply with VAT regulations, maintain proper records, issue tax invoices, and submit periodic VAT Returns ( generally Quarterly, not necessarily calendar quarter ) to the FTA. Failure to comply with VAT regulations can result in penalties and fines.

A Taxable Person that wants to apply for an exception from Tax Registration on the basis that all of his supplies are zero rated, shall apply to the FTA in a manner and by means specified by the Authority.

Once you have registered for VAT in the UAE, you are required to file your VAT return and make related VAT payments within 28 days from the end of your tax period.

A Taxable Person shall apply to the Authority for Tax deregistration in any of the following cases:

If he stops making Taxable Supplies and does not expect to make any such supplies over the next 12-month period;

The value of Taxable supplies made, or Taxable Expenses incurred by the Taxable Person over the previous 12 (twelve) months is less than the Voluntary Registration Threshold, and his Taxable supplies or Taxable Expenses, expected over the next 30 (thirty) days, are not expected to exceed the Voluntary Registration Threshold.

The failure of the Taxable person to submit the deregistration application within the specified timeframe results in a penalty of AED 1,000 up to a maximum of AED 10,000.