No, Dubai or even the entire UAE is not a tax free country anymore. The UAE Federal Government does not impose tax on the wealth of the companies and individuals. However, some new taxes in UAE have brought into existence; they are - Value Added Tax and Excise Tax. Taxes in UAE are charged subject to commodity, jurisdiction or the annual turnover of the company.
As a regular citizen or resident of UAE you will not have to pay tax and there is no income tax levied on the salaries. Though, commodities and services may get expensive terming that VAT will be implied on everything.
As a resident or citizen you do not have to pay any tax in Dubai or anywhere in UAE. But, as a business entity or a commercial enterprise tax is payable in all the Emirates depending on the business activity and jurisdiction of your company. However, 5% VAT is charged on all the products and services around the UAE.
Value Added Tax (or VAT) is a type of indirect tax applied on all kinds of commodities and services in the UAE. VAT also known as consumption tax and is charged throughout the supply chain, nevertheless, the eventual cost is borne consumers. The buyer will be eligible of such tax as input credit and get set off from output tax liability. It is the ultimate consumer who bear the final tax liability as he will not be able to get set off of such tax.In UAE VAT is charge on 5% on all the products and service within the country, however, few welfare organizations have an exemption.
Yes, implementation of VAT in UAE will be productive to businesses. UAE implemented VAT in order to provide citizens and residents with advanced public infrastructure and interests. Apart from the government budget, VAT will generate a new source of income towards these public welfare expenses. Businesses in UAE can expect a prolific growth as the country grows with these extensions and developments.
VAT or Value Added Tax came into effect from 1 January 2018.
Companies whose taxable products, services, imports and exports exceed the threshold of AED 375,000 annually, need to mandatorily get VAT registration in UAE. Whereas, a business may opt to register for VAT voluntarily if their products, services, imports and exports are less than the mandatory registration threshold, but exceed the voluntary registration threshold of AED 187,500.
Yes, businesses will be liable to maintain book of accounts for their business profits, incomes and costs. Companies will also have to document charges related to Value Added Tax separately. Along with the maintain of financial records, commercial organizations would also take assistance from accounting and auditing firms in UAE.
Yes, VAT invoices need to be retained for a period of 5years. These invoices need to be presented as and when required by the Federal Tax Authority.
The tax paying companies in UAE are required to file returns with the FTA on regular intervals. As slated, the returns need to be filed quarterly or whenever instructed by the FTA, i.e. within 28 days from the end of the tax period as per the measures determined in the VAT legislation. VAT returns need to be filed by FTA eservices.
VAT will be applied throughout the supply chain. All the companies and businesses need to mandatorily register themselves with the Federal Tax Authority FTA. Businesses and traders will be charged VAT on the goods and services that they buy from suppliers and will have to also charge their customers at the prevailing rate and incur VAT. The difference between the actual amount reclaimed or paid will be eventually collected by the government.
In United Arab Emirates, tax identification number or tax registration number (TRN) is what identifies your company's taxation records. Tax payable entities need to get the VAT registration procedures, after which they receive a TRN Number from the FTA. The TRN number has to be used every time you pay tax.
Companies and businesses can register for VAT tax through the e-services section on the FTA online portal (https://eservices.tax.gov.ae/). However, they need to create an account and obtain a TRN number. Companies would also require a series of documentations. For more details about VAT tax registration, you may check out this blog https://www.shuraa.com/blog/2017/11/12-important-faqs-about-vat-in-uae.html or speak to a tax consultant at Shuraa Tax Consultants and Accountants.
Yes, Excise Tax is present in UAE and applied on goods such as tobacco products, carbonated soft drink; energy drinks and special purpose goods.
Yes, businesses engaged in importing, exporting, manufacturing, trading, storing or transporting of the above mentioned goods will have to register with the Federal Tax Authority. There is no threshold for business unlike VAT in UAE.
Businesses and companies involved in excisable goods need to -
1) Ensure resources and systems are in place to effectively managing excise tax;
2) Maintain accurate, complete and readable excise tax records;
3) Submitting excise tax returns as specified by the taxation authorities;
4) Comply with the inventory and movement control system;
5) Keep customs and transport documents as well as all the relevant documents related to the transaction.
VAT is a value-added-tax applicable on certain supply of goods or services in UAE from 1st January 2018.
Main reason for implementing VAT in UAE is to generate more revenue for the government. Using this revenue, the Government plans to offer various types of public services, including medical facilities, good roads, transportation facilities, public schools, parks, waste control, and more. VAT will also provide a new source of non-oil revenue for the Emirates.
The short answer is yes. The travel and tourism industry is an important part of the UAE’s national economy. Not all parts of the industry will be subject to the same VAT rates. The travel and tourism sector can be broken down into several components, such as international transportation, local passenger transportation, hotel, meetings, exhibitions, healthcare, education, events and other special interest groups. The Basic healthcare and local transportation are exempt supply while international transportation is zero-rated supplies in the UAE. Meetings, conferences, events, and trade expos, which account for a significant portion of the revenue-generating drive of the tourism sector, are taxable.
Currently, the Dubai as well as UAE is doing a feasibility study of a Tourist Refund Scheme where visitors and tourists will be able to claim a refund on VAT paid on certain goods and services purchased in the UAE.
Businesses will be responsible for careful documentation of their business income, costs and associated VAT charges. Registered businesses and traders will charge VAT to all of their customers at the prevailing rate and incur VAT on goods / services that they buy from suppliers. The difference between these sums is reclaimed or paid to the government.
VAT, as a general consumption tax, is applied to the majority of transactions of goods and services unless specifically exempted or Zero rated by law.
A business entity who has a place of residence in the state must register for VAT if their total value of all supplies except exempt supplies and imports exceed the mandatory registration threshold of AED 375,000 in previous 12 months or is anticipated that the total value of said supplies and imports will exceed AED 375,000 in next 30 days.
Furthermore, a business entity may choose to register for VAT voluntarily if their taxable supplies and imports are less than the mandatory registration threshold, but exceed the voluntary registration threshold of AED 187,500 in previous 12 months or is anticipated that the total value of such supplies and imports will exceed AED 187500 in next 30days.
Similarly, a business entity may register voluntarily if their expenses incurred which are subject to tax exceed the voluntary registration threshold of AED 187500 in previous 12 months or is anticipated that suchexpenses exceeds the voluntary registration threshold of AED 187500 in next 30 days. This latter opportunity to register voluntarily is designed to enable start-up businesses with no turnover to register for VAT.
All businesses in the Dubai and across 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 to prove so. VAT-registered business entities:
* 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 the tax liability of the business entity concern
If you’re a VAT-registered business entity you must report the amount of VAT you’ve charged and the amount of VAT you’ve incurred as input and difference paid to the government on a regular basis. It will be a formal submission and the reporting will be made online.
If you’ve charged more VAT than you’ve incurred as input VAT, you have to pay the difference to the government. If you’ve incurred more VAT than you’ve charged, you can reclaim the difference.
VAT has come into force on 1 January 2018. Any business that is required to be registered for VAT and charge VAT from 1 January 2018 should have registered prior to that date, however if not yet registered can still do it with us.
Taxpayers must file VAT returns with the FTA on a regular basis (quarterly or for a shorter period, as the FTA decide so) within 28 days from the end of the tax period in accordance with the procedures specified in the VAT legislation. The Tax returns shall be filed online using eServices.
Businesses will be required to keep records which will enable the Federal Tax Authority to identify the details of the business activities and review transactions. The specifics regarding the documents which will be required to retain will be stated in the relevant legislation. (However, agencies have confirmed that up to 5 years documents need to be preserved.)
Any taxable person must retain VAT invoices issued and received for a minimum of 5 years.
The place of supply will determine whether a supply is made within the UAE (in which case the UAE VAT law will apply), or outside the UAE for VAT purposes.
For a supply of goods, the place of supply should be the location of goods when the supply takes place with special rules for certain categories of supplies (e.g. water and energy, cross border supplies).
For the supply of services, the place of supply should be where the supplier is established with special rules for certain categories of supplies (e.g. cross border supplies between businesses).
The VAT on real estate will depend on whether it is a commercial or residential property. Supplies (including sales or leases) of commercial properties will be taxable at the standard VAT rate (i.e. 5%). On the other hand, supplies of residential properties will generally be exempted from VAT. This will ensure that VAT would not constitute an irrecoverable cost to persons who buy their own properties. To ensure that real estate developers can recover VAT on construction of residential properties, the first supply of residential properties within 3 years from their completion will be zero-rated.
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);
• Supply or import of precious metals for investment purpose;
• 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.
• Supply of crude oil and natural gas;
The following categories of supplies will be exempt from VAT:
• The supply of some financial services;
• Residential properties through sale or lease other than that which is zero rated;
• Bare land; and
• Local passenger transport
VAT registered businesses will be able to reduce their output tax liability by the amount of VAT that relates to bad debt which has been written off by the VAT registered business entity. The legislation includes the conditions and limitations concerning the use of this relief.
To avoid double taxation where second-hand goods are acquired by a registered person from an unregistered person for resale, the VAT-registered person will be able to account for VAT on sales of second hand goods with reference to the difference between the purchase price of the goods and the selling price of the goods (that is, on the profit margin). The VAT which must be accounted for by the registered person will be included in the profit margin. The legislation will include the details of the conditions to be met to apply this mechanism.
Where a VAT registered person incurs input tax on its business expenses, this input tax can be recovered in full if it relates to a taxable supply made, or intended to be made, by the registered person. In contrast, where the expense relates to a non-taxable supply (e.g. exempt supplies), the registered person may not recover the input tax paid.
In certain situations, an expense may relate to both taxable and non-taxable supplies made by the registered person (such as activities of the banking sector). In these circumstances, the registered person would need to apportion input tax between the taxable and non-taxable (exempt) supplies.
Businesses will be expected to use input tax (ratio of recoverable to total) as a basis for apportionment in the first instance although there will be the facility to use other methods where they are fair and agreed with the Federal Tax Authority.
Penalties on VAT and taxation will be imposed on 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.
Generally, insurance (vehicle, medical, etc) will be taxable. Life insurance, however, will be treated as an exempt financial service.
The detailed taxability of financial services has been explained in the Article (42) of federal decree-Law No (8) of 2017 on Value Added Tax.
A scheme will be introduced to allow a UAE national who are not registered for VAT to reclaim VAT paid on goods and services relating to constructing a new residence. A residence that will be privately used by the person and his family only then recovery of VAT on such expenses as contractor’s services and building materials is possible.
Refunds will be made after the receipt of the application and subject to verification checks, with a focus on avoiding fraud.
A supplier registered or required to be registered for VAT must issue a valid VAT invoice for the supply. To be considered as a valid VAT invoice, the document must follow a specific format as mentioned in the legislation. In certain situations, the supplier may be able to issue a simplified VAT invoice. The conditions for the VAT invoice and the simplified VAT invoice are mentioned in the legislation.
VAT will not be deductible in respect of expenses incurred for making non-taxable supplies., input tax cannot be deducted if it is incurred in respect of specific expenses such as renting or leasing of motor car, entertainment expenses e.g. employee entertainment as per Article (53) of federal decree-Law No (8) of 2017 on Value Added Tax.
VAT on expenses that were incurred by a business can be deducted in the following circumstances:
• The business must be a taxable person (the end consumer cannot claim any input tax refund).
• 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.
Non-residents that make taxable supplies in the Dubai and other parts of UAE will be required to register for VAT unless there is any other UAE resident person who is responsible for accounting for VAT on these supplies. This exclusion may apply, for example, where a UAE business is required to account for VAT under a reverse charge mechanism in respect of a purchase from a non-resident.
VAT is due on the goods and services purchased from abroad.
In case the recipient in the State is a registered person with the Federal Tax Authority for VAT purposes, VAT would be due on that import using a reverse charge mechanism.
In case the recipient in the State is a non-registered person for VAT purposes, VAT will be required to be paid before the goods are released to the person as per Article (50) of federal decree-Law No (8) of 2017 on Value Added Tax.
Supplies made by government entities will typically be subject to VAT. This will ensure that government entities are not unfairly advantaged as compared to private businesses.
Certain supplies made by government entities will, however, be excluded from the scope of VAT if they are not in competition with the private sector or where the entity is the sole provider of such supplies. It is likely certain government entities will be entitled to VAT refunds – this is designed to avoid budgeting issues and provide a level playing field between outsourced and insourced activities.
For the supplies provided for government entities, the treatment of such supplies shall depend on the same supply and not on the recipient of the supply. Therefore, if the supply is subject to the standard tax rate, the treatment would remain the same even if it is provided to a government entity.
It is expected that businesses will need to complete additional information on their VAT returns to report revenues earned in each Emirate. Guidance will be provided to businesses with regards to this.
It is expected that the rules will be relatively straightforward for most businesses and will be based, for example, for B2C transactions, on the location of the transaction (e.g. in a retail environment, the location of the shop).
Not necessarily. Some goods that are imported may be exempt from customs duties but subject to VAT.
Yes.VAT will be levied on value of goods plus custom duty subject to the condition that the goods are liable for tax under UAE VAT.