United Arab Emirates

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VAT-registered businesses outside of the European Union are eligible to recover VAT on business costs from United Arab Emirates under the 13th Directive.

Understanding VAT Rates in the UAE

Value-added tax (VAT) is a relatively new phenomenon in the United Arab Emirates, implemented by the UAE government on January 1, 2018, to help raise funds for public projects and services. The VAT scheme also serves a dual purpose, allowing the country to move away from a reliance on oil and gas revenue.

Although the UAE’s VAT program is in its infancy, the country’s Federal Tax Authority has made the process as simple as possible, with easy-to-use online services and an E-Learning portal.

While most UAE nationals will need to pay VAT at each step of the supply chain, foreign businesses and tourists can apply for refunds on a case-by-case basis.

The UAE’s Current VAT Rates

The VAT UAE implementation is required for a certain taxable supply of goods and services. Unlike the many countries with several tiers of VAT rates, the UAE’s system contains only two rates:

• Standard (5%) – The vast majority of goods and services are subjected to the standard VAT rate.
• Zero (0%) – Zero-rated supplies include education and healthcare services, certain precious metals, international transportation, and exported goods.

While you’ll have to pay the standard VAT rate on most goods and services in the UAE, you may be able to claim a VAT refund if your business is not registered in the country. Before you can receive your VAT refund, UAE officials will have to review your application form. If all the information is correct, you’ll receive your refund within four months.

The UAE’s VAT Return Filing Process

If you’ve completed UAE VAT registration, you need to file your VAT return no more than 28 days from the end of your tax period. Tax periods in the UAE are either monthly or quarterly.

• If your business has an annual turnover below 150 million Emirati dirhams (40,838,500 USD), you’ll have to file every quarter.
• If your business has an annual turnover of 150 million Emirati dirhams (40,838,500 USD) or more, you’ll have to file every month.

To file your VAT return in the UAE, you must first create an account with the UAE Federal Tax Authority (FTA). From there, you can use the eServices section on the FTA website to register.

Once VAT registration is completed, you can pay your bill for VAT and excise tax online using one of four methods:

• eDirham or credit card (same-day payment)
• eDebit (same-day payment)
• Local bank transfer (two to three days)
• International bank transfer (two to three days)

Complying with UAE VAT Laws

Any business with taxable supplies and imports from the last 12 months exceeding 375,000 dirhams (approximately 100,000 USD) must register for VAT. Businesses exceeding the 187,500 dirham threshold can also register voluntarily.

Once registered, you must comply with the UAE’s VAT rules:

• Charge VAT on applicable goods and services
• Keep business records for at least 5 years
• Calculate annual turnover and correctly submit monthly or quarterly
• Take credit notes from the VAT return filing period into account

While UAE VAT compliance is straightforward, the relative recency of the program’s implementation means that changes are likely. For up-to-date information on changing laws and regulations, contact your local VAT IT branch today.

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Sources:

United Arab Emirates. Value Added Tax (VAT). https://u.ae/en/information-and-services/finance-and-investment/taxation/valueaddedtaxvat 

United Arab Emirates Ministry of Finance. Value Added Tax (VAT): Everything you need to know about VAT implementation in the UAE. https://www.mof.gov.ae/en/resourcesAndBudget/Pages/vatquestions.aspx 

United Arab Emirates. How to pay VAT and excise tax? https://u.ae/en/information-and-services/finance-and-investment/taxation/how-to-pay-vat-and-excise-tax 

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