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VAT Consultancy

Value Added Tax (VAT) has come into effect in UAE from 2018. JAXA can help you with your company’s VAT registration and proper record keeping as per VAT law, and assist in VAT return submission in Dubai and the rest of UAE. Here are a few things to know about VAT.

What is VAT?

VAT is a type of general consumption tax that is collected incrementally, based on value addition, at each step of a product’s supply chain. End consumers generally bear the cost of VAT while businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government. A business is liable to pay the tax that it collects from the customers to the government while it can net off any tax that it has paid to its suppliers from its liability. The net result is that tax receipts to the government reflect the ‘value-added’ throughout the supply chain. VAT is applicable in over 160 countries.

What is the rate at which VAT will be applicable in UAE?

The rate of VAT in UAE is 5%, or 0% (for certain sectors like basic education, transportation, healthcare services, etc).

What shall be taxed under VAT in UAE?

VAT is applicable to almost all goods and services in UAE, only few services like residential real estate, basic education, public transportation, international transportation, healthcare services, financial services, etc. are either zero-rated or exempted. This would include essential commodities, commercial real estate, automobiles, electronics, jewellery, restaurant services and entertainment.

What is a business in UAE required to do in relation to VAT?

Businesses having yearly turnover of above AED 375,000/- must register for VAT and collect VAT from its customers. All registered business must submit returns to the authority on a monthly/quarterly basis (except for the first return), and make the payment or ask for refund. Monthly return is applicable for companies having a turnover above AED 150 million and for certain selected industries, all others have to submit it on a quarterly basis. All businesses in the UAE must record all their financial transactions and ascertain that their account books are transparent and accurate.

How should a company register for VAT?

A company can register for VAT on the online portal of the Federal Tax Authority (FTA). One is required to set up an online account on the site and fill up the VAT registration form. For a detailed guide on how to go about VAT registration, you can go through this guide published by the FTA.

Can a business claim refund of VAT on its expenses?

If your taxable expenses are more than your taxable income, you can ask for the refund of the tax you paid on your expenses.

Can a business claim credit of VAT paid on any expenses?

Except VAT paid on a few expenses, like entertainment, motor vehicle purchase and leasing (if available for personal use of any person), a business can take credit of all other business expenses. This includes purchase of goods, expenses on telephone, utilities, stationary purchased for office expenses, etc.

How to submit returns and make payment?

Returns has to be submitted online using the user name and password used for registration. Payments can be made through different channels like e-Dirham card, credit card, bank transfer, transfer through exchange houses etc. A detailed guide line is available in the website of tax authority.

What records and documents should be maintained?

Any invoice issued should contain VAT registration number of supplier and customer, VAT % (for each item), amount in AED, etc. Proper accounting records including sales register, general ledger, purchase register, invoices issued, invoices received, credit notes, debit notes, VAT Ledger, etc. need to be kept.

JAXA can help you with any doubts or guidance related to VAT registration in UAE. For any queries on VAT or tax consultation for companies in the UAE, do contact us, and we’d be happy to assist.