UAE is a member state of GCC and all the countries in GCC have agreed to implement VAT. This VAT implementation came into effect since 2018 and created a common law framework for consumption.
A basic VAT tax of 5% was implemented on a host of products, but certain business sectors were exempted from it, such as healthcare, education, and basic consumer goods. The final VAT regulations announced last month has a lot of attractive features for investors and other companies in the UAE.
The new law assigns responsibilities to taxable residents, non-residents, individuals, as well as nominated representatives to register and ensure specified compliance.
Key points about VAT registration in UAE and revised tax law
- It’s mandatory for all taxable persons to register under respective country’s law. They should register under VAT and excise; apply for a tax registration number within the given time frame.
- Find a legal representative or appoint a tax agent responsible for compliances and tax payable on behalf of their principals.
- There are strict penalties for non-compliance that include prison terms or fines up to five times of the tax due. The penalty is imposed on key management personnel or owner who takes care of the VAT compliance.
Important features of the UAE VAT law
Some of the key points about VAT registration in UAE,
- Tax on supply of goods or services – VAT is leviable on supply of goods or services as per the Decree Law and other further procedures through executive regulations.
- Tax on import – VAT is leviable on import of goods as per the consumption bases rule. It will be taxed, since it’s supplied within UAE.
- Reverse charge mechanism – Supplier has to pay the tax of supplied goods or services, like in certain cases of import of goods; liability has been casted on the recipient of goods or services. In such case, the person liable to pay tax should register themselves under the law to fulfill its obligations.
- Place of supply – There are specific provisions under VAT for supply of goods and supply of services. Tax will be levied if the place of supply falls in the state. There are specific provisions to determine the place of supply in case of exports and imports.
- Date of supply – Date of supply determines the point of time when there is a liability to pay tax. Usually, it’s the date of supply, date of receiving advance, date of invoice, or anything else.
- Registration – One of the key points about VAT registration in UAE is that, a resident is required to obtain VAT registration if the value of aggregate supplies exceeds a compulsory registration threshold of AED 375,000 in preceding 12 months. The resident should get voluntary registration if the value of supply exceeds AED 187,500.
- Valuation – There are specific provisions on which the value of tax is to be charged. These specific provisions are supported by executive regulation to deal with discounts, value of transactions, profit margin, vouchers, deemed supply cases, etc.
- Tax invoice – Tax invoice is a significant document under VAT law as it records all the ingredients of supply and applicable tax on such supplies. The tax invoice requires a specified format whether it’s raised electronically or manually.
How A&A Associate can help you?
Our VAT consultants will understand your business model and analyze the impact of VAT on your business. Interpret complexities related to your business transactions and guide on accounting procedures.
Our timely services include,
- VAT registration
- Submission of VAT returns
- Claiming VAT refunds
- VAT deregistration
- VAT advisory services
- VAT training
Since the inception of VAT in UAE, we support tax payers to ensure that they are adopting proper tax procedures and VAT compliance!
A&A Associate provides one of the best VAT advisory services in Dubai, UAE in accordance with the client’s business needs!