VAT Return
VAT (Value Added Tax)
VAT (Value Added Tax) in the UAE is a consumption tax imposed on the supply of goods and services at each stage of the supply chain. It was introduced on January 1, 2018, as part of the UAE’s efforts to diversify its revenue sources and reduce reliance on oil income.
Key features of VAT in UAE
- Standard Rate:
- The VAT rate in the UAE is 5%, which is applicable to most goods and services.
- Zero-rated Supplies:
- Certain goods and services are taxed at 0%, meaning VAT is charged at 0%, but businesses can still recover input VAT. Examples include:
- Exports outside the GCC.
- International transportation of passengers and goods.
- Certain educational and healthcare services.
- Some specific goods, like gold and diamonds traded between registered businesses.
- Exempt Supplies:
- No VAT is charged on exempt supplies, but businesses cannot recover the input VAT related to these supplies. Examples include:
- Residential property leases (under specific conditions).
- Local passenger transportation.
- Financial services (e.g., loans, deposits).
- Registration Thresholds:
- Mandatory Registration: Businesses with annual taxable supplies and imports exceeding AED 375,000 must register for VAT.
- Voluntary Registration: Businesses with annual taxable supplies and imports exceeding AED 187,500 can voluntarily register.
- Filing and Payment:
- VAT returns are usually filed quarterly (or monthly for some large businesses).
- Businesses must file VAT returns and pay any due VAT to the Federal Tax Authority (FTA) through their online portal.
- Input VAT Recovery:
- Registered businesses can recover VAT incurred on business-related expenses, provided they meet certain conditions.
- Compliance and Penalties:
- Businesses are required to maintain proper records and invoices for VAT compliance. Non-compliance, such as late registration, filing, or payment, may result in penalties.
Benefits of VAT in the UAE
- Supports the UAE government’s vision for sustainable economic development.
- Provides a new revenue stream to fund public services, such as healthcare and education.
- Encourages businesses to maintain proper records and financial transparency.
If you need further assistance related to VAT, such as registration, filing, or compliance, let us know!