Navigating the UAE VAT system can be daunting, even for seasoned professionals. So we understand that for beginners, it’s important to have some advice when you are first starting out. Our guide is here to give you some simple, practical tips to give you more confidence when dealing with VAT, and help you to stay compliant with all the rules and regulations.
What is VAT?
VAT is an indirect tax applied to most goods and services, taxing the end consumer. Businesses do not bear the burden, instead just collecting and remitting the tax to the government. Since 1st January 2018, the United Arab Emirates has implemented a standard VAT rate of 5%.
Who needs to register for VAT?
In the UAE, Mandatory VAT registration applies to all companies or individuals with an annual turnover of AED 375,000 or more. However, you can also voluntarily register for VAT if you have an annual turnover between AED 187,500 and AED 375,000. Remember, if your registration is mandatory, you could face penalties if you fail to register in time.
How do I register?
- Visit the Federal Tax Authority (FTA) website and set up an e-services account.
- Complete the VAT registration form, providing details about your business, including your trade license and financial records.
- Once the form is complete, submit it for approval. The FTA typically processes applications within 20 business days.
- Once approved, you will receive a Tax Registration Number (TRN), which you must use for all VAT-related transactions.
After registration, you must charge VAT on all taxable goods and services. There are two types of VAT: output tax and input tax. Output Tax is the VAT charged on the sale of goods or services. Input Tax is the VAT paid on business-related purchases, which can usually be reclaimed, reducing your net VAT liability.
Failing to register can lead to heavy fines and legal consequences. Ensure you register if your business meets the threshold.
How do I file a VAT return?
Businesses are typically required to file VAT returns on a quarterly basis, although certain circumstances may require you to file them monthly. Your VAT return will take the VAT charged on your customer invoices, and will subtract the reclaimable VAT from any applicable business expenses. Therefore, your VAT return is a calculation of how much VAT you owe or are owed yourself.
Here’s how to file a return:
- Login to your e-Services account on the FTA portal.
- Fill in all the details of your output VAT, input VAT, sales and purchases on the VAT return form.
- Submit your return form (make sure to check everything through).
- Make the payment.
Some tips from us
Recordkeeping: Make sure that you are keeping clear and organised records of all transactions to simplify your return filing.
Keeping updated: Regularly check for updates of VAT laws and regulations from the FTA to ensure you are adhering to their rules.
Ask for help: It can be really useful to consult a tax professional for expert advice and assistance if you are confused about any of the requirements.
Complying with VAT in the UAE may seem complex, but with the right knowledge and tools, it’s manageable. Maintain proper records, stay informed about legal changes and consult a professional if you need some advice.
