After many consultations at national and regional levels, the VAT was introduced in the UAE in January 2018. The standard VAT rate is 5%, which is one of the lowest rates at the global level. Just like other countries, the UAE government has also introduced reduced VAT rates and exemptions for certain products and services. Below our company incorporation consultants in Dubai offer relevant information on the introduction of the value added tax and the VAT registration in UAE.
With vast experience in company formation in Dubai, our local consultants can help foreign investors who set up companies here to register them for the VAT on a voluntary basis.
We can also help you if you want to open a company in Dubai or register for VAT in UAE.
What is VAT and what will it mean in Dubai?
The value added tax or VAT is an indirect tax applied to sold products and services, which is why it could be regarded as a consumption tax. VAT is considered an indirect tax because it applies to the final consumer that purchases the product or the service VAT were applied to. There will be issues for the companies selling goods or services as they will be the ones collecting the tax and returning it to the government, while for the population of Dubai VAT will mean higher prices for certain categories of goods and services that were not subject to any taxes.
Why is VAT necessary in Dubai?
Introducing VAT came as a suggestion from the International Monetary Fund. The logic behind this recommendation is that the federal government of the UAE has no base income that can be controlled, thus relying on the money coming from payments made in Dubai and Abu Dhabi. Other than that, the UAE is negotiating with the United States, the European Union, Australia, and China on free trade treaties that will lead to the disappearance of customs duties thus minimizing the income generated by other countries. As The last reason for the introduction of VAT in Dubai is that the Dirham (the local currency) is very dependable on the US dollar which makes the control of the monetary system very unstable.
Reduced VAT rates in UAE
The following goods and services benefit from a 0% VAT rate:
- international transportation services;
- aircraft and sea transportation services;
- investments in precious materials;
- the supply or residential properties;
- education services;
- healthcare services.
There are also a few categories of services and goods which are exempt from paying the VAT in Dubai. These are:
- local passenger transportation services;
- the sale of residential properties by the realtor;
- the sale of land plots;
- certain financial services.
In order to collect the VAT, Dubai companies will be required to register with the tax authorities.
Who is required to register for VAT in Dubai?
The VAT is a relatively new tax, however, the government has made important progress in clarifying and helping those who need to register for this tax in the Emirate. VAT registration in UAE is optional for new companies, however, it can become mandatory under specific conditions. With respect to the entities required to apply for VAT registration in Dubai, we mention:
- natural persons and companies making VAT-taxable supplies in Dubai can register voluntarily for VAT;
- natural persons and legal entities importing goods subject to the VAT in Dubai can also register optionally for VAT;
- companies importing goods exceeding 187,500 AED per year can choose to register for VAT;
- companies selling and/or importing goods and services exceeding 375,000 AED per year are required to register for this tax;
- foreign companies selling VAT-taxable goods and services in Dubai are required to register for this tax.
Dubai companies registered for VAT will impose and collect the tax from the final consumer and will pay it to the government. For this purpose, businesses must file VAT returns which will enable them to recover the amount paid as a VAT. It is useful to know that foreign companies registered for VAT in Dubai can also claim refunds here.
If you want to open a company in Dubai, you can opt for VAT registration from the beginning and our company registration advisors can help you.
What are the requirements for VAT registration in UAE?
One of the most important requisites to meet when applying for a VAT number in Dubai is to have a tax identification number. This is obtained together with the Certificate of Incorporation and is issued by the Trade Register in Dubai. Based on the tax identification number, a company will be issued a VAT certificate.
There are several documents that need to be prepared when registering for VAT in Dubai. Among these are:
- the company’s business license (copy after the trade or commercial license);
- copies after the passport of the owner and other shareholders in the case of companies;
- the Memorandum and Articles of Association of the company;
- information about the representative of the company and contact information;
- proof of the registered address of the company in the UAE;
- information about the corporate bank account (IBAN included);
- an income statement for the last 12 months (where available);
- an estimation of the expected revenue, turnover and expenses for the following 30 days after VAT registration;
- information about the import-export activities of the company (where applicable);
- the company’s customs code and copy of the Dubai Custom Code Certificate (where available);
- information about the Gulf Cooperation Council countries in which the company trades;
- a detailed description of the company’s business experience for the last 5 years (where available);
- information on whether the company will be part of a tax group;
- copies after the identification papers with the necessary visas in the case of natural persons.
Even if VAT registration can be completed online through the Dubai Government’s online portal, due to the extensive list of documents to be filed and the requirement of creating an online account, the procedure can prove rather difficult for business owners. Our Dubai company formation specialists can help with this procedure.
You can read about VAT registration in Dubai in the scheme below:
VAT registration in Dubai
Not all companies supplying goods and services must register for VAT, but only those registering incomes above the 375,000 AED. Also, VAT registration is voluntary for companies with incomes below 187,500 AED. The main advantage of VAT registration is that companies can be refunded for the amount paid from the collection of the new tax following the submission of the tax returns. VAT returns will be filed electronically at the end of the taxable period or on a quarterly basis.
The taxable periods are:
- monthly for companies with an annual income of 150 million AED or more;
- quarterly for companies with an annual income below 150 million AED.
It should be noted that non-resident companies or individuals with economic activities in the UAE are also required to register for VAT here.
All VAT invoices must be kept for a period of 5 years by all VAT taxpayers.
The registration process is simple and local companies can benefit from assistance from our accountants in Dubai when applying for a VAT number.
The value added tax was implemented for the first time in France in the ’50s and after that more and more countries began to adopt it. In the last few years, the CGS countries have begun considering the introduction of this tax as well. Countries like the UAE, Saudi Arabia, Qatar, Kuwait, Bahrain, and Oman are working on a law that will introduce the VAT system.
VAT accounting requirements
All companies registered for VAT in Dubai must comply with specific accounting procedures, among which file tax returns in a due period of time. This period is assigned by the tax authorities in Dubai.
Here are the main VAT accounting requirements:
- Dubai companies have 28 days to file their VAT returns after the end of the tax period;
- failing to file these returns will attract fines between 10,000 and 50,000 AED;
- businesses with an annual turnover above 150 million AED are required to register for VAT;
- companies must impose a 5% VAT rate on most of the goods and services supplied in Dubai.
Those interested in opening a Dubai company and registering it for VAT optionally can rely on our local agents.
Assistance in VAT registration in Dubai
Foreign investors seeking to register for VAT in Dubai are required to appoint a local representative and our consultants can act on their behalf when dealing with the authorities. We can also handle various accounting matters of their companies in Dubai or in any free zone. We can also assist in registering a business in any Dubai free zone.
The video below is an overview of the introduction of the VAT in Dubai:
The implementation of VAT in UAE
The UAE Government implements regulatory mechanisms and frameworks on a periodic basis, across Government departments and realms, as part of its key initiatives to boost economic health. One such significant implementation was the introduction of VAT (Value Added Tax) in the UAE, declared the representatives of our company who help businessmen open companies in Dubai.
In 2018, Value Added Tax (VAT) was implemented in the GCC (Gulf Cooperation Council), with key economies like the Kingdom of Saudi Arabia and the United Arab Emirates adopting and implementing the regulatory framework. For the general public, this meant higher payouts for entertainment, food, cars and other categories. For businesses, this meant levying VAT on their goods and services, at each transactional stage from raw materials to finished products. More importantly, VAT would not only impact businesses operating in mainland jurisdiction but also have a complex impact on businesses based in free zone jurisdictions as well. The entire framework of VAT taxation is an attempt to streamline macro and micro-financial compliance across all businesses based anywhere in UAE.
The UAE Government adopted awaited policy, whereby they took the role of mentor and educator, to get businesses compliant under the VAT framework. However, in 2019, with one calendar year of VAT implementation having been completed, they adopted a bit more stringent compliance framework. This particular approach was to be used as a model for VAT implementation across other GCC countries, where the concept of taxation is relatively new. The government deserves credit for smooth VAT implementation and it is evident from the overall compliance rate which is above 90% across all UAE businesses.
The Government saw VAT collection revenues of AED 27Bn in 2018, surpassing its target of AED 12Bn for 2018 and AED 20Bn for 2019. Naturally, from a monetary perspective, this is one of the large revenue-generating sources for the UAE Government.
While the general public, the ultimate consumer, have adopted VAT smoothly and accepted (and budgeted for) the increased cost of the goods or services they consumed, it is the businesses that have been concerned about the regulation mechanism, the rules, the jurisdictions and any penalties.
We provide valuable guidance to our clients on VAT services and a full suite of VAT services, right from VAT Health Checks, to registration, to ongoing VAT return filing, compliance and consultancy services. We believe that our clients should not only be VAT-ready and compliant but should also be able to turn this into competitive advantage with the right VAT services strategy.
While VAT and VAT services may be a relatively new concept in the Middle East, VAT has been in force for many decades across other parts of the world. Leveraging on VAT frameworks, regulations and implementations from around the globe, our sincere advice would be to take VAT seriously and engage with expert advisors, preferably those with global experience. Getting the VAT Health checked for your business (for VAT readiness) would be a good start. We can also help you open a business in Dubai.
Our Services: VAT Registration
Whether your requirement is VAT services or GST registration services in UAE or anywhere in the world, our comprehensive and effective service covers your needs, with minimal hassles.
VAT registration demands strong knowledge of local tax legislation and procedures, not to forget the appropriate language skills. Any deviation from these fundamental prerequisites will lead to many applications getting rejected.
To minimize the issues with registration, many businesses opt to engage VAT services through specialists who provide service through a dedicated account manager, to assist you with the entire registration and compliance process.
Our team of expert VAT advisors provides multilingual support to help you obtain a VAT registration number in quick time:
- Complimentary assessment of VAT registration obligations,
- Advice on registration dates and types,
- Guidance on the documentation and information required,
- Translation services where required,
- Review of all relevant registration material,
- Preparation and submission of all application forms,
- Set up on online submissions portals,
- Managing all correspondence with the tax authorities.
VAT Compliance and Filing
Post-registration, your quarterly or monthly VAT returns would be filed by our team of VAT advisors, by meeting the mandatory statutory declarations as per Government guidelines.
Once registered for VAT in UAE, you are required to file your periodic statutory declarations in the form of quarterly or monthly VAT returns. It is a simple summary of all transactions your business performed in that period, which attract VAT compliance either in form of financial transaction or reporting.
Every VAT return is different and will have different information requirements and reporting formats. Our team of advisors has the information and guidelines to be followed for filing VAT returns in the UAE and can also help you with the company incorporation in Dubai.
With global VAT requirements being different in different countries, and with regulations being changed frequently, not only are we fully updated on these changes, we provide VAT consultancy services with practical support for your business.
With companies conducting business with multiple parties across the globe, it becomes a challenge to manage the changing VAT obligations. It becomes imperative to engage a VAT services expert who can guide you in all VAT jurisdictions.
Why choose us?
- In-depth knowledge of VAT legislation
- Single point of contact for all jurisdictions
- Global presence
- Consistency in process
- Strong credentials
- Flexibility in services
- Personalized engagement
- Multilingual team
- Cost-effective solution.
If you want to open a company in Dubai, you can contact our company formation agents for details about the incorporation process. You can also count on us if you want to set up a company in Dubai or register for VAT in UAE.