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What is VAT in UAE?

By September 23, 2019 No Comments

Value Added Tax (VAT) introduced in the UAE on 1 January 2018 and VAT is the type of indirect tax levied on the purchase or usage of goods and services. This type of tax bears by or levied on the final consumer and the companies or businessmen collects tax on behalf of the government.

The standard rate of Value Added Tax is 5% levied on most of the supplies except for the supplies of exempted or zero-rated goods and services.

The following goods and services are exempted from VAT:

1) Financial services provided free of cost.

2) Supply of bare land

3) Education

4) Some foodstuff

5) Local transport services for passengers by land, air, water with in the countryโ€™s boundry

6) Supply made with in the VAT-free zones

7) Health care

8) Lease for more than 6 months of residential property

The VAT applicable on some goods and services at 0% are:

1) First sale/lease of residential property

2) Export goods and services

3) Education and healthcare services

4) Investment on some precious metals

5) International transports of goods and passengers

 

Why we registered in Value Added Tax (VAT)

If, your turnover exceeds the threshold of taxable supplies then you must register in VAT. Registration in VAT explains that you want to grow your business also you get some benefits and it implies a positive impact on your image or business.

Threshold for Registration:

In the UAE there are three types of threshold for registration in VAT

1) Mandatory registration

2) Voluntary registration

3) Exempt from VAT registration

Mandatory Registration:

If the taxable supplies or turnover exceeds the amount of AED 375,000 in the last twelve months or expected to be reached within 30 days and this limit is only for the resident person. The registration on non-resident is mandatory, irrespective of threshold limit.

Voluntary Registration:

If any resident does not fulfil the requirements of mandatory registration but wants to registered their business with VAT then he can apply for voluntary registration after the fulfillment of requirement/limit/threshold which is annual taxable supplies (or taxable input expenses) of AED 187,500 (50% of mandatory threshold) or more but less than AED 375,000.

Voluntary registration is not mandatory is only for small business who enjoys the benefits of registration of the VAT.

Any business has VAT registration can only made taxable supplies and charge VAT from their customers on behalf of the government.

EXEMPTION FROM VALUE ADDED TAX (VAT) REGISTRATION:

Any person or businesses made (supplies) zero-rated goods and services are only exempt from registration, if theyโ€™re not exceed the limit of mandatory threshold (AED 375000).

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