Complete Guide to VAT in UAE
Do you know how value added tax (VAT) affects your daily business operations, profits, and cash flow? Let us understand the significance of VAT in UAE and how it affects your business.
VAT, which is a type of consumption tax, is added to the price of goods or services when you purchase it. For business owners and entrepreneurs planning to start and scale their business in the UAE, it is crucial to understand how VAT essentially works. A better understanding of VAT in UAE will not only help you ensure compliance but also facilitate effective financial planning and decision making.
Continue reading this article to get in-detail information about the VAT tax in UAE, from registration, benefits, and invoicing to filing returns.
Understanding VAT Rates in UAE
VAT in UAE was implemented with effect from 1 January 2018 to minimise the country’s dependence on oil and gas based income. The Federal Tax Authority (FTA) is responsible for the administration, collection, and enforcement of VAT in the UAE. In the UAE, the standard VAT rate is 5%, and it applies to most goods and services, with certain exemptions and zero-rated categories.
Refer to the table below to understand how the VAT rates apply to different industries in UAE:
| Industry | VAT Rates in UAE | Details |
|---|---|---|
| Oil and Gas | 0% / 5% | Crude oil and natural gas have 0% VAT. Other oil and gas product, like petrol, have 5% VAT |
| Exports (goods and services) | 0% | Exports to countries outside the Gulf Cooperation Council (GCC) are zero-rated for VAT |
| Real Estate | 0% / 5% / Exempt | First-time sale of residential property has 0% VAT, commercial property has 5% VAT, and some properties are exempt |
| Healthcare | 0% / Exempt | Basic healthcare services have 0% VAT, while non-essential services and some medical supplies may be taxed |
| Financial Services | Exempt | Most financial services, like interest and loans, are exempt from VAT |
| Education | 0% / Exempt | Public education like schools and universities has 0% VAT, but some private training may be taxed |
| Retail and Consumer Goods | 5% | Most goods and services are subject to the standard VAT rate of 5% |
| Hospitality (restaurants and hotels) | 5% | Standard VAT applies to hotel bookings& food services, and similar items |
| Telecommunications | 5% | Subject to standard VAT |
Who Needs to Register for VAT in UAE?
It is important for foreign investors and entrepreneurs doing business in UAE to understand if they need to register for VAT or not. This will help them avoid penalties, while ensuring that business operations are carried out smoothly. VAT registration in the UAE can either be mandatory or voluntary, depending on certain key factors. Here is a detailed overview of both:
Mandatory Registration
It is compulsory for businesses in UAE to register for VAT if their annual earnings from taxable goods and services exceed the AED 375,000 threshold. However, a non-UAE business is required to register for VAT if it is making taxable supplies in the country, regardless of its value. This applies when there is no other party in the country responsible for accounting for VAT on those supplies.
Voluntary Registration
Businesses with taxable supplies and imports exceeding AED 187,500 per year may choose to register for VAT on a voluntary basis. You can partner with VAT consultants in UAE, like Gryffin Capitalist, who can help you stay compliant with tax laws by offering expert guidance on registration, filing, and VAT-related processes.
UAE VAT Registration Deadlines
The deadlines of VAT registration in UAE primarily depends on how much taxable income your business earns. If your taxable turnover goes over the set limit, you must register for VAT within 30 days. Missing the deadline can also lead to fines, so it's important to keep track and register on time. By availing Gryffin Capitalist’s VAT consultancy services in UAE, you can avoid delays and penalties.
Here is all you need to know:
| Type of Registration | Conditions |
|---|---|
| Mandatory Registration | Businesses must register within 30 days of exceeding AED 375,000 in taxable supplies and imports. |
| Voluntary Registration | No set deadline; can register if taxable supplies/imports are over AED 187,500 |
Deregistration of VAT in UAE
VAT deregistration in UAE is the process of canceling your VAT registration with the FTA when your business no longer meets the VAT requirements. This may happen if your taxable supplies fall below the threshold or if you have stopped business operations. It is crucial to apply for deregistration on time to avoid fines and stay compliant with UAE tax laws.
Some of the key documents required to complete the deregistration process include copy of cancelled business trade license, latest financial statement, board resolution, signed and stamped letter confirming no business activity in the UAE, among others.
The process of VAT Deregistration are the general steps you need to follow which include logging in to your EmaraTax account, selecting the Taxable Person Account and choosing the deregister options under the VAT to complete the deregistration.
Benefits of VAT Registration in the UAE
Here are some of the benefits of VAT registration in the UAE. It can help your business in both the short term and long term.
- VAT registration confirms the legitimacy and Trust of your business in the UAE
- Filing timely VAT returns ensures that your business has a good financial records over a period of time
- Completing the VAT registration after being eligible ensures compliance and will not invite any penalties form the FTA
- Companies with VAT Registration can apply to claim input VAT Recovery after the VAT filing.
- VAT registration can open your business to new opportunities as many tenders prefer VAT-registered applicants
Step-by-Step Guide to register for VAT in UAE
The process of registering for VAT in UAE requires you to follow a certain procedure, in line with the local laws and regulations. Refer to the following steps to get an understanding of different steps involved in registering for VAT in UAE:
Start by checking if you qualify for filing VAT registration in the UAE or not.
Sign-up to create an ‘EmaraTax’ account on the FTA’s website. To prevent errors and delays, you may consult Gryffin Capitalist for guidance. Our team can carefully fill the details for you.
Once your account is activated, you will have access to the EmaraTax dashboard. At this stage, you will be required to create a ‘New Taxable Person Profile’
You can click on ‘view’ to open your taxable person account. Now you can start your VAT registration process by clicking on ‘register’ under the ‘value added tax’ section.
In the next step, you will be required to provide business details, contact information, and other key information. Along with this, you must submit all the necessary documents to finish your VAT registration. Gryffin Capitalist can assist you in gathering and organising all the required business and contact details, ensuring the information is accurate
Documents Required for VAT Registration in UAE
- Copy of your Business Trade license
- A copy of passport or Emirates ID
- Copy of the company’s audit report
- Partnership agreement or Articles of Association (AoA), if required
- Company’s financial statement (audited/unaudited)
- A letter from bank, validating the applicant’s bank account details
- Power of Attorney documents, if applicable
What our clients say
Thanks to Gryffin Capitalist, starting my business in the UAE was smooth and efficient. They offered advice on company formation and licensing and assisted in opening a bank account.
Starting a business in the UAE seemed complicated, but Gryffin Capitalist made it seamless. The team is very knowledgeable, professional, and responsive.
I had a great experience registering my company in the UAE with Gryffin Capitalist. The Gryffin Capitalist team assisted in selecting the right Emirate to complete all legal steps.
Simplify VAT Registration with Gryffin Capitalist
Gryffin Capitalist, a leading corporate services provider, specialises in offering business setup services to investors and entrepreneurs from across the globe. Apart from this, we provide a range of post company registration services, helping you lead a successful business journey. One of these services is registration of VAT in UAE.
From assessing your eligibility to collecting documentation and completing the registration form, our experts ensure a smooth and error-free process. We simplify complex tax requirements, minimise the risk of delays. Besides, our experts provide personalised assistance at every step of the way helping from business setup in UAE till your business stay compliant with UAE tax regulations. Reach out to us NOW for seamless VAT services in UAE.
Quality Professionalism
High Privacy
Strong belief in long-term client relationships
Competitive Market Pricing
Global Footprint
Efficient and Transparent Process
Frequently Asked Questions (FAQs)
It takes around 20 working days from the date of submission of your completed VAT application.
Once your VAT registration is approved, Gryffin Capitalist can help you access the soft copy of your VAT certificate from the e-Services account dashboard.
Failing to register for VAT within 30 days of exceeding the turnover threshold can lead to a AED 10,000 fine.
A VAT Group lets related businesses register together as one entity for VAT. This means transactions between these businesses do not have to pay VAT.
You must apply if your taxable supplies fall below the mandatory threshold or if you’ve stopped your business. Apply within 20 business days to avoid penalties.
