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Value Added Tax (VAT) in United Arab Emirates: What You Need to Know | Pragma International Network of Law and Consulting Firms

1. What is the meaning of Value Added Tax (also known as VAT) in the United Arab Emirates?

Value Added Tax (also known as VAT) in the United Arab Emirates is nothing more than a tax on the amount by which the value of a product or service has risen over the course of its production or delivery. As the name implies, this is an additional quantity of the goods and services being purchased.

2. How will the Value Added Tax (VAT) be implemented in the United Arab Emirates?

The United Arab Emirates, as well as the whole GGC, has proposed imposing Value Added Tax (VAT) beginning in January 2018. In the United Arab Emirates, the value-added tax (VAT) is set at 5 percent on all goods and services.

3. What was the impetus behind the UAE’s decision to introduce VAT?

It was agreed to introduce VAT in order to provide a new source of revenue in order to continue offering high-quality living conditions and improved public services. Furthermore, with the approaching EXPO 2020 and the goal of decreasing reliance on oil income – VAT has been introduced.

4. What is the procedure for obtaining VAT registration in Dubai or other areas of the UAE?

Businesses may register for VAT via the e-services portion of the UAE Federal Tax Authority (FTA) website, which is accessible from any computer or mobile device. Businesses, on the other hand, must first register for an account. An simpler method would be to use Generis Global to complete the process.

5. What exactly is a TRN number, and who is required to have one?

A TRN number is an abbreviation for Tax Registration Number. Tax-paying business entities must complete the VAT registration processes before receiving a Taxpayer Identification Number (TRN). This TRN number is required to be used each and every time tax is paid.

6. Is it necessary for businesses to translate all invoices into Arabic and keep them on file?

According to Article 5 of the Tax Procedures Law, it is mandatory for businesses in the United Arab Emirates to keep records for at least five years and to present them to the tax authorities on a regular basis in the Arabic language. It is possible for the authorities to accept invoices and other papers in English as well, provided that the business has included attached Arabic translations of such documents, if required by the authorities.

7. Will VAT be due solely on the service fee charged, or will it also be due on the reimbursement of costs claimed under an invoice as well?

Invoices will be taxed since they are accounted for in the turnover; nevertheless, reimbursement of expenditures is not a revenue and must be accounted for in the receipts section of the accounting records.

8. If a UAE-registered LLC export business does not have any customers in the UAE or GCC and all of its revenues originate from clients in the United Kingdom, Europe, and the United States, does the company still need to register for VAT in the UAE?

Yes, due to the fact that the business is established on the UAE mainland, it is essential to keep accurate financial records and get the necessary VAT registration. Export service income, on the other hand, is ZERO rated and is included in the definition of taxable services; nevertheless, they are entitled for a reimbursement of the input tax paid in accordance with the law.

9. In accordance with UAE VAT regulations, does a shipping business fall into the zero-VAT category?

Air, sea, and land transportation of commodities are subject to taxes and will be taken into account during the yearly turnover calculation; however, some items are exempt from this requirement.

10. Is it necessary for the business to submit records to the UAE Federal Tax Authority on a monthly basis?

Returns must be filed on a quarterly or monthly basis, depending on the company’s VAT registration certificate, in the majority of instances. The UAE Federal Tax Authority, on the other hand, has the last say and may request that the business provide its documents for verification at any moment. As a result, it is essential to keep accurate financial records.

11. If a business relocates all of its operations and licences to a freezone, would VAT still be charged on such transactions?

Yes, freezone businesses are not exempt from the need to register for VAT.

12. What are the tax-exempt companies or services in the United Arab Emirates?

Services in the Financial Industry
Residential structures are made available for purchase or leasing.
Provision of undeveloped land Provision of local passenger transportation