Scope of VAT

The scope of VAT in the UAE includes:

• Goods and Services: VAT is applicable to most goods and services unless specifically exempted.
• Imports: Imported goods and services are subject to VAT.
• Free Zones: Businesses in designated free zones may be subject to VAT, depending on their activities and compliance with specific regulations.

VAT Calculations

Calculating VAT involves determining the VAT amount based on the taxable supply of goods and services. The basic formula is:

VAT Amount=Taxable Amount×VAT Rate\text{VAT Amount} = \text{Taxable Amount} \times \text{VAT Rate}VAT Amount=Taxable Amount×VAT Rate

For example:

• Taxable Amount: AED 1,000
• VAT Rate: 5%

VAT Amount=AED1,000×0.05=AED50

Input VAT vs. Output VAT:

• Output VAT: VAT collected from customers on sales.
• Input VAT: VAT paid on purchases and expenses.

Businesses can claim a refund for the input VAT on their purchases against their output VAT.

VAT Turnover Limit

Businesses with a taxable turnover exceeding AED 375,000 annually are required to register for VAT. Companies with a taxable turnover between AED 187,500 and AED 375,000 can choose to register voluntarily.

VAT Registration Process

Businesses must apply for VAT registration through the Federal Tax Authority (FTA) website. Required documents include:

• Trade license
• Emirates ID or passport copies of the owners
• Financial statements

Due Dates for VAT Returns

VAT returns must be submitted to the FTA on a quarterly basis, with the following key deadlines:

• Filing Period: Typically, VAT returns must be submitted within 28 days following the end of each tax period.
• Payment Deadline: Any VAT owed must be paid simultaneously with the submission of the VAT return.

Understanding VAT in the UAE

Value Added Tax (VAT) is a consumption tax applied to the sale of goods and services in the United Arab Emirates (UAE). Introduced on 1 January 2018, the standard VAT rate is 5%, with certain goods and services qualifying for a zero-rated supply.

Mandatory Registration Threshold

Businesses are required to register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000 over the previous 12 months.

Voluntary Registration Threshold

Businesses may choose to register for VAT voluntarily if their taxable supplies and imports (or taxable expenses) exceed the voluntary registration threshold of AED 187,500 over the previous 12 months.

Scope of Services for Accounting Firms

Accounting firms in the UAE can offer the following VAT-related services:

• VAT Registration Assistance: Helping businesses determine their eligibility and process for VAT registration.
• Tax Return Filing: Preparing and submitting VAT returns accurately and timely.
• Input Tax Recovery: Advising on reclaiming VAT paid on business-related purchases and expenses.
• Compliance and Advisory Services: Ensuring adherence to VAT laws and providing strategic advice on tax planning.

By offering these services, accounting firms can support businesses in navigating the complexities of VAT regulations in the UAE.