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Essential things you need to know about VAT registration in the UAE

8 April 2020

Value added Tax or VAT was introduced in the UAE on 1st January 2018 at the rate of 5%, one of the lowest in the world. This was put in place to provide the UAE with a new source of income which will be utilized to provide high-quality public services. It was also put in place to help the government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.

There are lots of rules and regulations when it comes to VAT in the UAE, make mistakes and you could end up overpaying resulting in increased pressure on your business, or underpay and be subject to fines.

Here are four things you need to know about VAT registration in the UAE:

1. Not every company needs to pay VAT

A business must register for VAT if its taxable supplied and imports exceed AED 375,000 per annum. Registering for VAT is optional for businesses whose supplies and imports exceed AED 187,000 per annum. Foreign businesses may also recover the VAT they incur when visiting the UAE. Knowing when to register your business for VAT can be complicated however with the right guidance you can avoid incurring unnecessary fines or penalties. Voluntary registration can also be beneficial to your business, allowing your business to be eligible for tax refunds and expense offsets.

2. VAT does not apply to all services and goods

Not all goods and services are subject to VAT, some are exempt. Zero rated goods and services include, but are not limited to, some educational services, some investment grade precious metals, some export outside the GCC and some healthcare services.

Additionally, a company registered in the UAE in which operations are outside the country doesn’t need to charge VAT. Only business operations conducted inside the UAE are subject to VAT.

The world of VAT in the UAE can be complicated, and it is best to consult a VAT expert in the region to ensure you avoid fines and charges.

3. The UAE VAT rate is one of the lowest in the world

Standard VAT in the UAE is only 5% which is one of the lowest in the world. There are currently no plans to increase this rate despite other countries having rates extensively higher than 5% including the UK at 20%, France at 20% and China at 17%.

For more information on VAT in the UAE contact SFM today to discuss your concerns with one of our dedicated client managers.
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