VAT registration in the UAE
  • January 26, 2023

With the implementation of Value Added Tax (VAT) in 2018, the UAE government introduced an additional revenue source for the government but, more notably, a regulatory mechanism widely used in advanced economies. At 5%, the UAE has one of the lowest VAT rates globally.

 

The general VAT of five per cent applies to the consumption of goods and services levied at the point of sale. Some goods and services are subject to a 0% rate or an exemption from VAT. The zero per cent VAT applies to the exported goods and services outside the Gulf Cooperation Council (GCC) member states.

 

VAT exemption & Zero-rated Supplies

According to Article 45 of the Federal Decree-Law no (8) 2017, there are supplies subject to zero VAT rates, including:

Educational services, healthcare services, Precious metals, telecommunications services, exported goods and services, crude oil, and natural gas.

 

VAT exemption applies to supplies, such as certain financial services, the supply of residential real estate, domestic passenger transport, and bare land.

 

VAT Registration for Businesses

For UAE resident businesses, it is mandatory to register for VAT if the supplies and goods meet the threshold of AED 375,000 per annum. And VAT registration is voluntary for firms that exceed AED 187,500 for a year. Companies can register for VAT in the UAE, file the VAT return and make the VAT payments within 28 days from the end of the specific tax period. 

 

Businesses pay the government the tax collected from their customer. The companies also receive a refund of the tax amount they paid to vendors or suppliers. UAE VAT applies equally to companies operating on the mainland and free zone. Some free zones, however, are identified outside the UAE for tax purposes. These are called Designated Free Zones (DZ). But the supply of certain services within DZs is subject to VAT as per the UAE VAT legislation.

 

EmaraTax & Magnati

The government launched a new platform, EmaraTax, on December 5th, 2022, to integrate all FTA tax services like tax payments, refunds, and other administrative support for taxpayers. EmaraTax automatically migrates the information from the FTA account. 

 

The FTA also announced the discontinuation of the usage of the e-Dirham platform for paying taxes, replacing it with Magnati. Magnati is the new online payment option for online payments related to FTA services. However, the FTA e-services website also offers various payment options to pay tax or other tax obligations. 

 

Filing VAT Returns 

VAT-registered companies or businesses must file a VAT return to the Federal Tax Authority (FTA) at the end of a tax period through the EmaraTax, the UAE’s digital tax services platform. The existing FTA account details will be automatically transferred to Emaratax and companies can login to submit the VAT returns.


There are standard tax periods for each type of business:

VAT filing for firms with revenue of more than AED 150 million per annum.

Quarterly VAT filing for enterprises below a turnover of AED 150 million annually.

 

Businesses must submit the VAT return to the FTA before the due date, which consolidates the values of the supplies and purchases a taxable individual has made within a definite tax period. It also shows the VAT liability of a taxable individual. 

 

How to file a VAT return?

Companies must meet all the VAT requirements before filing a VAT return. The EmaraTax portal has a form called VAT201 that one must fill out carefully because incorrect and inaccurate VAT submissions while filing tax returns are liable to fines and penalties. 

 

VAT Changes in the UAE (Update January 2023)

Recently, the UAE has brought changes to the existing VAT rules, which will come into effect by January 2023. 

 

The country made several tax reformations earlier to strengthen government income and diversify economic capital. However, the latest significant amendments in the VAT system for businesses are as follows:

 

1. There is a 14-day period to issue the tax credit note to settle the tax, beginning the date of supply. 

2. Businesses must keep financial transactions and up-to-date accounting records. 

3. There are amendments in the category of zero-rated supplies:

4. The supply of financial services, residential properties, goods related to public transportation, and basic healthcare services are exempt from the VAT. Federal Tax Authority (FTA) may deregister entities in these cases. 

5. The educational services provided by any institution other than the qualifying educational institutions will be subject to VAT. Qualifying education institutions include nurseries, preschools and higher educational institutions owned or funded by the Federal or local Government.

6. Moreover, the government will launch a 9 per cent corporate tax on business profits from the start of the financial year on or after June 2023. 

 

How can Ascent Partners help?

Ascent Partners is a boutique consultancy providing bespoke, end-to-end corporate services ranging from company formation to accounting, bookkeeping, and compliance services for entrepreneurs looking to set up their next venture in the UAE. We work alongside to strategise, startup, and scale businesses in the UAE and the broader region.

 

With a combined experience of 50+ years, our expert consultants provide reliable and unparalleled guidance throughout all strategic phases of a business' evolution.