The Value Added Tax (VAT) is a consumption tax applied to a product at various stages of its supply chain, with value being added from the point of manufacturing to the point of sale. Currently implemented in over 180 countries worldwide, VAT is a significant indirect tax levied on the end-customer, irrespective of their income, emphasizing consumer consumption over income generation.

In 2018, the United Arab Emirates (UAE) introduced a 5% VAT, providing an additional revenue stream for the government, used to enhance various public services offered to UAE residents. UAE laws mandate the filing of VAT returns for taxable individuals or businesses in accordance with the guidelines set by the Federal Tax Authority (FTA). P.W provides comprehensive and compliant VAT return filing services across Dubai and other Emirates.

VAT registration in UAE is necessary for all businesses that meet certain taxable supplies and imports prerequisites. These criteria are as follows:

• Businesses that accrue over AED 375,000 in taxable supplies and imports must register for VAT.
• For businesses amassing more than AED 187,500 in taxable supplies and imports, VAT registration is optional.

Customers pay VAT upon purchasing a product or service, and the business subsequently remits this amount to the government. All VAT registrants must file VAT returns in the UAE, regardless of their sales, purchases, VAT registration, output tax, and input tax. The government reimburses any VAT paid by the business to suppliers.

Businesses can complete their VAT registration through the official FTA website. For any queries or clarification regarding VAT registration in the UAE, individuals can reach out to the FTA at info@tax.gov.ae.

Registered businesses impose a 5% VAT on a range of goods and services, acting on behalf of the government. This tax applies at different stages of the supply chain and is also levied on tourists at the point of purchase.

VAT applies to businesses registered in both mainland and free zone jurisdictions. If these businesses meet the taxable supplies and imports prerequisites, they are required to register for VAT. However, specific designated zones, referred to as “VAT-free zones,” are exempt from tax based on the UAE cabinet decision.

Following the end of a tax period, VAT-registered businesses must file their VAT returns within a specified timeframe. VAT return filing in the UAE refers to the calculation of the amount of VAT to be paid or reimbursed by the tax authorities.

The VAT return provides a summary of a business’s total supplies and purchases for a given tax period, reflecting the VAT liability of the business. The difference between the VAT on supplies and purchases for the specified tax period represents the VAT liability.

Businesses can access and fill out the VAT return form on the official FTA website if they meet the VAT return prerequisites. The VAT 201 form is used for VAT Return Filing.

The duration of the tax period depends on the business’s annual revenue. For businesses earning less than AED 150 million annually, the tax period is quarterly. In contrast, for businesses with yearly revenue exceeding AED 150 million, the tax period is monthly. The VAT return must be filed within 28 days following the completion of the tax period, as stipulated by the FTA.

The FTA may grant an alternative tax period based on the business category. As per FTA regulations, businesses must file VAT returns in the UAE at regular intervals and within the specified timeframe. If a taxable business fails to submit returns within this period, it may be liable for penalties under the law.

PW offers comprehensive services covering essential requirements such as visa processing, document drafting, government liaising, bank account opening, and more. Our team of business setup consultants, PRO service executives, and compliance advisers ensures a hassle-free process in Dubai, UAE.