The Federal Tax Authority (FTA) was established through Federal Law by Decree No. 13 of 2016. As of January 1st, 2018, a standard rate of 5% was introduced for Value Added Tax (VAT) across the UAE. VAT is an indirect tax that is applied to most goods and services bought and sold in a country with this tax. Businesses collect tax from their customers and pay it to the government while also being able to request a refund from the government for tax paid to suppliers. This results in tax receipts for the government reflecting the value added throughout the supply chain..
Registration for VAT
A business is required to register for VAT if its taxable imports and supplies exceed AED 375,000, which is the mandatory registration threshold. However, a business can opt to voluntarily register for VAT if its imports and supplies are below the mandatory registration threshold but exceed AED 187,500, which is the voluntary registration threshold.
WHAT Businesses in UAE MUST DO
• Must charge VAT on taxable goods or services they supply;
• May reclaim any VAT they’ve paid on business-related goods or
services;
• Keep a range of business records which will allow the government to
check that they have got things right
• VAT-registered businesses must regularly report and submit the VAT
they charged and paid to the government, typically online. They pay
the difference if they charged more VAT than paid, and reclaim the
difference if they paid more VAT than charged.
