VAT is a tax on the use of goods and services charge at each point of sale. Its like an indirect tax used in more than 150 counties all around the world. VAT was introduced in UAE on 1 January 2018 with the rate of 5 per cent. As for all countries VAT in UAE is considered as a new source of income to be utilised to provide quality public services of all people across the country. The government examine it as a method to reduce the use of oil and other hydrocarbons for revenue.
- GCC VAT Agreement (which is guiding regulation).
- Tax Procedures Law.
- VAT Law (Executive Regulations for Implementation awaited)
Limit for VAT registration
Turnover > AED 375,000 p.a.
(Optional for taxable persons whose supplies & expenses > AED 187,500 p.a. < AED 375,000 p.a.)
Categories of taxable supplies
- Exempt: Not chargeable to VAT (& cannot claim VAT refund of VAT paid on consumed goods / services)
- Taxable: Standard rate to be 5% or Zero rated @ 0% (can claim refund of VAT paid on consumed goods / services)
Exempt goods / services
- Financial services (to be clarified but probably would cover interest & forex)
- Local transport for passengers.
- Residential real estate (3 years after construction upto first sale) & Bare Land
Zero rated goods / services (0%)
- Health (selected healthcare services)Education (upto elementary al1 & higher educational institutes only those funded by govt (& only selected educational services)
- Real estate: residential (for 3 years from construction)
- International passenger transport
- Supply of means of transport (like boat, trains, aircrafts)
- Investment grade precious metals
- supply of crude & natural gas
Standard rated @ 5%
All other goods & services including but not limited to
- Food items
- Oil & gas
- Real estate (commercial)
- Financial services (fees / chgs but excl interest)