VAT in UAE – Everything You Must Know

VAT in UAE

Here is full details about VAT in UAE. VAT in UAE is ready to be implemented from 1st January 2018. As per sources various items are going to be exempted from the ambit of VAT. The list includes Healthcare, Education, Local Transport, Residential Real Estate (long term leases on residential properties) and 100 other Essential items. 

VAT Registrations shall begin in Third Quarter of 2017. Those Taxable persons having revenue of more than AED 375,000 in year shall be liable to register for VAT. Another criteria is that, If a taxable person having revenue or expenditure above AED 187,500 upto AED 375,000, he shall have the voluntary option to register for VAT.

There will be no Input Tax Credit available on the Custom Duty paid by taxable person. So that the VAT Shall be payable over and above the Custom Duty paid by the importer of goods. Custom Duty includes part of the Cost of Goods on which the VAT shall be levied. Under the VAT rule, Taxable Person includes persons located within UAE or outside UAE or GCC. 

The rules of Place of Supply shall be applied for test of applicability of VAT. In case of Goods, Location of the Goods where the supply takes place shall be considered for VAT. In case of Services, Location of Service Provider shall be considered for applicability of VAT. Import of Goods shall be charged VAT upon the purchase by the importer under reverse charge mechanism and can claim input tax credit if the goods are re-exported.

Conditions for Getting the input tax credit

  • Recipient of Supply must be a taxable person 
  • Tax should be charged correctly
  • The recipient of the supply must supply the documentary evidence of the VAT paid
  • The goods and services received are for making further taxable supplies
  • VAT input tax credit can be claimed only on the amount paid or intended to be paid in 6 months by the recipient.

It is unlikely that a VAT refund shall be made to Tourists purchasing goods in UAE. However Gold, Silver or Platinum or Diamond in Jewellery form shall be subject to 5% VAT. VAT applicability on freezones, VAT on financial services and services provided by Banks and VAT Returns shall be filed on a quarterly basis in UAE. VAT returns shall be filed online and shall be filed in Arabic.Record of VAT invoices shall be maintained for a period of 5 years.

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