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11 things to know about VAT in UAE

Know about VAT in UAE including VAT Registration, TRN Number Verification, Tax Return Filing, Tax Audit, Exempt Supplies, Zero-rated Supplies

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11 things to know about VAT in UAE

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  1. 11 things to know about VAT in UAE 11 things to know about VAT in UAE Value Added Tax (VAT) came into force in the UAE on 1st January 2018. As per UAE VAT Law, the current rate of VAT in UAE is 5%, and it applies to most supplied goods and services. VAT is an indirect tax, and it is also known as a consumption tax or Goods and Services Tax (GST) in different parts of the world. Over 150 countries have implemented VAT as a means to raise revenue. As a renowned VATConsultancy in UAE,N R DoshiandPartners providesa whole gamut of VAT related services.

  2. 1. VAT Registration 1. VAT Registration Voluntary VAT Registration Mandatory VAT Registration Mandatory VAT Registration is for those A business can opt for voluntary vat businesses whose taxable turnover is more registration if its taxable turnover is more than AED 375,000. than AED 187,500.

  3. 2. VAT Applicability 2. VAT Applicability As per UAE VAT Laws, VAT is levied on the supply of all goods and services unless they are explicitly zero-rated or exempted

  4. 3. Exempt Supplies 3. Exempt Supplies VAT in UAE provides for exempt supplies. UAE Executive VAT Regulations notify about the exempt supplies on which there’s no tax levy. If one supplies such goods and services, then VAT is not charged. As per UAE VAT Law, if one supplies exempted goods and services, then he will not be entitled to the input tax credit on the purchases he makes. Say a manufacturer buys raw material at a 5% rate of tax and produces items that are exempt from tax, then the burden of 5% input tax paid on raw materials will be on him as he will not be able toclaim the input tax credit. Certain financial services, residential buildings, and supply of bare land, etc. are exempt from VAT in UAE.

  5. 4. Zero 4. Zero- -rated Supplies rated Supplies As per UAE VAT, Zero-rated supplies refers to the taxable supply on which VAT is charged at zero rates. The input tax credit is available on the purchase of goods and services, which are supplied as zero-rated supplies. VAT Laws in UAE specify that all export of goods and services in UAE subject to conditions laid down in UAE Executive Regulations will be treated aszero-rated supplies.

  6. 5 5. . Products subject to VAT in UAE Products subject to VAT in UAE VAT in UAE is levied on retail products such as food, beverages and jewelry, and all non-essential consumer items. It is also levied on stationery, school uniforms, after-school activities, cars, oil and gas, electronics and smartphones, second-hand goods, imported products, insurance products such as health, motor, property, and reinsurance, water and electricity, etc.

  7. 6. Services subject to VAT in UAE 6. Services subject to VAT in UAE Services like plastic, cosmetic, or elective surgery, education provided by private higher educational institutions, fee-based financial services, vehicle services, and repairs, catering services, hotels and restaurants, telecoms and electronic services, etc.

  8. 7. VAT on Real Estate 7. VAT on Real Estate Real Estate is bifurcated into two categories for VAT purposes: Commercial property transactions, including rental and sale agreements, office space, retail, public parking, and mobile homes, will attract VAT. Further, hotels, motels, and other serviced accommodations are also subject to VAT, including residential property leased to non-residents on a short-term basis.

  9. 8. TRN Verification 8. TRN Verification Federal Registration / TRN Number to businesses registered for VAT. Only businesses registered for VAT and having a valid TRN should charge VAT on supplies. TRN Number Verification is required when the buyer is not sure of the VAT Registration status of the supplier because any VAT paid on purchases would be available as Input Tax Credit only if the supplier has a valid TRN Number. One can verify the TRN Number of any business by visiting the FTA portal. TRN Verification helps in knowing the genuineness of the supplier. Tax Authority issues a unique Tax

  10. 9. Tax Return Filing 9. Tax Return Filing A VAT-registered business files a Tax Return quarterly. The authority may ask certain businesses to file a return every month to ensure compliance with the VAT Laws and reduce the risk of tax evasion. Further, to reduce compliance burden and administrative load, the UAE VAT Law is provisioned to allow certain types of businesses with a longer VATreturn filing period. UAE VAT Executive Regulations have issued the VAT Return Format in which a registered business must provide the information. The return filing process is online, and all VAT-registered businesses in UAE file their Return by logging in on the FTA portal.

  11. 10. VAT Audit/ Tax Audit in UAE 10. VAT Audit/ Tax Audit in UAE VAT Audit / Tax Audit in UAE is carried out by the FTA at the business premises of the taxable person known as ‘field tax audit’ or in the offices of the FTA. The taxable person is required to provide all the information in a prescribed format known as FTA Audit File (FAF). VAT in UAE requires a registered business to maintain all the financial records of transactions and file a periodic VAT Return. A taxable person is required toself assessthe amount of VAT Payable and the Input TaxCredit available.

  12. 10. VAT Audit/ Tax Audit in UAE 10. VAT Audit/ Tax Audit in UAE Tax Assessment Tax Assessment Failing to complete VATRegistration within the specified time • Failing to file a TaxReturn within the specified time • Failing to payfor the tax payable asper the VATReturn within the specified time • Filingan incorrect VATreturn • Failure on the part of the registered business to account for tax on behalf of • another person when he wasrequired todosoas per the UAEVAT Laws Taxevasion causing the shortfallin TaxPayable •

  13. 11. Responsibilities of a Business in UAE 11. Responsibilities of a Business in UAE Maintain proper financial records and keep its accounting information accurate • and upto date. Register for VATif it meets minimum turnover criteria • Keep proper financial records if the turnover is less than the minimum threshold to • provewhy it need not register for VAT Charge VAT on Taxablegoodsand services if it holdsa validTRN • ClaimInput TaxCredit for VATpaidon the purchase of taxable supplies • File VATReturns on a timely basis • Pay taxes to Government if the amount of VAT charged exceeds the amount of VAT • paid. Obey VATLaws of the UAE •

  14. VAT Consultancy in UAE VAT Consultancy in UAE N R Doshi and Partners is well-equipped to provide VAT consultancy in UAE and help your business handle VAT related matters, including VAT Bookkeeping, VAT Compliance, VAT Registration, VAT Return Filing, VAT Audit, and VAT Tax Agent Service. Contact us, anda professional consultant willbe at your service.

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