United Arab Emirates – Lovat Compliance

Standard rate

The standard VAT rate in United Arab Emirates in 2024 is 5%.


    
        
            
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What is zero rated

Сertain education services for Governmental nurseries, preschools, schools, and higher educational institutions owned;
Healthcare services and related medicines and medical equipment;
Means of air, sea, and land transportation e.g. ships, and aircraft;
International transportation;
The first sale of new residential property (within 3 years of construction);
Crude oil and natural gas;
Exports outside of GCC* states;
Investment in precious metals (gold, silver, and platinum);
Investment in precious metals (gold, silver, and platinum).

* Gulf Cooperation Council

Threshold

Residents who have a business in UAE are not taxed if their inventory is under AED 375,000 USD BUT Foreigners who sell and ship items to customers in UAE must register when the first sale is made.

Registration procedure

To register, you need to create an account with the tax authority and send in a questionnaire that includes your director’s information, business description, and contact information.

You will need to attach the following documents to your application:

Business or Trade license (articles of incorporation);
ID or passport of Manager/Owner;
ID or passport copy of authorized signatory (if different from Manager);
Proof of qualifying manager/authorized signatory (e.g. articles of association, power of attorney).

Deductible VAT

When your input tax is greater than the output tax on a VAT return, the taxpayer can request a VAT refund after filing their VAT return. Application for refund must be submitted via FTA’s e-Services portal.

Tax representative

The appointment of a representative is not a prerequisite for registration. However, all countries’ tax systems differ, and to avoid “pitfalls” you can hire a consultant. Lovat can assist you with this.

VAT returns filing date

After registration, taxpayers are required to file tax returns no later than the 28th day of the month following the tax period. The tax period is determined depending on the annual turnover:

If the turnover is below AED 150 million, then, as a rule, quarterly filing of VAT returns is assigned;
If the turnover is higher, then a monthly period is applied.

The Tax Agency may, at its discretion, assign a different tax period for a particular type of business.

VAT payment date

The deadline for tax payment coincides with the last day of filing a tax return.

Penalties

Late submit the declaration after the deadline specified in the Tax Law:

1,000 AED for the first time;
2,000 AED in case of repetition within 2 years.

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VAT Standard rate

The standard VAT rate in the United Arab Emirates in 2024 is 5%.

Threshold

There is no threshold for registration for sellers of digital software. If you sell your digital software (games, e-books, etc.) to B2C you need to register for VAT from the first sale.

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E-services list

Domain name provision service, web hosting, and remote maintenance of programs and equipment;
Supply and updating of software;
Provide access to images, text, and information provided electronically, such as photos, screensavers, electronic books, and other electronic documents and files;
Supply of music, movies, and games on demand;
Supply of e-magazines;
Supply of advertising space on a website and any rights associated with such advertising;
Provide access to political, cultural, artistic, sporting, scientific, educational, or entertainment broadcasts, including broadcasts of events;
Live streaming via the Internet;
Distance learning service;
Services of an equivalent type that have a similar purpose and function.

Pieces of evidence

To determine the location of the recipient, some of the factors which may be indicative of the recipient’s location are:

The internet protocol (“IP”) address of the device used by the recipient to receive the electronic service;
The country code stored on the SIM card used by the recipient to receive the electronic service;
The place of residence of the recipient;
The billing address of the recipient and/or;
The bank details used by the recipient for the payment.

Registration procedure

The registration application must be submitted online. To do this, you need to create an account on the portal, fill out a questionnaire and attach the necessary documents.

VAT returns filing date

After VAT registration in the UAE, you need to file a VAT declaration and make the appropriate VAT payments within 28 days from the end of the tax period. The standard period is a month.

VAT payment date

Pay the VAT due before the deadline for submitting declarations.

Penalties

A 2% penalty on the amount of unsettled tax;
A 4% monthly penalty is due after one month from the original due date of payment, then on the same date monthly thereafter.

Keeping records

There is a strict requirement to maintain all the records for a minimum of 5 years. Annual accounts and any additional information necessary to verify entries should be kept. General ledgers, purchase day books, invoices and credit notes issued and received, VAT ledgers, VAT calculations, adjustments, records of supplies, exports, and imports, etc. should all be maintained and readily available to be presented to the FTA if the case of any VAT audit.

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