Frequently Asked Questions on VAT UAE

Value Added Tax (VAT) was introduced in the UAE on 1 January 2018. VAT is an Consumption tax imposed on the supply of most goods and services. Businesses collect and account for the tax. The central design feature of VAT is that, the tax is collected through staged process and Charged at each stage in the supply chain.  As suggested, VAT is a tax on final consumption by households is that the burden of the VAT should not rest on businesses and the end-consumer ultimately bears the costs

VAT will provide the country with a new source of income, which will ensure the continued provision of high-quality public services such as hospitals, roads, public schools, parks and civil services. VAT will also help the government achieve its vision of reducing dependence on oil and building a sustainable knowledge economy.

VAT is levied mostly on all the goods or services in phased manner at each level in supply chain.

Generally, VAT is levied at 5% across UAE, which is in line with the "Common VAT Agreement of the States of the Gulf Cooperation Council (GCC)".
- There are also some of the goods and services on which VAT is levied at 0% (Zero rate) presently.

If your business exceeds the supplies and imports of AED 375,000 then it is mandatory to register for VAT. You can also voluntarily register for VAT if your supplies & imports are below AED 375,000 and above AED 187,500.

You can register for VAT through the Federal Tax Authority’s (FTA) website.

Yes, FTA has accredited some of the softwares. R7VAT is amongst one of the FTA accredited software. Some of the top corporations in UAE and UK are already using the R7VAT for automating and managing the VAT and staying compliant with FTA.

Generally both "Exempt supplies" and "Zero rated supplies" attracts VAT at 0% (Zero rate). The principle difference lying in eligibility of recovery of Input VAT associated with them. Businesses can recover Input VAT associated with "Zero rated supplies", agains the same they are not eligible to recover Input VAT associated with "Exempt supplies" even though they have actully incurred it.

Yes, however business need to satisfy certain requirements covered under the Legislation such as having a place of residence in the UAE and being related/associated parties then such business will be able to register as a Tax group.

Cygnet R7VAT simplifies the process of preparing VAT returns for companies of all sizes. It offers an end to end automation that extracts source data from various business systems, performs extensive validations as per the FTA VAT laws in UAE. Email us for a quick product demo:

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