VAT / Taxation matters

All Gulf Cooperation Council (GCC) member states have applied the standard VAT rate of 5% on all goods and services that have not been either VAT exempted or zero-rated.

In the UAE as from 1 January 2018, VAT is charged at 0% (zero- rated) for the following services and goods:

  • Exports of goods and services to outside the GCC
  • International transportation and related supplies
  • Newly constructed real estate
  • Education
  • Healthcare
  • Certain exemptions in air, sea and land transportation supplies and investments in commodities

The following categories of supplies are exempted from the VAT:

  • Specifically announced financial services by the VAT Executive Regulations
  • Residential properties
  • Land property
  • Local passenger transport

Business Owners – how to get prepared for VAT

Businesses must register with the Federal Tax Authority for VAT purpose. The registration is indispensable to recover the VAT on the different stages of value enhancement. To be able to determine which businesses must be VAT registered, a VAT registration threshold applies for all UAE-resident businesses:

  • A business must register for VAT if they make taxable supplies or imports that exceed the mandatory registration threshold of AED 375,000.00.
  • A business can choose to register for VAT optionally if their taxable supplies and imports are less than the mandatory registration threshold, but exceed the registration threshold of AED 187,500.00.
  • A person may register voluntarily if their expenses exceed the voluntary registration threshold (e.g. start-up businesses with no turnover).

No threshold applies to non-resident businesses if they make taxable supplies within the UAE, they will therefore be required to subscribe for VAT (for example work that is done on UAE premises).

Businesses that are related/associated to at least one business being VAT registered are able to register as a so-called VAT Group.

Can VAT be recovered?

If purchases are used for business purposes and subject to certain conditions, any business can recover VAT on such purchase of goods and services. Depending on the activities performed by the taxable person, the Input VAT deduction can be made, if the activities allow VAT recovery on associated costs.

Recovery possibilities could be

Input tax can be fully recovered if it relates to a taxable supply made leading to a value enhancement in the good (taxed with 5% or 0%). Input tax can however not be recovered if it relates to a non-taxable supply made (exempted supply) or it has been obtained for private purposes. Special rules can be followed if an expense relates to both taxable and non-taxable supplies.

VAT refund

Once the businesses are VAT registered within the UAE, recoverable Input VAT may incur. All VAT refund requests received by the authorities are subject to verification checks, with a particular focus on avoiding fraud and tax evasion.

Swiss ILC services

Swiss ILC gladly assists clients in various ways and throughout the whole process of the VAT implementation. We assist with VAT registration, return filing of the VAT, reviewing company structure agreements on our clients VAT conformity and perform the necessary accounting.

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