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If you have planned to set up your business in UAE, you must need to comprehend everything about the Value Added Tax policy of the UAE. At Idea Bizone, our goal is to help our customers go through the process successfully and understand everything.
Let’s know more about this
We help our customers be compliant easily, quickly, and successfully, but questions arise. Why do some companies require a VAT compliant? You can remember that people living in the Middle East are not paying taxes as they only apply tax on oil companies and people running foreign banks. That is probably why you thought of starting a business in the UAE.
But from the year 2018, on January 1, Dubai levied some taxes, and among that, Value added tax or VAT got applicable on almost all the goods and services. Now, if you are running a restaurant in UAE, you have to get some VAT amount on food and other things and pay it back to the government.
That means you have to charge the VAT amount from your customers and hand it over to the government, and this applies to all the goods and services. That’s why you have to be compliant, and we will help you throughout the process. Let’s know more about this value-added tax.
You must have heard about income tax, which applies to your income, but value-added tax is slightly different from your expenditures. It is related to your getting hold of services and goods. The value-added tax applies whether you buy something in the manufacturing process or the distribution.
The value-added tax applies to all services or goods when they add value to your life. When customers make any purchases, they pay this value-added tax in most cases. In the real sense, businesses accumulate this tax and hand it over to the government authorities. If the VAT is not being set aside and given to the government, many penalties will apply to you. These penalties may include criminal charges as well.
Value Added Tax is applicable in almost every country and is most commonly known as a consumption tax. European Union Members, New Zealand, Canada, and more than 150 countries have levied this tax.
Our company evaluates the customer’s quotations, invoices, contracts, and other purchase orders in complete detail. After this evaluation, we tell our customers about their registration categories based on their business type. There are two types of registration, and these are either voluntary registration or mandatory registration. Let’s see what these are:
We assist our customers throughout the process, whether it is creating their account, getting their TNA, proceeding with the documentation, or receiving the Tax residency certificate. Let’s see these in detail:
We help our customers to build an online profile using the Federal Tax Authority. Remember, this Federal Tax Authority or FTA is a government authority that manages, collects, and applies different taxes. With an online account on FTA, the customers can easily have their online presence and avail themselves of the opportunities.
Once the account creation process is completed, and registration has been done successfully, a TRN certificate or Tax Registration Number certificate will be issued.
The Federal Tax Authority FTA requires certain documents with a specific pattern, and we help our customers by having those documents till they are submitted to FTA. We also make sure that they follow a specific format communicated by FTA.
Finally, the Federal Tax Authority issues a corporate or an individual tax residency certificate, and we help our customers to get the certificate without any hassle.
When it comes to starting a business in Dubai, there are multiple reasons to consider: the government’s funding initiatives to help companies grow and develop. Nevertheless, tax benefits tend to be on the top of the list.
The Middle East has no taxes on corporate and personal income to date. Only the value-added tax needs to be paid at a low 5% rate only. Setting up a free zone in the UAE gives you a 0% income and corporate tax rate, along with a 100% repatriation of the business profits and freedom from customs duties.
It was in 2018 that VAT started in Dubai. This applies to all traditional and online store purchases in Dubai.
Since 1st January 2018, all businesses in the UAE are required to get themselves registered for VAT. They need to collect the amount and submit it to the government. This was the first time VAT had been introduced in the Middle East.
For the management and collection of federal taxes, the FTA, Federal Tax Authority, had been established. VAT had been brought to offer a new income source, helping the government provide services like parks, hospitals, and waste control. The idea behind introducing VAT was also to reduce the country’s dependence on oil-derived income.
Before starting a business in Dubai, there are some steps you need to take to get your business set right. With the right start off, you’d be saved from trouble. We at Idea BiZone, are here to help your business with our expert team and guide you throughout the VAT and tax obligations in the UAE.
Among the essential considerations are staying informed about the VAT obligations, registering as required, and timely VAT payment. Not knowing these obligations could end you up with certain penalties. With an unpaid VAT liability, your interest rate could go as high as 300%.
You must know that the VAT rate in Dubai is 5%, which applies to all taxable services and good supplies covering imports as well. With some services being exempted, you need to see whether supplies are taxable.
A taxable supply covers the supply of services or goods to be considered by someone who owns a Dubai business. All the retail industries, including food at hotels and restaurants and other entertainment activities are covered. Most companies you can think off come under a taxable supply.
If you are 5% VAT applicable, you need to see if your supplies are exempt or 0% VAT supplies. Even with a taxable supply, some services are 0% VAT rated.
The 0% VAT applies to services and goods exported outside the GCC and Gulf Cooperation Council member states, including Kuwait, Bahrain, Qatar, Saudi, Oman, and the UAE. Zero-rated VAT is also applicable to natural gas and crude oil international transportation. Precious, investment-grade metal supplies like gold and silver with 99% purity and certain fields, including education and healthcare, also outweigh the zero-rated VAT.
0% VAT is also applicable for the newly-made residential properties first supplied within three years of construction. If you’re considered an outside state person, you also get the 0% VAT benefit.
While 0% VAT is charged for zero-rated services, some services are entirely exempted from VAT. VAT exemption is only for four items: local public transport, vacant land, financial services, and residential property supply.
If your taxable supplies are not exempt or zero-rated, you need to charge a VAT of 5%. Nevertheless, every business doesn’t need VAT registration; only those meeting the minimum threshold are required. Companies that make imports or taxable supplies annually of 375,000 AED or more must register for VAT. VAT registration is a choice with taxable supplies or implications above 187,500 AED goods worth.
While you’re charging your customers with VAT, you also need to pay the VAT on certain purchasing services and goods. Nevertheless, you can get some of the VAT, called input tax, paid back. The VAT liability total is the VAT amount collected for customers minus the input tax. The input tax is the money your business pays when it purchases some goods. The tax on inputs can be recovered.
It should not surprise you that VAT registration is needed. You can register through an FTA regulating Dubai VAT. Before registering, you need to make your e-service account with a valid email address. Once done, you can begin the process of registration on the FTA portal. Enter the necessary information and attach the required documents. Give your banking details and contact.
You will receive a unique Tax Registration Number from the FTA that you can use to sign in to the portal. You need to track your taxable supplies and keep your information updated. You’ll need to register as soon as you cross the minimum threshold.
Once the tax period ends, you need to submit a VAT return online to the FTA. This summarizes all the taxable supplies that were covered in this period. It also gives an insight into the VAT that should be collected and paid to the government. You need to provide the VAT in time because late filing returns can lead to penalties. You can pay online quickly through FTA’s official website using eDebit, credit card, or bank transfer. The bank transfer may be international or local. But make sure to make the payments on time. Flexibility in making payments lets you conveniently and easily pay.
We are sure that you are now aware of VAT in Dubai, a requirement that has been applicable since 2018. Yet, there is no corporate or personal tax in the country. When you start a new business in the UAE, you’d want to keep the reporting, collection, and remitting VAT obligations.
We help our customers to adopt proper tax-paying procedures and VAT compliance. Not only that, but we also help you to evaluate your business transactions and resolve all the tax disputes.
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