VAT Services for Australian Businesses

VAT Services in Dubai, UAE for Australian Businesses

Value Added Tax

Value Added Tax (VAT) in the UAE was introduced in January 2018 at a standard rate of 5%. VAT is an indirect tax applied to most goods and services supplied or sold. It is a common form of consumption tax used in over 150 countries worldwide.

In the UAE, VAT contributes to funding public services such as hospitals, schools, roads, and public safety, reducing reliance on oil revenue while supporting sustainable economic growth. Businesses act as tax collectors on behalf of the government, charging VAT to customers and remitting it to the Federal Tax Authority (FTA).

VAT Registering for VAT

Australian businesses operating in the UAE must register for VAT if their taxable supplies and imports exceed AED 375,000. Voluntary registration is possible for businesses below this threshold but exceeding AED 187,500, enabling startups to comply early.

VAT-registered businesses must:

• Charge VAT on taxable goods and services.

• Reclaim VAT on business-related expenses.

• Maintain accurate financial records for FTA compliance.

• File regular VAT Returns via the EmaraTax portal.

   

Zero-Rated and Exempt Sectors

Zero-rated supplies (0% VAT) include:

• Exports outside the GCC

• International transportation

• Certain transport means (aircrafts, ships)

• Investment-grade precious metals (gold, silver 99% purity)

• Newly constructed residential properties (first supply within 3 years)

• Certain education and healthcare services

Exempt supplies include:

• Certain financial services

• Residential properties

• Bare land

• Local passenger transport

Partial Exemption:

Businesses incurring VAT on expenses related to both taxable and non-taxable supplies must apportion input tax accordingly. This ensures compliance while maximizing recoverable VAT.

VAT-registered businesses generally:

1. Must charge VAT on taxable goods or services they supply;
2. May reclaim any VAT they’ve paid on business-related goods or services;
3. Keep a range of business records that will permit the government to examine that they are compliant with the laws and regulations.

If you are a VAT-registered business, you must report the amount of VAT you’ve charged and the amount of VAT you’ve paid to the government on a regular basis by filing VAT Return on the EmaraTax portal. If you’ve charged more VAT than you’ve paid, you have to pay the difference to the government. If you’ve paid more VAT than you’ve charged, you can reclaim the difference by submitting a VAT Refund application.

Zero-rated sectors

VAT will be charged at 0% in respect of the following main categories of supplies:

1. Exports of goods and services to outside the GCC.
2. International transportation, and related supplies.
3. Supplies of certain sea, air, and land means of transportation (such as aircraft and ships.
4. Certain investment-grade precious metals (e.g. gold, silver, of 99% purity).
5. Newly constructed residential properties that are supplied for the first time within three years of their construction.
6. Supply of certain education services, and supply of relevant goods and services.
7. Supply of certain healthcare services, and supply of relevant goods and services.

VAT-exempt sectors

The following categories of supplies will be exempt from VAT:

1. The supply of some financial services (clarified in VAT legislation)
2. Residential properties
3. Bare land
4. Local passenger transport

Partial exemption

Where a VAT registered person incurs input tax on its business expenses, this input tax can be recovered in full if it relates to a taxable supply made, or intended to be made, by the registered person. In contrast, where the expense relates to a non-taxable supply (e.g. exempt supplies), the registered person may not recover the input tax paid.

In certain situations, an expense may relate to both taxable and non-taxable supplies made by the registered person (such as activities of the banking sector). In these circumstances, the registered person would need to apportion input tax between the taxable and non-taxable (exempt) supplies.

Businesses will be expected to use input tax (ratio of recoverable to total) as a basis for apportionment in the first instance although there will be the facility to use other methods where they are fair and agreed with the Federal Tax Authority.

Government Entities and VAT purposes

Supplies made by government entities are typically subject to VAT. This ensures that government entities are not unfairly advantaged as compared to private businesses.

Certain supplies made by government entities will, however, be excluded from the scope of VAT if they are not in competition with the private sector or where the entity is the sole provider of such supplies. Certain government entities are entitled to VAT refunds – this is designed to avoid budgeting issues and provide a level playing field between outsourced and insourced activities.

For the supplies provided for government entities, the treatment of such supplies depends on the same supply and not on the recipient of the supply. Therefore, if the supply is subject to the standard tax rate, the treatment will remain the same even if it is provided to a government entity.