Value Added Tax

VAT Services in Dubai , UAE

Value Added Tax

Value Added Tax (VAT) was introduced in the UAE in January 2018 at a standard rate of 5%. It is an indirect tax applied to most goods and services bought and sold. VAT is a common type of consumption tax used globally, with over 150 countries implementing VAT or equivalent Goods and Services Tax systems.

In the UAE, the government provides essential public services such as hospitals, schools, roads, parks, waste management, and law enforcement. VAT helps fund these services and reduces reliance on oil and hydrocarbon revenues, supporting the country’s long-term economic sustainability.

VAT is charged at each stage of the supply chain, with businesses acting as tax collectors on behalf of the government, while the ultimate cost is borne by the consumer.

VAT for French Businesses Operating in UAE

Registering for VAT

• Mandatory registration is required if taxable supplies and imports exceed AED 375,000.

• Voluntary registration is possible if supplies and imports exceed AED 187,500, or if expenses exceed this threshold, allowing startups with no turnover to register.

VAT-related responsibilities of businesses

All businesses in the UAE need to maintain records of their financial transactions and ensure that their financial records are accurate and up to date. Businesses that meet the minimum annual turnover requirement (as evidenced by their financial records) are required to register for VAT. Businesses that do not think they should be VAT-registered should maintain their financial records in any event, in case FTA need to establish whether they should be registered.

VAT-registered businesses generally:

French businesses in the UAE must:

1. Maintain accurate and up-to-date financial records.
2. Charge VAT on taxable goods and services supplied.
3. Reclaim VAT paid on business-related expenses.
4. Submit VAT returns regularly via the EmaraTax portal, reporting VAT collected and paid. Excess VAT paid can be reclaimed through 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 aircrafts and ships.
4. Certain investment grade precious metals (e.g. gold, silver, of 99% purity).
5. Newly constructed residential properties,ssthat 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 by government entities are generally subject to VAT to ensure fairness with private businesses. Certain government services not competing with the private sector may be excluded. Some government entities are eligible for VAT refunds, ensuring a level playing field between outsourced and in-house activities.

VAT treatment depends on the nature of the supply, not the recipient. Supplies subject to the standard rate remain taxable even if provided to government entities.