VAT (at rates of 0% or 5%) has been applied in the United Arab Emirates since January 1, 2018.
VAT in the UAE works like VAT in France, Belgium, etc . It is the end consumer who pays it, while it is neutral for companies which must collect it and transfer the balance between the VAT collected on their sales and the VAT deductible on their purchases.
The 4 VAT Scenarios
Whether or not a company is required to register for VAT depends on their revenue and activity level for which there are 4 possible scenarios:
- MANDATORY: Revenue for the last 12 months or the next 30 days is greater than AED 375,000. VAT registration is mandatory.
Caution! When you have exceeded the threshold of AED 375,000, you have only 20 days to register for VAT. You will then be able to recover the VAT on your purchases;
- VOLUNTARY: Revenue for the last 12 months or the next 30 days is greater than AED 187,500 and less than AED 375,000. VAT registration is optional. If you choose this option, you will then be able to recover the VAT on your purchases. Otherwise, you will not be able to recover the VAT on your purchases;
- EXCEPTION: Only companies which have activities outside UAE and outside GCC (Oman, Saudi Arabia, etc.) and which do not intend to have any.
Caution! When you have exceeded the threshold of AED 375,000, you have only 20 days to register for VAT. The company will not have a VAT number, so it cannot recover it on its purchases. There is no quarterly declaration to be made in this case, but it is required to register in order to request it.
NB: The registration to the exception concerns only the companies which have a services activity. For companies that have a trading activity (import-export) outside UAE, they do not need to register to the exception.
- EXEMPTION: VAT exemption that only applies to a certain industry such as healthcare, education, oil and gas, real estate and transport. Registration is necessary if you exceed the threshold of mandatory turnover (check in the registration form if you are affected by exempt VAT).
VAT is 0% on:
– Export of goods and services outside the Emirates and GCC countries (if you invoice a customer located outside the Gulf countries, the VAT rate will be 0%);
– International transport and related supplies;
– Supply of certain means of maritime, air and land transport (such as aircraft and ships);
– Certain precious investment metals (for example gold, silver, purity of 99%);
– Newly built residential properties, which are supplied for the first time within 3 years of their construction;
– Provision of certain education services and provision of goods and related services;
– Supply of certain health services and supply of goods and related services.
VAT is 5% on the sale of goods and services inside the UAE.