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: If your revenue for the last 12 months or the next 30 days is greater than AED 375,000, then registration for VAT is compulsory. You will then be able to recover the VAT on your purchases;
- VOLUNTARY: If your revenue for the last 12 months or the next 30 days is greater than AED 187,500 and less than AED 375,000, then registration for VAT is optional. If you choose to register, then 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 concerns companies that have activities outside of both the UAE and the GCC (Oman, Saudi Arabia, etc.) and that do not intend to have any. The company will not have a VAT number, so it will not be able to recover it on its purchases. There is no quarterly declaration to be made in this case;
- EXEMPTION: Only applies to certain sectors such as health care, education, oil and gas, real estate and transport. Registration is still necessary if you exceed the mandatory revenue threshold. If you need to register, then make sure to tick the box in the form to indicate that you are exempt from 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.