Our tax advisors can assist you in securing an individual or corporate tax residency certificate from the Federal Tax Authority.
Speak one-on-one to our qualified tax experts for customised planning, so your business can achieve efficient tax outcomes whilst ensuring compliance with all your tax obligations.
From creating an online account through the FTA portal to assisting and submitting any required documents in formats mandated by the FTA, our experienced accountants will guide you through each step.
Our in-house accountants will assist in registering your business for VAT with the FTA, including providing you advice on eligibility for a VAT exception. Upon completing the registration process, you will be issued with a Tax Registration Number (TRN) certificate.
Our team prepares quarterly VAT reports to help you determine if you have VAT payable/refund.
Did you know that the Middle East does not tax individuals? They only tax oil companies and foreign banks.
That’s good news for anyone looking to start a business in Dubai. What you should remember is that as of January 1, 2018, Dubai started charging value-added tax or VAT on the majority of the goods and services.
As a business, you’ll have to charge VAT in Dubai on almost all goods and services from food at restaurants to hardware tools. If you’re surprised about VAT and want to learn more, you’ve come to the right place. Keep on reading for a complete guide to VAT in Dubai.
There are several reasons to start a business in Dubai including the funding initiatives by the government to accelerate business growth and its vibrant economy. But if you talk to anybody, the tax benefits are probably at the top of their list.
The Middle East still has zero tax on personal and corporate income. The only thing you need to pay is the value-added tax at a low rate of 5%.
You can set up in a free zone which means you pay 0% corporate and income tax rate, no customs duties and you have the option to repatriate 100% of the profits from the business.
Value-added tax, or VAT, is a tax based on consumption. Unlike taxes levied on income, VAT applies to purchases of goods and services. It’s added to every point in the manufacturing and distribution process where the business added value to the product.
It’s generally paid by the customer on any purchases. The business must collect the VAT and remit it to the government. Not doing so can lead to penalties or even criminal charges.
VAT is the most common type of consumption tax. Over 150 countries, including European Union members, Canada and New Zealand, have implemented VAT.
VAT only came to Dubai in 2018. It applies to all online purchases and traditional store purchases received in Dubai.
As of January 1, 2018, the UAE required businesses to register for VAT. They were required to collect and remit the amounts to the government. It’s the first time that there has been a VAT in the Middle East.
The Federal Tax Authority (FTA) was established to manage and collect federal taxes. VAT was implemented to provide a new source of income to help the government provide different services, including hospitals, parks and waste control. The vision behind implementing VAT was to reduce its dependence on income derived from oil.
The reality is that there are several steps you need to take before starting a business in Dubai. You want to make sure you get your business formation right from the start. This can save you a lot of trouble in the future.
One of the most important considerations is understanding your VAT obligations, registering as needed, and paying your VAT on time. Without knowing your obligation, you can end up paying a significant amount of penalties for any interest. Interest can increase up to 300% of any unpaid VAT liability.
The first thing you need to know is that the VAT in Dubai applies at a flat rate of 5%. It applies to all taxable supplies of goods and services including imports. Some services are exempt, so you need to find out whether you have a taxable supply.
A taxable supply is any supply of goods or services for consideration from a person conducting business in Dubai. This includes all retail businesses, food at restaurants and hotels and other entertainment activities. Any business that you’re thinking of starting would likely be considered a taxable supply.
If you’re wondering whether the 5% VAT applies to you, you first need to determine whether any of your supplies are 0% VAT or exempt supplies.
Even if you have a taxable supply, certain services have a 0% VAT rate. These businesses must include zero value in their invoices.
The 0% VAT applies to goods and services that are exported outside the Gulf Cooperation Council (GCC) member states. GCC member states include Bahrain, Kuwait, Oman, Qatar, Saudi and the UAE.
Zero-rated VAT also applies to international transportation and the supply of crude oil or natural gas. Supply of investment-grade precious metals such as silver and gold with 99% purity. Certain areas like health care and education also benefit from the 0% VAT rate.
Newly constructed residential properties will also be subject to 0% VAT if they are supplied for the first time within 3 years of their construction.
You may also be subject to a 0% VAT if you are considered “outside of the state”. A person is “outside of the state” if:
Zero VAT is different from exempt VAT. If you are providing a zero-rated taxable supply, you still have to register for VAT with the government. You also have to provide an invoice, but you will charge 0% VAT.
Unlike zero-rated services where businesses have to charge 0% VAT, exempt services are completely exempt from VAT. There are only 4 items that are exempt from VAT, including financial services, supply of residential property, vacant land and local public transportation.
Financial services are generally exempt from VAT. Financial services are those services that are connected to dealing with money. This can include exchanging currency, providing loans or credit, deposit-taking or savings accounts.
Providing insurance contracts also falls within exempt financial services. Financial services are only exempted when you charge a fee, discount, or commission for providing those services.
The supply of residential buildings is exempt from VAT, whether for sale or lease. Places that are not fixed to the ground and can be moved are not considered residential buildings, including RVs, motor homes, etc. Hotels and motels are also not exempt from VAT.
Exempt services include any local transport by way of land, water, or air from one state to another state. If you have a business that transports locally, you should look into whether the services are exempt. Even a helicopter or airplane for local transport is exempt from VAT.
If none of your taxable supplies are zero-rated or exempt, then you have to charge a 5% VAT. But remember that not all businesses need to register for VAT. There is a minimum threshold you must meet before it’s mandatory.
There is a minimum threshold for those businesses that are required to register for VAT. They must be making taxable supplies or imports of AED 375,000 or more annually.
If you have taxable supplies or import more than AED187,500 worth of goods, you have the choice to register for VAT.
As a business, you will charge your customers VAT. But you’ll also have to pay VAT on certain goods and services that you purchase. You have the chance to get back some of that VAT paid. This is known as Input Tax.
Your total VAT liability is the total amount of VAT you collected from customers less the Input Tax. Input tax is the amount of money paid by the business when purchasing certain goods. You can recover any tax paid on inputs.
For example, a business can buy 10 computer tablets from a business in one month and sell 20 tablets to a customer. They’ll pay 5% VAT on the purchase. The customer will also pay 5% VAT.
This can lead to double taxation on the same product. This is why the business can recover the VAT they paid on the first purchase. At the end of the day, VAT is only charged once to the end-user.
Remember that you can’t recover VAT if you provide exempt services.
This should not come as a surprise to you, but you need to register for the VAT. You have to register with FTA who regulates VAT in Dubai.
First, you need to create an e-service account. You need to do this before you can register for VAT. To sign up, you’ll need a valid email address.
Once you create an account, you can start the registration process from the FTA’s portal. Enter all the information and attach the documents. You’ll need to provide contact and banking details
Once the FTA approves your application, they will give you a unique Tax Registration Number. You can use that to sign in to your VAT portal.
You’re obligated to keep track of your taxable supplies. Make sure all your information is up to date. The minute you’re over the minimum threshold, you’ll be obligated to register. You don’t want to be over the limit and not realize that you have VAT obligations.
You must file your VAT return with the FTA online within 28 days from the end of the “tax period”. A tax period depends on your annual turnover. If you have an annual turnover below AED 150 million, you need to file your VAT returns monthly.
Larger businesses with an annual turnover of over AED 150 million must file their returns monthly. This threshold ensures that the business makes its VAT payment monthly without creating delays or confusion. These larger amounts of VAT payments are better dealt with monthly.
At the end of each tax period, you must submit a VAT return to the FTA online. This is basically a summary of the total taxable supplies you’ve made in that period. It also shows how much VAT you should have collected and now need to pay to the government.
You need to file VAT returns and pay any VAT owing every quarter, by the 28th of the subsequent month. Late filing returns can result in penalties. Missing the deadline means that you will be subject to a penalty of AED 1,000 for the first time, and AED 2,000 for every other instance of late filing.
The penalty for late payment can be significant. It’s 2% of the unpaid VAT amount for the first 7 days, and 4% after the first 7 days. If you don’t pay the VAT amount in a month, you will have to pay a penalty of 1% per day until it reaches 300% of the unpaid VAT amount.
Even if you have a zero-rated supply, you still have to file your VAT returns. If you don’t, you will be subject to the same late-filing penalties.
You can have VAT payable or VAT owing. If you have VAT owing, you can pay online through the official FTA website. You can pay by credit card, eDebit or bank transfer. The bank transfer can be local or international.
Paying your VAT should not be difficult. You want to make sure you pay the amounts on time. The flexibility of the payments allows you to pay your VAT easily and conveniently.
You know all about the VAT in Dubai, which is a requirement that started in 2018. There is no personal or corporate income tax in Dubai. Remember you don’t want to miss out on your reporting, collecting and remitting obligations under VAT when you’re starting your new business.
Now that you know everything there is to know about VAT in Dubai, you need to consider all the costs of starting a business. Let us help you calculate the cost of starting a business so you can be prepared for anything. Use our business cost calculator today.
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