This article has been researched and written by the Tax & Compliance Team at Creation Business Consultants. AI has not been used in generating this article.
WHAT IS VAT IN THE UAE?
Value Added Tax (VAT) in the UAE is a tax on goods and services introduced in the UAE on January 1, 2018. The regular rate of VAT is 5% applicable on most transactions, which makes it an important part of the financial process for businesses and consumers alike. Being compliant with VAT regulations is necessary for businesses. To avoid costly mistakes, being aware of registration guidelines, deadlines for filings, and penalties for non-compliance will ensure your business can run smoothly.
WHO NEEDS TO REGISTER FOR VAT?
Businesses operating in the UAE, more specifically conducting taxable activities, must determine if they require registration. The current registration limit is AED 375,000. Here’s a breakdown of entities that must register:
- Natural Persons: Individual taxpayer that has taxable turnover in excess of the threshold.
- UAE-based Business Entities: consists of Limited Liability Companies (LLC), Joint Stock Companies, Partnerships, and Sole Establishments
- Foreign Companies: A company with a Permanent Establishment (PE) operating in the UAE, undertaking taxable business activities.
- Free Zone Entities: Any business operating within UAE Free Zones that is in business for supply.