VAT in the UAE
Value Added Tax (‘VAT’) is expected to be introduced in the United Arab Emirates (“UAE”) with effect from 1 January 2018.
The VAT Framework Agreement which has been agreed to, and signed by, all six Member States of the Gulf Cooperation Council (“GCC”) is the Treaty governing the introduction of the VAT in the GCC.
The VAT Framework Agreement was made public by the Kingdom of Saudi Arabia on 21 April 2017 and applies to all of the Member States, including the UAE.
The commercial companies will be taxable at the standard VAT rate ( 5%).
You will be required to be registered when the VAT law is in force if you are a business that is resident in the GCC and you are making supplies of goods or services in the UAE and either:
1. Your turnover was more than AED 375,000 in the last 12 months; or
2. You expect that your turnover will be more than AED 375,000 in the next 30 days.
If you are not required to register, you will be eligible to apply for registration
when the VAT law is in force if:
1. Either your turnover or expenses (which will be subject to VAT) were more
than AED 187,500 in the last 12 months; or
2. You expect that either your turnover or expenses (which will be subject to VAT)
will be more than AED 187,500 in the next 30 days.
Definitions that you should be aware of
Any activity conducted regularly, on an ongoing basis and independently by any Person, in any location, such as industrial, commercial, agricultural, professional, service, or excavation activities or anything related to the use of tangible or intangible properties.
Tax Registration Number (“TRN”)
A person can only hold one TRN for VAT purposes at any one time. It is your responsibility to ensure that duplicate applications are not submitted. Branches are not separate legal entities; only the entity of which they are branches should apply for registration where that entity meets the relevant criteria. Even if you are operating via branches in more than one Emirate, only one VAT registration is required.
A Tax group can be formed between two or more legal persons (each of which must be resident in the UAE), that are associated and which meet specific control criteria. The prospective representative member of the Tax group is the only member who can create the group.
Tax Identification Number (TIN)
In order to create a Tax group, and if you are the representative member, you must first apply for VAT registration in the normal manner using the standard VAT registration application form. Upon submission of the application, you will be allocated a Tax Identification Number (TIN) which is required in order to be able to proceed and complete a Tax group registration form.
All supplies that are made in the U.A.E (whether subject to 5% or zero-rated tax under Article(45) of the Federal Decree Law No(8) of 2017), excluding supplies exempted under Article (45) of the Federal Decree Law No(8) of 2017).
All goods or services imported from abroad.
A “supply” is any supply of goods or services in the UAE for consideration by any person in the course of conducting business.