The UAE and Bahrain recently implemented VAT for the first time. For many businesses, VAT compliance can be daunting and overwhelming – and most underestimate the time and resources needed to get their systems VAT ready.
Sage makes VAT compliance easy for businesses of all sizes, across all industries. We’re ready to help you with:
Our portfolio of fully-compliant, flexible, and customisable software solutions has been designed to meet the needs of growing businesses like yours. This, combined with our more than 30 years’ experience in helping businesses across the globe to streamline their accounting and payroll functions, makes Sage the preferred partner in VAT compliance.
Upgrade to Sage and start your painless VAT compliance journey today. You’ll be glad you did.
If you’d like to speak to a Sage consultant about VAT in the UAE, click the ‘Call Me Back’ icon to the right of your screen.
Value Added Tax (VAT) is an indirect tax that is paid by consumers when they buy most goods and services. VAT was introduced in the Gulf Cooperation Council (GCC) as a way to diversify member nations’ economies and uncover new revenue streams.
Businesses in Saudi Arabia, Kuwait, the United Arab Emirates (UAE), Qatar, Bahrain, and Oman with an annual turnover of AED 375,000 must comply with the new VAT laws. This involves collecting a standard tax rate of five percent (5%) at each stage of the supply chain, on behalf of the government.
VAT became effective for UAE states on 1 January 2018. This significantly changed the way business is conducted in the Middle East.
Dubai was one of the first countries to implement VAT in the UAE in 2018, as was Saudi Arabia. However, some countries have delayed implementation until 2019 and even 2021.
This table outlines the current state of VAT in the GCC:
Saudi Arabia and Dubai already have VAT. Other GCC nations, like Bahrain, Qatar, and Oman have delayed value added tax implementation until 2019. Kuwait will implement VAT in 2021.
VAT is charged on certain products, property, and services. Certain sectors, like medical fees, education, local and air transport, medicines, residential property rentals and sales, and public schoolbooks, will be exempt from VAT, but these may differ between member countries.
In the UAE, VAT for real estate has been separated into two categories: commercial and residential.
VAT will be applied to commercial property transactions in the UAE, including rental and sale agreements. Property used for office, retail, or public parking space will be taxed, as will movable property, like mobile homes.
Hotels, motels, and other serviced accommodation will also attract VAT, as will residential property that is leased to non-residents on a short-term basis.
Bare land and residential sales and rentals will be exempt from VAT.
Certain sectors will be exempt from paying VAT in the UAE. While each country will issue specific exemptions, the VAT law makes provisions for goods and services that are exempt or zero-rated.
Goods and services that are exempt from VAT in the UAE do not incur input or output tax. This includes life insurance, the sale and rental of bare land and residential property, and local passenger transport.
Zero-rated goods and services in the UAE incur an output tax of 0% (instead of 5%). Suppliers can claim input tax on expenses incurred in the supply of these goods and services, which include certain education and healthcare services, supplies of crude oil, natural gas and investment precious metals, exports, margin-based financial services, supply of services to GCC countries that have not implemented VAT law, international transportation, and newly constructed residential properties.
Company VAT registration is free of charge and can be done online via the FTA’s e-Services portal.
To register for VAT online, you will need:
Bear in mind that full transition can take between 9 and 12 months.
You will need to regularly submit a VAT return with the FTA (quarterly or for a shorter period, should the FTA decide so) within 28 days after the end of the tax period. You can pay VAT online, via the FTA’s e-Services portal.
To submit accurate returns, you will need to keep records of all your transactional data for up to five years. To ensure compliance with UAE Vat law, you might need to make changes to your accounting systems and processes.
For automatic compliance, use software that is already VAT complaint, immediately updated with any law changes, and lets you easily calculate VAT.
To successfully prepare for VAT, business owners need to register their companies and then develop a comprehensive implementation plan to ensure all business operations are compliant.
This plan must address:
The law sets administrative penalties for businesses that:
Penalties are set at a minimum of AED 500 and up to five times the amount of VAT that would have been payable for the period in question.
At 5% VAT, this puts your maximum risk at 25% of turnover.