VAT in UAE - Key Highlights

Coverage:

Registration:

Compulsory registration for turnover over AED 375,000. Voluntary registration for turnover over AED 187,000
Registration opens from Oct 1 2017 and deadline is Dec 31st 2017. Voluntary/early registration allowed from July 1st 2017.

Vat Rates:

Exempt

Zero Rate:

Standard Rate: The standard rate is 5%

Jewelry
Second hand cars – margin scheme
Financial services – standard rate on Fee income. Margin based income is exempt. Islamic banking products to be treated same as equivalent conventional products.
Insurance premium except Life insurance is taxable.

Goods & Services:

Goods – Place of supply rules apply. Where goods are physically present when sold.
Goods for export will be zero rated. Export has to be done within 3 months and BL/ documentary evidence required.
Import of goods – no VAT but Reverse Charge applies. Has to be accounted for on the VAT return.
Import & transshipment to other GCC countries – Pay VAT and UAE will transfer it to the other GCC country.
Services – based on where the Business is based. Alternatively, a Consumption based rule will apply. E.g. telecom or software services will be taxed where services and used and enjoyed.

Free Zones:

Rules are still not clear, but VAT may apply in a non-fenced free zone and not apply in a customs controlled free zone like Jebel Ali.

VAT Returns:

The return will include only summary data of purchases and sales, Input & Output tax and which Emirate the sale has been done.
Returns will be quarterly and must be filed and tax paid within 28 days of quarter end.
All returns and tax payment will be fully electronic.

Accounting and Audit:

Proper accounting records to be kept.
Time of supply rules will determine when to account for output VAT. Goods – when goods are made available to customers and Services – earlier of issuance of Invoice or receipt of payment.
VAT is a rules based law and accounting principles of accrual or cash basis do not apply.
Minimum data requirements defined to be included in Invoices. Tax Registration Number, Date of sale, Emirate of sale, clear description and quantity of goods, amount of sale etc.
All accounting records to be kept for minimum of 5 years.
No action can be taken by Federal Tax Authority after 5 years but no limit in case fraud is found.
External Audit of accounts is not mandatory.

Appeals Process: