Frequently Asked Questions
If you have any concerns please read this collection of frequently asked questions before contacting us. If you are still unclear about something feel free to contact.
Value Added Tax (or VAT) is an indirect tax applied on the consumption of most goods and services. It is also referred to as a type of general consumption tax. It is imposed on a product at each stage of production before the final sale. At each stage in the supply chain, businesses collect VAT on behalf of the government. Because it is added to the customer’s purchase price, ultimately it is the end consumer who pays VAT.
Not all parts of the industry will be subject to the same VAT rates, though. The travel and tourism sector can be broken down into several components, such as luxury, medical, education, meetings, exhibitions, healthcare, education, events and other special interest groups. It is expected that healthcare and education will be zero-rated supplies in the UAE. Meetings, conferences, events, and trade expos, which account for a significant portion the revenue-generating drive of the tourism sector, will be taxable.
Currently, the UAE is doing a feasibility study of a Tourist Refund Scheme where visitors and tourists will be able to claim a refund on VAT paid on certain goods and services purchased in the UAE.
A business can also choose to register for VAT voluntarily under two conditions:
- If the supplies and imports of the business are less than the mandatory registration threshold, but greater than the voluntary registration threshold of AED 187,500.
- If expenses of the business exceed the voluntary registration threshold. This opportunity is designed to enable start-up businesses with no turnover to register for VAT.
- Exports of goods and services to outside the GCC.
- International and intra-GCC transport
- Supplies for certain sea, air, and land means of transportation (such as aircraft and ships).
- Supply of precious metals for investment (gold, silver, and platinum)
- Newly constructed residential properties that are supplied for the first time within three years of their construction.
- Supply of certain educational services and relevant goods and services.
- Supply of certain healthcare services and associated goods and services.
- Certain eatables (a standard list will be ratified across the GCC by the Financial and Economic Cooperation Committee)
- The oil sector and the oil and gas derivatives sector (at the discretion of each member state)
- The supply of certain financial services
- Sale of bare land
- Lease or sale of residential property
- Local transport
Note: Import of precious metals is taxed at 0%. At each stage in the supply chain, businesses collect VAT on behalf of the government. Because it is added to the customer’s purchase price, ultimately it is the end consumer who pays VAT.
- If the recipient in UAE is registered under the VAT regime, they would have to pay VAT under the reverse-charge mechanism.
- If the recipient in UAE is not registered under the VAT regime, the VAT due should be paid on the import from outside the GCC. In this case, the tax should be paid before the goods are delivered to the recipient.
- Customs value, Insurance, Freight (CIF) x 5%
For high-value consignments (customs declared value exceeds AED 1000):
- (Freight (CIF)+ Excise tax + Customs Duty + Customs Fees) x 5%
- Export of goods to a non-GCC member state
- Export of goods to recipients in a GCC VAT implementing state
- Export of goods requiring installation/assembly/completion outside UAE
- If you export goods to a VAT-registered recipient, the export will be taxed at 0%.
- If you export goods to a non-registered recipient, and if the value of the goods supplied by you to the destination state is below the mandatory registration threshold in the destination state, then the supply will be taxed at 5%.
- If you export goods to a non-registered recipient, and if the value of the goods sent by you to the destination state exceeds the mandatory registration threshold in the destination state, then the supply will be treated as domestic supply. In this case, VAT will be applicable according to the VAT laws of the destination state and you will have to register for VAT in the destination state in this case.
- Export documents issued by the local Emirate Customs Department regarding goods leaving the state
- Airway bill
- Bill of landing
- Consignment note
- Certificate of shipment
The above documents should contain the following information:
- The name of the supplier
- The name of the consignor
- A description of the goods
- The value of the goods
- The export destination
- The mode of transport and route that the export will take
- Taxable supply: When a supply takes place within the UAE, it falls within the scope of the UAE VAT, and will be considered taxable supply.
- Out-of-scope supply: When a supply takes place outside the UAE, it is outside the scope of the UAE VAT.
- If the item was purchased before VAT was implemented (January 1st, 2018) and is sold anytime after that, the VAT needs to be applied on the total selling price.
- If an item was purchased and sold after VAT was implemented, then VAT needs to be applied on the profit margin. The VAT will be levied on the profit margin, since the seller of the pre-owned goods would have already been taxed at the time of purchase.
- Pre-owned goods imported into UAE doesn’t qualify for this scheme. Import of pre-owned goods are always subject to VAT on the total price.