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The Ministry of Finance of the UAE has published its final version of the VAT executive regulations
The Regulations define Value Added Tax as the 5% tax imposed on the import and export of goods and services at each stage of production and distribution, including what is deemed to be a supply, with the exception of specific supplies subject to the zero rate and what is exempted as specified in the Decree-Law
As the new tax legislation comes into force in the UAE and GCC, you need to ensure your business is ready to comply.
First BIT experts regularly monitor the updates made by the UAE Ministry of Finance (MoF), The Federal Tax Authority and
provide you with the latest overview.
The UAE's VAT Law Key Points
5%
Percentage of VAT
January 1, 2018
VAT comes into force
September, 2017
Registration for VAT opens
375,000 AED
Minimum annual turnover to make a business VATable
Definitions
GCC States: all countries that are full members of The Cooperation Council for the Arab States of the Gulf pursuant to its Charter.

Implementing States: The GCC States that are implementing a Tax law pursuant to an issued legislation.

Goods: Physical property that can be supplied including real estate, water, and all forms of energy as specified in the Executive Regulation of this Decree-Law.

Services: Anything that can be supplied other than Goods.

Import: The arrival of Goods from abroad into the State or receipt of Services from outside the State.

Concerned Goods: Goods that have been imported, and would not be exempt if supplied in the State.

Concerned Services: Services that have been imported, where the place of supply is in the State, and would not be exempt if supplied in the State.

Person: A natural or legal person.

Taxable Person: Any Person registered or obligated to register for Tax purposes under this Decree-Law.

Taxpayer: Any person obligated to pay Tax in the State under this Decree-Law, whether a Taxable Person or end consumer.

Tax Registration: A procedure according to which the Taxable Person or his Legal Representative registers for Tax purposes at the Authority.

Tax Registration Number (TRN): A unique number issued by the Authority for each Person registered for Tax purposes. This is an unofficial translation

Registrant: The Taxable Person who has been issued with a TRN.

Recipient of Goods: Person to whom Goods are supplied or imported.

Recipient of Services: Person to whom Services are supplied or imported.

Importer: With respect to importing Goods, it is the Person whose name is listed as the importer of the Goods on the date of Import for customs clearance purposes. With respect to Services, it is the Recipient of these Services.

Tax Return: Information and data specified for Tax purposes and submitted by a Taxable Person in accordance with a form prepared by the Authority.

Consideration: All that is received or expected to be received for the supply of Goods or Services, whether in money or other acceptable forms of payment.

Business: 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.

Exempt Supply: A supply of Goods or Services for Consideration while conducting Business in the State, where no Tax is due and no Input Tax may be recovered, except according to the provisions of this Decree-Law.

Taxable Supply: A supply of Goods or Services for a Consideration by a Person conducting Business in the State, and does not include Exempt Supply.

Deemed Supply: Anything considered as a supply and treated as a Taxable Supply according to the instances stipulated in this Decree-Law.

Input Tax: Tax paid by a Person or due from him when Goods or Services are supplied to him, or when conducting an Import.

Output Tax: Tax charged on a Taxable Supply and any supply considered as a Taxable Supply.

Recoverable Tax: Amounts that were paid and may be returned by the Authority to the Taxpayer pursuant to the provisions of this Decree-Law.

Due Tax: Tax that is calculated and charged pursuant to this Decree-Law.

Payable Tax: Tax that is due for payment to the Authority.

Tax Period: A specific period of time for which the Payable Tax shall be calculated and paid.

Tax Invoice: A written or electronic document in which the occurance of a Taxable Supply is recorded with details pertaining to it. This is an unofficial translation

Tax Credit Note: A written or electronic document in which the occurance of any amendment to a Taxable Supply that reduces or cancels the same is recorded and the details pertaining to it.

Mandatory Registration Threshold: An amount specified in the Executive Regulation of this Decree-Law; if exceeded by the value of Taxable Supplies or is anticipated to be exceeded, the supplier shall apply for Tax Registration.

Voluntary Registration Threshold: An amount specified in the Executive Regulation of this Decree-Law; if exceeded by the value of Taxable Supplies or taxable expenses or is anticipated to be exceeded, the supplier may apply for Tax Registration.

Transport-related Services: Shipment, packaging and securing cargo, preparation of Customs documents, container management, loading, unloading, storing and moving of Goods, or any another closely related services or services that are necessary to conduct the transportation services.

Place of Establishment: The place where a Business is legally established in a country pursuant to the decision of its establishment, or in which significant management decisions are taken and central management functions are conducted.

Fixed Establishment: Any fixed place of business, other than the Place of Establishment, in which the Person conducts his business regularly or permanently and where sufficient human and technology resources exist to enable the Person to supply or acquire Goods or Services, including the Person's branches.

Place of Residence: The place where a Person has a Place of Establishment or Fixed Establishment, in accordance with the provisions of this Decree-Law.

Non-Resident: Any person who does not own a Place of Establishment or Fixed Establishment in the State and usually does not reside in the State.

Related Parties: Two or more Persons who not separated on the economic, financial or regulatory level, where one can control the others either by Law, or through the acquisition of shares or voting rights.

Customs Legislation: Federal and local legislation that regulate customs in the State.

Designated Zone: Any area specified by a Cabinet Decision issued at the suggestion of the Minister, as a Designated Zone for the purpose of this Decree-Law.

Export: Goods departing the State or the provision of Services to a Person whose Place of Establishment or Fixed Establishment is outside the State.

Capital Assets: Business assets designated for long-term use.

Capital Assets Scheme: A scheme whereby the initially recovered Input Tax is adjusted based on the actual use during a specific period.

Administrative Penalties: Amounts imposed upon a Person by the Authority for breaching the provisions of this Decree-Law or Federal Law No. (7) of 2017 on Tax Procedures.

Administrative Penalties Assessment: A decision issued by the Authority concerning to Administrative Penalties due.

Excise Tax: A tax imposed on specific Goods.

Tax Group: Two or more Persons registered with the Authority for Tax purposes as a single taxable person in accordance with the provisions of this Decree-Law.

Value Added Tax
Value Added Tax (or VAT) is an indirect tax imposed on the supply of most goods and services. It is one of the most common types of consumption taxes found around the world. More than 150 countries have implemented VAT (or its equivalent, Goods and Services Tax), including all 29 EU member states, as well as Canada, New Zealand, Australia, Singapore and Malaysia.

VAT is charged at each step of the 'supply chain'. Ultimate consumers generally bear the VAT cost while Businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government.

A business pays the government the tax that it collects from the customers while it may also receive a refund from the government on tax that it has paid to its suppliers. The net result is that tax receipts to government reflect the 'value add' throughout the supply chain. To explain how VAT works we have provided a simple, illustrative example above (based on a VAT rate of 5%).

Mandatory registration and voluntary registration
A business must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED375,000. Furthermore, a business may choose to register for VAT voluntarily if their supplies and imports are below the mandatory registration threshold, but exceed the voluntary registration threshold of AED187,500.

Similarly, a business may register voluntarily if their expenses exceed the voluntary registration threshold. This particular opportunity to register voluntarily is designed to enable start-up businesses with no turnover yet to register for VAT.

For more details, see:
Federal Decree-Law No. (8) of 2017 on Value Added Tax
- Title Four Tax Registration and Deregistration;
Executive Regulation of Federal Decree-Law No (8) of 2017 on Value Added Tax
- Title Three Registration.
Designated Zone
Any Designated Zone specified by a decision of the Cabinet shall be treated as being outside the State and outside the Implementing States, subject to the following conditions:
a. The Designated Zone is a specific fenced geographic area and has security measures and Customs controls in place to monitor entry and exit of individuals and movement of goods to and from the area.
b. The Designated Zone shall have internal procedures regarding the method of keeping, storing and processing of Goods therein.
c. The operator of the Designated Zone comply with the procedures set by the Authority.

For more details, see::
Federal Decree-Law No. (8) of 2017 on Value Added Tax
- Chapter Five Designated Zones;
Executive Regulation of Federal Decree-Law No (8) of 2017 on Value Added Tax
- Title Nine Designated Zones.
VAT rate
The VAT rate in the UAE is fixed at 5% and is levied on the supply of all goods and services, including food, commercial buildings and hotel services, if no explicit provision is made to impose a zero rate or an exemption.

The zero rate is imposed on some goods and services, including health and education services, the supply of investment gold, the first supply of residential buildings, and the supply of international transport of passengers and goods, and exports.

Activities exempt from tax include bare land, local transportation of passengers, supply of residential buildings and the supply of some financial services.

Businesses that supply goods or services that are subject to a zero rate can recover the VAT that they incurred on their purchases. Meanwhile, businesses that supply exempt goods or services cannot recover the VAT they incurred on their purchases.

For more details, see:
Federal Decree-Law No. (8) of 2017 on Value Added Tax
- Article (3) Tax Rate;
- Title Six Zero Rates and Exemptions;
Executive Regulation of Federal Decree-Law No (8) of 2017 on Value Added Tax
- Title Six Zero-rated supplies;
- Article (31) Zero-rating the export of services;
- Title Seven Exempt Supplies.

Length of tax period
The standard Tax Period applicable to a Taxable Person shall be a period of three calendar months.

For more details, see:
Executive Regulation of Federal Decree-Law No (8) of 2017 on Value Added Tax
-Article (62) Length of tax period.
Tax Invoice
A Registrant making a Taxable Supply shall issue an original Tax Invoice and deliver it to the Recipient of Goods or Recipient of Services.

Tax Invoice shall contain all of the following particulars:
a. The words "Tax Invoice" clearly displayed on the invoice.
b. The name, address, and Tax Registration Number of the Registrant making the supply.
c. Where a Recipient of the supply is a Registrant, the name, address, and Tax Registration Number of the Recipient.
d. A sequential Tax Invoice number or a unique number which enables identification of the Tax Invoice and the order of the Tax Invoice in any sequence of invoices.
e. The date of issuing the Tax Invoice.
f. The date of supply if different from the date the Tax Invoice was issued.
g. A desription of the Goods or Services supplied.
h. For each Good or Service, the unit price, the quantity or volume supplied, the rate of Tax and the amount payable expressed in AED.
i. The amount of any discount offered.
j. The gross amount payable expressed in AED.
k. The Tax amount payable expressed in AED together with the rate of exchange applied where the currency is converted from a currency other than the UAE dirham.
l. Where the invoice relates to a supply under which the Recipient of Goods or Recipient of Services is required to account for Tax, a statement that the Recipient is required to account for Tax, and a reference to the relevant provision of the Decree-Law.

The Taxable Person may issue a simplified Tax Invoice in either of the following situations:
a. Where the Recipient of Goods or Recipient of Services is not a Registrant;
b. Where the Recipient of Goods or Recipient of Services is a Registrant and the Consideration for the supply does not exceed AED 10,000.
A simplified Tax Invoice shall contain all of the following particulars:
a. The words "Tax Invoice" clearly displayed on the invoice.
b. The name, address, and Tax Registration Number of the Registrant making the supply.
c. The date of issuing the Tax Invoice.
d. A description of the Goods or Services supplied.
e. The total Consideration and the Tax amount charged.

For more details, see:
Federal Decree-Law No. (8) of 2017 on Value Added Tax
-Chapter Five Tax Invoices;
Executive Regulation of Federal Decree-Law No (8) of 2017 on Value Added Tax
- Title Thirteen Tax Invoices and Tax Credit Notes.
Tax return and payment
A Tax Return must be received by the Authority no later than the 28th day following the end of the Tax Period concerned. A Taxable Person shall settle Payable Tax in relation to a Tax Return during the same period.

A Tax Return must contain such details as the Authority may require and, at the minimum, allow for the following information to be included:
a. The name, address and the TRN of the Registrant;
b. The Tax Period to which the Tax Return relates.
c. The date of submission.
d. The value of Taxable Supplies made by the Person in the Tax Period and the Output Tax charged.
e. The value of Taxable Supplies subject to zero rate made by the Person in the Tax Period.
f. The value of Exempt Supplies made by the Person in the Tax Period.
g. The value of any supplies subject to Clauses (1) and (3) of Article (48) of the Decree-Law.
h. The value of expenses incurred in respect of which the Person seeks to recover Input Tax and the amount of Recoverable Tax;
i. The total value of Due Tax and Recoverable Tax for the Tax Period.
j. The Payable Tax for the Tax Period.

For more details, see:
Federal Decree-Law No. (8) of 2017 on Value Added Tax
-Chapter Two Tax Returns and Tax Payment;
Executive Regulation of Federal Decree-Law No (8) of 2017 on Value Added Tax
-Article (64) Tax return and payment.
Record-keeping
Accounting Records and Commercial Books shall include the following:

Accounting books in relation to that Business, which include records of payments and receipts, purchases and sales, revenues and expenditures, and any business, and any matters as required under any Tax Law or any other applicable law, including:
1) Balance sheet and profit and loss accounts.
2) Records of wages and salaries.
3) Records of fixed assets.
4) Inventory records and statements (including quantities and values) at the end of any relevant Tax Period and all records of stock-counts related to Inventory statements.

The Taxable Person shall keep the following records:
a. Records of all supplies and Imports of Goods and Services.
b. All Tax Invoices and alternative documents related to receiving Goods or Services.
c. All Tax Credit Notes and alternative documents received.
d. All Tax Invoices and alternative documents issued.
e. All Tax Credit Notes and alternative documents issued.
f. Records of Goods and Services that have been disposed of or used for matters not related to Business, showing Taxes paid for the same.
g. Records of Goods and Services purchased and for which the Input Tax was not deducted.
h. Records of exported Goods and Services.
i. Records of adjustments or corrections made to accounts or Tax Invoices.
j. Records of any Taxable Supplies made or received in accordance with Clause (3) of Article 48 of this Decree-Law, including any declarations provided or received in respect of those Taxable Supplies.
k. A Tax Record that includes the following information:
1) Due Tax on Taxable Supplies.
2) Due Tax on Taxable Supplies pursuant to the mechanism in Clause (1) of Article (48) of this Decree-Law.
3) Due Tax after the error correction or adjustment.
4) Recoverable Tax for supplies or Imports.
5) Recoverable Tax after the error correction or adjustment.

The Taxable Person who makes a Taxable Supply of Goods or Services in the State must keep a record of the Emirate in which the supply takes place.

For more details, see:
Federal Decree-Law No. (8) of 2017 on Value Added Tax
- Article (78) Record-keeping;
Executive Regulation of Federal Decree-Law No (8) of 2017 on Value Added Tax
- Article (71) Record-keeping requirements;
- Article (72) Record keeping of the supplies made.
Executive Regulation of Federal Law No. (7) of 2017
- Title Two Keeping Accounting Records and Commercial Books.
Tax Group
Two or more persons conducting Businesses may apply for Tax Registration as a Tax Group if all of the following conditions are met:
a. Each shall have a Place of Establishment or Fixed Establishment in the State.
b. The relevant persons shall be Related Parties.
c. One or more persons conducting business in a partnership shall control the others.

For the purposes a Tax Group, one of the Persons registered as a member of the Tax Group shall be nominated to be the representative member of the Tax Group.
a. Any Business carried on by a member of the Tax Group shall be deemed to be carried on by the representative member and not to be carried on by any other member of the Tax Group.
b. Any supply by a member of the Tax Group to another member of the same Tax Group may be disregarded.

If Related Parties do not apply for Tax Registration as a Tax Group, the Authority may assess their relation based on their economic, financial and regulatory practices in business and register them as a Tax Group if their relation was proved thereto.

For more details, see:
Federal Decree-Law No. (8) of 2017 on Value Added Tax
- Article (14) Tax Group;
Executive Regulation of Federal Decree-Law No (8) of 2017 on Value Added Tax
- Article (9) Related Parties;
- Article (10) Conditions for Registration as a Tax Group;
- Article (11) Appointment of the Representative Member of a Tax Group;
- Article (12) Effect of registration as a Tax Group;
- Article (13) Aggregation of Related Parties.
Export
Export - Goods departing the State or the provision of Services to a Person whose Place of Establishment or Fixed Establishment is outside the Implementing States.

Export shall be zero-rated.

The exporter should provide official and commercial evidence of export:
a. "official evidence" means Export documents issued by the local Emirates Customs authority in respect of Goods leaving the State;
b. "commercial evidence" shall include any the following:
1) airway bill
2) bill of lading
3) consignment note
4) certificate of shipment.

If the Person required to Export the Goods does not do so within the period of 90 days or a longer period that the Authority has allowed, Tax shall be charged on the supply at the rate that would have been due on the supply if it was made in the State.

For more details, see:
Federal Decree-Law No. (8) of 2017 on Value Added Tax
- Article (45) Supply of Goods and Services that is Subject to Zero Rate;
Executive Regulation of Federal Decree-Law No (8) of 2017 on Value Added Tax
- Article (30) Zero-rating the export of goods;
- Article (31) Zero-rating the export of services.
Import
Import - the arrival of Goods from abroad into the Implementing State or receipt of Services from outside the Implementing States.

The Import value of Goods consists of the customs value pursuant to Customs Legislation, including the value of insurance, freight and any customs fees and Excise Tax paid on the Import of the Goods. Tax shall not be included in the Value of the Supply.

If the Taxable Person imports Concerned Goods or Concerned Services for the purposes of his Business, then he shall be treated as making a Taxable Supply to himself, and shall be responsible for all applicable Tax obligations and accounting for Due Tax in respect of these supplies.

The Taxable Person must Declare and pay the Due Tax in the Tax Return which relates to the Tax Period in which the Date of Supply for the Concerned Goods or Concerned Services took place.

For more details, see:
Federal Decree-Law No. (8) of 2017 on Value Added Tax
- Article (35) Value of Import;
- Article (48) Reverse Charge;
- Article (54) Recoverable Input Tax
Executive Regulation of Federal Decree-Law No (8) of 2017 on Value Added Tax
- Article (47) General rules regarding Import of Goods;
- Article (48) Calculation of Tax under the Reverse Charge Mechanism on import of Concerned Goods or Services;
Designated zone ≠ Free zone
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"Designated zone ≠ Free zone"
VAT-registered Businesses:
Issue tax invoices
Must charge VAT on taxable goods or services they supply;
Track VAT payable/Receivable
Carefully documenting your business income and costs and associated VAT charges.
Must retain VAT invoices issued and received for a minimum of 5 years.
Keep a range of business records
which will allow the government to check that they have got things right
Submit VAT returns
Filing tax returns
Pay VAT
Claim VAT refunds
Generate audit files
Report
Report the amount of VAT you've charged and the amount of VAT you've paid to the government on a regular basis.
What records will you need to keep?
Records need to be kept for at least 5 years.
You will have to keep:
Business Records:
• records of all supplies and imports of
goods and services;
• all tax invoices and tax credit notes and
alternative documents received;
• all tax invoices and tax credit notes and
alternative documents issued;
• records of goods and services that have
been disposed of or used for matters not
related to the business, detailing the VAT
paid on those goods and services;
• records of goods and services purchased
for which the input tax was not
deducted;
• records of exported goods and services;
and
• records of adjustments or corrections
made to accounts or tax invoices.
VAT Records:
• output tax due on taxable supplies;
• output tax due on taxable supplies
accounted for via the reverse charge
mechanism;
• output tax due after the correction of
any errors or adjustments;
• input tax recoverable on supplies or
imports; and
• input tax recoverable after the
correction of any errors or adjustments.
Accounting Records
• balance sheet and profit and loss
accounts;
• records of wages and salaries;
• records of fixed assets;
• inventory records and statements
(including quantities and values) at the
end of any relevant tax period and all
records of stock-counts related to
inventory statements.
GET VAT READY
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The due date for the submission of the first VAT tax return

Days
Hours
Minutes
Seconds
Businesses within tax threshold must register for VAT!
Make sure your business is ready for VAT
Source: The UAE's Federal Tax Authority Website

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