19 Dec VAT Return Filing in Dubai
Read this article to learn about the VAT (Value Added Tax) filing process for a business established in Dubai.
What is Value Added Tax (VAT)
Value Added Tax (VAT) is a consumption tax charged on a wide range of goods and services. More than 160 countries use a VAT system. In addition, most industrialized countries that are a part of the Organization for Economic Co-operation and Development have a VAT system.
The current VAT regime in the United Arab Emirates started in 2018. The VAT rate is five percent and applies to most goods and services, with some goods and services subject to a zero rate or an exemption from VAT.
UAE VAT registration
A company must register for VAT in the UAE if a business’s taxable supplies and imports exceed the mandatory registration limit of AED 375,000 (USD $102,000) per annum. Companies can register for VAT voluntarily if their supplies and imports exceed AED 187,500 (USD $51,000) per annum.
Startups and small-scale companies can register voluntarily if their expenses exceed the voluntary registration threshold, qualifying them for a tax credit.
Companies can register online for VAT via the UAE Federal Tax Authority (FTA). The process takes approximately 45 minutes, and the Federal Tax Authority takes about 20 days to review and complete the application.
UAE VAT-exempt and zero percent rated sectors
The below categories are zero-rated, which means there is no VAT charged:
- Specific education and healthcare supplies.
- Goods and services exported outside the Gulf Cooperation Council region.
- International transportation.
- Certain precious metals
The below categories are exempt from VAT:
- Certain financial services
- Residential properties
- Undeveloped land
- Life insurance
- Local passenger transport
UAE VAT return filing
VAT returns for the United Arab Emirates are all filled online, as there are no paper-based options. VAT returns must be filled with the FTA regularly and usually within 28 days of the ‘tax period’ end. A ‘tax period’ is a specific period for which the payable tax shall be computed and paid.
The standard tax period is as follows:
- Quarterly – businesses with an annual turnover below AED150 million (USD $40.8 million)
- Monthly – businesses with a yearly turnover of AED150 million (USD $40.8 million) or greater.
After creating the Federal Tax Authority account and successfully logging in, the next step is to provide various inputs to the fields in the form, the name of the firm, address, and tax registration number. In addition, information regarding the VAT sales and expenses in the financial year must be included in all filings Details like zero-rated service and exempt service must also be included.
The VAT due amount will usually be higher than the recoverable amount that must be paid. However, if the recoverable amount is higher than the VAT due, the amount can be refunded to the company by the FTA.
The last step of the online filing process is a declaration of the financial details provided.
Late or incorrect VAT return filing
A penalty of AED 1000 (USD $272) will be charged to companies who fail to file the UAE VAT return on time. And if the company repeats the offense within the next 24 months, the penalty increases to AED 2000 (USD $544).
An incorrect VAT return filing in the UAE can cause a fixed penalty of AED 3000 (USD $817) for the first time and AED 5000 (USD $1361) for the second time. In addition, a percentage-based penalty will be charged on the amount unpaid due to the error.
Hire experts to help you with VAT
If you want to avoid the hassle of filing your VAT and making mistakes, you can turn to professional services that can give you advice as well as do all the processing for you. As always, our seasoned consultants are happy to give you guidance even if you are just exploring all your options.
Related Article: Corporate Tax in the UAE