Value Added Tax (VAT)

A value-added tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. The amount of VAT that the user pays is on the cost of the product, less any of the costs of materials used in the product that have already been taxed. Value Added Tax (VAT) was introduced in the UAE on 1 January 2018. The rate of VAT is 5 per cent.

• Should I be registered for VAT?

If your taxable turnover – the value of the goods and services that you supply and any imports, but excluding any exempt supplies (e.g. certain financial services and life insurance, some property transactions and local passenger transport) – exceeds AED 375,000 in a 12 month period, or if you expect your taxable turnover to exceed AED 375,000 in the next 30 days, you are required to register for VAT. If your taxable turnover, or expenses which you incur that are subject to VAT, is less than AED 375,000, but more than AED 187,500, you can register for VAT voluntarily.

• Will there be penalties if  failed to register vat on time?

By not registering within the timeframe announced, a taxable person shall be subject to an administrative penalty of AED 20,000 according to Cabinet Decision no. (40) of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE. A taxable person for VAT is every person who is registered or obligated to be registered for the purposes of VAT.