Since the implementation of Value Added Tax (VAT) in January 2018, the standard VAT rate in UAE has been set to be 5% for goods and services. However, some goods and services come under the other two VAT rates named Zero-rated VAT and Exempt rated VAT. Here is a complete list of VAT Rates in the United Arab Emirates.
UAE is tax-covered for startups, medium-sized corporations, and high-profile companies. The country is presently one of the most preferred locations to set up businesses or HQs for offices. Besides the zero tax on personal income and zero corporate tax, UAE welcomes investors and entrepreneurs with zero-currency limits, different business licenses, and activities to the zones, and lower import duties.
Why VAT is implemented in UAE?
The VAT will give the UAE a new revenue stream that will be used to continue to fund top-notch public services. Additionally, it will assist the government in attaining its goal of lessening reliance on oil and other hydrocarbons as a source of income.
If you are dreaming of starting a company in the UAE, expanding or relocating to this country, it is the most ideal decision as UAE is economically stable, investor-friendly, and tax-free. However, it is quite important to understand the VAT system in the country.
VAT Rates in UAE
United Arab Emirates divided the VAT rates into three namely,
- Standard VAT Rate
- Zero Rated VAT
- Exempt Rated VAT
Presently, the VAT rate in the UAE is 5% on most taxable goods and services. The businesses that are registered to VAT need to collect the VAT amount from consumers on behalf of the government, hence they bear the VAT costs.
VAT Rate List Overview
Rate of Tax
Standard VAT Rate
The following goods and services are included in the Standard VAT rate of 5%,
- Leisure and entertainment
- Most of, off the counter retail
- Construction supplies or hardware tools
- Food at restaurants and hotels
However, not all products or services are subject to the standard VAT rate. Certain business activities supplying zero-rated goods and services charge 0%.
Zero Rated VAT
The following are the Zero-rated products:
- Exporting goods and services outside the GCC (Gulf Cooperation Council)
- Transporting internationally, or supplying through the sea, air, land, or any means of transportation
- Supplying investment-based precious metals such as gold, silver, and platinum
- New estate for residential purpose
- Supplying educational services, and healthcare services
Exempt Rated VAT
There is a difference between exempt-rated VAT and zero-rated VAT. Customers are not charged VAT in the case of exempted rated VAT. The provider cannot recoup input tax on expenditures incurred in manufacturing-exempt supplies.
The following will be considered under exempt rated VAT,
- Bare land
- Residential Buildings (unless zero-rated)
- Certain financial services
- Local passenger transport
You may note that VAT is NOT paid by businesses, instead, it is charged to customers in the price of goods purchased, and collected by businesses, thus making it an indirect tax. Businesses are responsible for reporting to the government.
We have experts who assist you with any VAT-related issues. BMS Auditing is one of the approved Tax Agents. We cover all the elements of VAT and provide the best VAT services in UAE. Our VAT services include:
Reach out to us and we will keep you informed on every update from the FTA.
FAQs on VAT Rates in UAE
1. How do I stay compliant with VAT?
Complying with VAT is to follow the VAT Laws of the UAE. government, which includes creating the correct invoices, and maintaining relevant records of transactions for at least 5 years using authorized currency rates.
2. What are your key responsibilities in VAT?
- You need to charge VAT on taxable goods and services sold
- You should file VAT returns every 3 months, even if there is no VAT to report
- You could reclaim VAT paid for goods and services from other VAT-registered businesses
3. What is exempted from VAT?
Certain goods and services in the UAE are exempted from VAT and are tax-free. These are as follows:
- Financial Services
- Residential buildings
- Bare land
- Local transport services