Shuraa Tax Blog

Author: Ritish Sharma

  • Wages Protection System in the UAE

    Wages Protection System in the UAE

    The UAE has always been committed to protecting workers’ rights and ensuring fair pay. One of the ways it does this is through the Wages Protection System UAE , an electronic system that helps make sure employees get paid on time and in full. This system ensures that salaries are transferred directly to employees’ bank accounts, providing more transparency and security.

    The WPS is part of the UAE’s broader labour laws, which require employers to pay wages promptly. By using the WPS, both employers and employees benefit from a smoother, more organized process for salary payments, helping create a fairer workplace for everyone.

    What is the Wages Protection System (WPS) in the UAE?

    The Wages Protection System (WPS) is an electronic salary transfer system implemented by the UAE Government to ensure the timely and full payment of employees’ wages in compliance with UAE labour laws. The system is regulated by the UAE Central Bank and the Ministry of Human Resources and Emiratisation (MOHRE), aiming to enhance transparency, ensure workers’ rights, and improve the overall business environment in the country.

    How WPS Works in UAE:

    • Employers must register their employees with the WPS and ensure that their wages are paid through approved banks or financial institutions that are part of the system.
    • The system electronically transfers wages directly to employees’ bank accounts or e-wallets.
    • Employers must submit monthly wage files, reporting the details of salaries paid to employees, including amounts, date of payment, and any deductions made.
    • The WPS acts as a monitoring tool for the Ministry of Human Resources and Emiratisation (MOHRE) to ensure compliance with UAE labour laws.

    Employers and Employees Covered Under the WPS System:

    • Employers: All companies in the UAE, except for those in certain free zones, are required to use WPS for paying their employees’ salaries. Employers must set up accounts with approved banks to process payments.
    • Employees: All employees working in the private sector under the UAE Labor Law are covered under WPS. This includes skilled, unskilled, contractual, and temporary workers, as well as full-time and part-time employees.

    How to Register for WPS in the UAE?

    To register for the Wages Protection System UAE, employers in the UAE must follow these steps:

    1. Open a Bank Account for the Company

    Employers must open a corporate bank account with a UAE-based bank that is approved by the UAE Central Bank for WPS transactions. Many banks in the UAE are part of the WPS network.

    2. Register with the Ministry of Human Resources and Emiratisation (MOHRE)

    Employers need to register their business with the MOHRE by submitting the necessary documents. This includes providing the company’s trade license, passport copy of the employer, and proof of the company’s legal status.

    Employers should update their company’s information on the MOHRE’s online portal and link the company’s bank account to the system for salary transfers.

    3. Create Employee Records

    Employers must create detailed records of all employees, including the Salary Information File (SIF), which contains all salary details for employees. This includes information such as:

    • Employee name
    • National ID number
    • Work permit details
    • Salary structure
    • Bank account information (for wage transfers)

    4. Upload Wage Files to WPS

    After setting up the bank account and employee records, employers will need to upload wage files to the WPS system. These files should include:

    • Employees’ wage details (amount, bonuses, deductions)
    • Date of payment
    • Employee bank account numbers

    The wage file is submitted via the employer’s chosen bank’s electronic system or through the MOHRE portal.

    5. Ensure Payment to Employees

    The bank processes the SIF file and ensures that the wages are transferred directly to employees’ bank accounts or e-wallets. Employers must ensure that the wages are paid according to the file, and the payment is made on time. The bank will communicate with the MOHRE to confirm that the transaction has been completed successfully.

    6. Confirm and Monitor Compliance

    The employer will receive reports and notifications from both the MOHRE and the bank to confirm that wages have been successfully paid. Employers must regularly monitor WPS payment reports to ensure that all employees are receiving their salaries correctly and on time.

    How to Prepare SIFs for WPS in the UAE?

    The SIF (Salary Information File) is a crucial part of the WPS payroll in the UAE. It is a file containing all the necessary details about employees and their salary payments that employers submit to the MOHRE to comply with the WPS requirements. Here’s how to prepare the SIF correctly:

    1. Collect Employee Salary Details

    Gather accurate and complete information for each employee, such as:

    • Full name
    • Employee ID
    • Nationality
    • Job title
    • Monthly salary amount
    • Bank account details (for salary transfer)

    Ensure that the salary data aligns with the employment contract and WPS UAE law, such as the minimum wage requirements if applicable.

    2. Format the SIF File

    The file typically needs to be in XML format or CSV format, depending on the bank’s system. The structure includes sections such as employer details, employee details, payment amounts, and transaction references.

    3. Submit Employee Bank Account Information

    Ensure that the bank account details for each employee are accurate and entered correctly. The WPS system in UAE relies on these details to transfer wages.

    4. Review Salary Payment Dates

    Double-check the salary payment date to ensure it falls within the legal timeframe. The UAE labour law requires employees to be paid within a certain period after the end of the month.

    5. Verify File Compliance

    Before submission, ensure the SIF complies with WPS rules regarding salary minimums and maximums, payment methods, and reporting formats. Employers should verify that all necessary fields are filled and that there are no discrepancies in employee details or salary payments.

    6. Upload and Submit the SIF File

    Once the SIF file is correctly prepared, it must be uploaded to the WPS system through the employer’s account on the MOHRE portal or the authorized bank portal. After submission, the system will validate the file and confirm if it’s correct or if any errors need to be addressed.

    7. Confirm Payment Processing

    After submission, the bank processes the payments based on the data in the SIF file. Employers should confirm that the salary disbursements are completed successfully.

    Penalties for Non-Compliance with WPS

    Non-compliance with the Wages Protection System (WPS) in the UAE can result in several penalties and consequences for employers:

    • Employers who fail to pay employees on time through WPS may face fines ranging from AED 1,000 to AED 5,000 per employee, depending on the violation. Repeated offenses may result in higher fines and additional penalties.
    • Companies that don’t comply may face suspension of new work permits, limiting their ability to hire and expand their workforce.
    • Legal action can be taken against employers who fail to pay wages, including lawsuits from employees for unpaid salaries.

    Benefits of the WPS in UAE

    The WPS salary system in UAE offers several advantages for both employers and employees:

    1. Timely Salary Payments

    WPS ensures that employees receive their salaries on time, eliminating delays and reducing the risk of disputes related to payment schedules.

    2. Transparency and Accountability

    The system provides clear records of salary payments, creating transparency and helping both employers and employees track payments easily.

    3. Protection for Workers’ Rights

    WPS helps protect workers by ensuring they are paid as agreed in their contracts, preventing exploitation and non-payment of wages.

    4. Reduced Disputes

    By using a standardized, electronic payment system, WPS minimizes misunderstandings and conflicts over salary payments between employers and employees.

    5. Legal Compliance

    Employers comply with UAE labour laws by using the WPS, avoiding potential fines, legal action, and reputational damage.

    6. Improved Business Reputation

    Companies that adhere to WPS build trust with their employees, leading to a more positive work environment and improved reputation within the industry.

    Simplifying WPS Compliance with Expert Support

    The Wages Protection System (WPS) is essential for ensuring that employees in the UAE get paid on time and fairly. For employers, following WPS rules not only protects workers but also helps avoid penalties and maintain a good reputation. By using WPS, businesses can create a more transparent and positive work environment.

    To make sure everything runs smoothly, companies can rely on professional services like PRO and payroll services from Shuraa, which make it easier to manage WPS compliance. With expert help, businesses can stay on track and focus on their growth with peace of mind.

    Contact us today for personalised assistance: 

    📞 Call: +(971) 44081900  

    💬 WhatsApp: +(971) 508912062 

    📧 Email: info@shuraatax.com 

    Frequently Asked Questions

    1. What is WPS in UAE?

    WPS UAE is an electronic system that ensures employees are paid on time and fairly. It is regulated by the UAE government to monitor salary payments from employers to employees.

    2. How does WPS work?

    WPS works by electronically transferring salaries through an approved bank or financial institution. Employers submit employee salary details to the system, and payments are made directly to employees’ bank accounts.

    3. How to withdraw your salary from WPS UAE?

    Employees can withdraw their salary from any ATM or bank branch where their salary is deposited. The salary is transferred into the employee’s bank account through the WPS system.

    4. What is the minimum number of employees for WPS?

    Companies with ten or more employees must adhere to the WPS guidelines in the UAE.

    5. Can employees track their salary payments through WPS?

    Yes, employees can track their salary payments through the bank or financial institution where their wages are deposited.

  • How To Identify Performance Obligations in IFRS 15?

    How To Identify Performance Obligations in IFRS 15?

    Understanding how to recognize revenue correctly is important for businesses of all sizes. IFRS 15, Revenue from Contracts with Customers, is the global standard that helps companies report their revenue in a clear and consistent way.

    One of the key steps in this process is identifying performance obligations in a contract. Simply put, performance obligations are the promises a business makes to deliver goods or services to a customer. Getting this right is crucial because it affects when and how revenue is recorded. If businesses misidentify their performance obligations, it can lead to incorrect financial reports and compliance issues.

    IFRS 15 applies to businesses in various industries, from retail and software to construction and services. Accountants, finance teams, and business owners must understand how to properly identify performance obligations to ensure accurate reporting.

    So let us break down the process into simple steps to help you comply with IFRS 15 with ease.

    What are Performance Obligations in IFRS 15?

    A performance obligation is a promise a business makes to deliver goods or services to a customer as part of a contract. Under IFRS 15, companies must identify and account for each distinct obligation separately to ensure proper revenue recognition.

    A performance obligation can be:

    • A single product or service (e.g., selling a laptop).
    • A series of goods or services (e.g., a 12-month subscription).
    • A bundle of products and services (e.g., a phone with a service plan).

    To qualify as a separate performance obligation, a good or service must be:

    • Distinct – The customer can use it on its own or with readily available resources.
    • Separately Identifiable – It is not highly dependent on other contract elements.

    Properly identifying performance obligations is essential because it determines when and how revenue is recognized. IFRS 15 requires businesses to allocate revenue based on these obligations, ensuring that financial reports accurately reflect their earnings.

    Steps to Identify Performance Obligations

    Identifying performance obligations is a crucial step in applying IFRS 15. Below is a step-by-step guide to help businesses identify the performance obligations in the contract:

    Step 1: Identify the Contract with a Customer

    Before identifying performance obligations, businesses must first determine if a valid contract exists under IFRS 15. A contract must meet the following criteria:

    • Approved by all parties (written, verbal, or implied)
    • Clearly defined rights and payment terms
    • Commercial substance (affects cash flows)
    • Probable that the entity will collect payment

    Step 2: Identify Distinct Goods or Services

    A performance obligation is a promise to transfer a distinct good or service to a customer. Businesses need to break down their contracts and identify these components.

    Meaning of ‘Distinct’ Goods or Services:

    A good or service is distinct if:

    • The customer can benefit from it on its own or with other readily available resources.
    • It is separately identifiable from other promises in the contract.

    How to Determine if a Good/Service is Distinct:

    • Standalone Capability – Can the customer use the good or service on its own?
    • Separability Criteria – Is it independent of other contract elements, or is it closely linked?

    If a good or service does not meet these criteria, it should be combined with other elements until a distinct performance obligation is formed.

    Step 3: Assess Whether Goods or Services Are Distinct Within the Context of the Contract

    Even if a good or service is distinct, businesses must evaluate whether it is distinct within the contract.

    Factors to Consider When Evaluating Distinct Performance Obligations:

    • Significant Integration – If multiple elements are highly integrated, they may not be distinct.
    • Modifications/Customizations – If one product or service significantly customizes another, they may be combined.
    • Interdependence – If the goods/services are highly dependent on each other, they should be considered a single obligation.

    Examples of Bundled and Unbundled Services:

    • Bundled: A software license sold with mandatory implementation services (both may be a single obligation).
    • Unbundled: A smartphone sold with an optional extended warranty (each is a separate obligation).

    Step 4: Consider Variable Consideration and Options for Additional Goods/Services

    Contracts often include additional components that can impact performance obligations.

    How Options, Loyalty Programs, and Warranties Affect Performance Obligations:

    • Options for Additional Goods/Services – If a customer has a future purchase option at a discount, it may be a separate performance obligation.
    • Loyalty Programs – Reward points that can be redeemed for future goods/services create an additional obligation.
    • Warranties – A standard warranty is usually not a separate obligation, but an extended service warranty may be.

    Treatment of Variable Consideration:

    • Some contracts include elements like discounts, refunds, performance bonuses, or penalties.
    • Businesses must estimate the amount of variable consideration and allocate it to the correct performance obligations.

    Examples of Identifying Performance Obligations in IFRS 15

    Understanding how to identify performance obligations in different industries can help businesses apply IFRS 15 correctly. Here are some practical examples:

    Example 1: Software Company Selling Licenses with Maintenance Services

    A software company sells a one-year software license along with ongoing technical support and updates.

    Identifying Performance Obligations:

    • The software license is a distinct good, as customers can use it independently.
    • The maintenance service (support & updates) is a separate service since it provides additional benefits beyond the initial purchase.

    Since both elements are distinct, the company should allocate the contract price between the software license and the maintenance service, recognizing revenue separately over time.

    Example 2: Construction Contracts with Multiple Deliverables

    A construction company signs a contract to build an office building, which includes:

    • Designing the project
    • Providing raw materials
    • Construction work

    Identifying Performance Obligations:

    • If the design phase is independent of construction, it could be a separate obligation.
    • If the materials are delivered separately and can be used by another contractor, they may be distinct.
    • If the construction work is highly integrated and dependent on the design and materials, it may be considered a single obligation.

    The company must assess whether each component is distinct. If the entire process is integrated, it is a single performance obligation, and revenue should be recognized progressively as work is completed.

    Example 3: Airline Ticket with Additional Services

    An airline sells a flight ticket that includes:

    • The base airfare
    • An optional baggage allowance
    • Lounge access for premium passengers

    Identifying Performance Obligations:

    • The flight service is a primary performance obligation.
    • The baggage allowance and lounge access are separate obligations if they are sold separately and provide additional benefits to the customer.

    The airline must allocate the total transaction price across each component and recognize revenue separately when each service is provided (e.g., baggage allowance when used, lounge access on the day of travel).

    Example 4: Hotel Offering Stay Packages with Additional Benefits

    A hotel sells a weekend package that includes:

    • A two-night stay
    • Breakfast and dinner
    • Spa access

    Identifying Performance Obligations:

    • The room stay is a distinct obligation.
    • Meals and spa access are additional obligations if they have separate value.

    The hotel should allocate the total price among these obligations and recognize revenue as each service is provided (e.g., room revenue per night, meal revenue per meal, and spa revenue when accessed).

    Get Professional Guidance Today

    Understanding and correctly identifying performance obligations under IFRS 15 is crucial for proper revenue recognition and financial reporting. By carefully reviewing contracts, determining distinct goods or services, and following the right steps, businesses can stay compliant and avoid financial errors.

    If you’re unsure about IFRS 15 or need expert guidance, Shuraa Tax is here to help! Our team can assist you in navigating the complexities of financial reporting and ensuring compliance with ease. Contact us today to get professional support tailored to your business needs.

    Contact us today for personalised assistance: 

    📞 Call: +(971) 44081900  

    💬 WhatsApp: +(971) 508912062 

    📧 Email: info@shuraatax.com 

  • Backlog Accounting Services in Dubai

    Backlog Accounting Services in Dubai

    Running a business in Dubai is exciting, but it can also be challenging to keep your financial records up to date. Many businesses, especially during busy times or periods of rapid growth, fall behind on managing their accounts. This is where backlog accounting services in Dubai can make a big difference.

    Backlog accounting in Dubai helps you organize and update all your past financial records, so they are accurate, complete, and ready for any audits or compliance checks. It’s a lifesaver for businesses that may have missed tracking expenses, VAT filings, or other important financial tasks.

    If you’re a startup, a growing business, or an established company, backlog accounting is essential if you’ve fallen behind on your finances. It helps you stay on top of legal requirements, gain a clear picture of your financial health, and make better business decisions.

    What is Backlog Accounting in Dubai?

    Backlog accounting is the process of organizing and updating a company’s financial records that have not been maintained for a specific period. It involves going back to reconstruct past transactions, ensuring all data is accurate, and bringing the books of accounts up to date.

    This service is especially critical for businesses in Dubai, where compliance with UAE laws and regulations, such as VAT filings, is mandatory.

    Common Causes of Financial Backlogs in Businesses

    1. Rapid Business Growth

    When a business grows quickly, managing finances often takes a backseat to other priorities like scaling operations or handling increased customer demand. This can lead to delayed financial tracking and missed record-keeping tasks.

    2. Lack of In-House Accounting Expertise

    Many small and medium-sized enterprises (SMEs) lack dedicated accounting teams or experienced accountants. This shortage of expertise can result in delayed record-keeping and missed financial updates.

    3. Inadequate Financial Tracking Systems

    Outdated or inefficient accounting software and processes can make it difficult to maintain accurate records, especially as transactions pile up over time.

    Why Backlog Accounting is Critical for Businesses in Dubai

    In Dubai’s highly regulated business environment, maintaining accurate financial records is more than just good practice—it’s a necessity. Here’s why backlog accounting is crucial for businesses operating in Dubai:

    1. Compliance with UAE Laws and Regulations

    The UAE has strict financial reporting and tax regulations, including VAT compliance and annual audits. Delayed or incomplete records can result in fines, penalties, and even legal complications. Backlog accounting in UAE helps businesses update their financial records to ensure they meet all regulatory requirements.

    2. Accurate VAT Filing and Reporting

    Since the introduction of VAT in the UAE, timely and accurate filing has become essential. Backlog accounting in Dubai ensures that all past transactions are recorded properly, allowing businesses to file accurate VAT returns and avoid penalties for missed or incorrect filings.

    3. Clear Financial Insights for Better Decisions

    Incomplete financial records can leave business owners in the dark about their company’s financial health. Backlog accounting organizes past data, providing clarity on cash flow, profitability, and expenses. This enables better decision-making and long-term planning.

    4. Attracting Investors and Securing Loans

    Investors and lenders require detailed and accurate financial statements before providing funding. Businesses with backlogs might struggle to present the necessary data. Clearing backlogs ensures your financial records are audit-ready, making it easier to attract investments or secure business loans.

    5. Smooth Business Operations

    Financial backlogs can disrupt daily operations, causing confusion in cash flow management and budgeting. Addressing these gaps with backlog accounting services ensures that businesses can operate smoothly without financial uncertainty.

    What is a Backlog Accounting Service in Dubai?

    Backlog accounting service in Dubai is a professional solution designed to help businesses organize, update, and reconcile financial records that have fallen behind. Whether due to rapid growth, lack of expertise, or other operational challenges, backlog accounting services ensure that all past transactions are accurately recorded and aligned with UAE regulatory standards, such as VAT compliance.

    These services are critical for maintaining financial transparency, avoiding penalties, and preparing for audits or investor reviews.

    Types of Backlog Accounting Services in Dubai

    Backlog accounting services can be tailored to meet the specific needs of different businesses. Here are some common types:

    1. Data Entry and Reconciliation

    This involves processing and recording all outstanding financial transactions, including invoices, receipts, bank statements, and other financial documents. It also includes reconciling bank accounts and other financial records to identify and resolve discrepancies.

    2. Sales Backlog Accounting

    This focuses specifically on managing and processing outstanding sales orders or contracts that have not yet been fulfilled or invoiced. This may include tracking open sales orders, recognizing revenue accurately based on delivery or completion milestones, and reconciling sales data with inventory and shipping records.

    3. Purchase Backlog Accounting

    This deals with outstanding purchase orders or commitments that have not yet been received or paid for. This typically involves tracking open purchase orders, matching purchase orders with invoices and receiving reports, and accruing expenses related to outstanding purchase commitments.

    4. Clean-up of Chart of Accounts

    This involves reviewing and reorganizing a company’s chart of accounts to ensure it is structured logically and efficiently for accurate financial reporting.

    5. VAT Backlog Processing

    This focuses on addressing backlogs related to Value Added Tax (VAT) compliance, including processing outstanding VAT invoices, calculating VAT liabilities, and preparing VAT returns.

    6. Work In Progress (WIP) Backlog Accounting

    This is particularly relevant for manufacturing and construction businesses. It focuses on tracking the costs and progress of unfinished projects or products.

    Benefits of Backlog Accounting Services in UAE

    Backlog accounting services in UAE offer several key benefits to businesses operating in the emirates:

    1. Corrected Financial Statements

    Backlog accounting services ensure that financial statements (income statements, balance sheets, cash flow statements) are accurate and reflect the true financial position of the business.

    2. Reduced Errors and Discrepancies

    By systematically processing outstanding transactions and reconciling accounts, these services minimize errors and discrepancies in financial records, leading to more reliable financial data.

    3. Improved Cash Flow Management

    It helps identify overdue payments and outstanding receivables, improving cash flow tracking. Enables better budgeting and resource allocation for future business growth.

    4. Reduced Administrative Burden

    Outsourcing backlog accounting services frees up internal resources and reduces the administrative burden on staff, allowing them to focus on core business activities.

    5. VAT Compliance

    With the introduction of VAT in the UAE, backlog accounting services are essential for ensuring accurate VAT calculations, reporting, and compliance with tax laws.

    How Shuraa Can Help with Backlog Accounting Services

    Shuraa Tax is a trusted name in Dubai when it comes to providing expert accounting and tax services including Backlog Accounting in Dubai. We specialize in handling complex financial backlogs with precision and efficiency. Our team of qualified accountants and tax consultants has extensive knowledge of UAE regulations, ensuring that your financial records are updated in line with local laws and compliance requirements.

    We offer comprehensive support throughout the backlog accounting process:

    • Reconstructing financial records with accuracy.
    • Reconciling bank statements, sales, and purchase accounts.
    • Updating VAT filings and preparing audit-ready statements.
    • Resolving any past compliance issues to avoid penalties or fines.

    Our goal is to not only clear your backlogs but also to streamline your accounting systems for future success. By partnering with Shuraa, businesses can overcome their financial challenges and gain clarity, compliance, and confidence in their operations.

    For expert guidance on Backlog Accounting Services in Dubai, Call us at +97144081900 or WhatsApp Us at +971508912062. You can also drop an email at  info@shuraatax.com.

    Frequently Asked Questions

    1. Can backlog accounting help with overdue VAT filings?

    Yes, backlog accounting in UAE can assist in filing overdue VAT returns by ensuring all past transactions are accurately recorded and reconciled. This helps businesses comply with UAE VAT regulations and avoid penalties.

    2. How much does backlog accounting cost in Dubai?

    The cost of backlog accounting services in UAE or Dubai varies depending on the complexity and volume of the backlog, the size of the business, and the specific services required. It’s best to consult with an accounting firm like Shuraa Tax for a tailored quote based on your unique needs.

    3. Why is backlog accounting important for businesses in Dubai?

    Backlog accounting is essential for ensuring compliance with UAE regulations, maintaining accurate financial records, and preventing penalties. It also provides clear financial insights for better decision-making and supports audit readiness.

    4. What documents are needed for backlog accounting services in Dubai?

    Common documents required include bank statements, invoices, receipts, financial reports, tax returns, and any other records of transactions during the backlog period. Professional accountants can guide you through the documentation process to ensure nothing is missed.

  • Understanding UAE Corporate Tax Exemptions

    Understanding UAE Corporate Tax Exemptions

    The UAE has always been a favourite destination for businesses and investors because of its tax-friendly environment and strong economy. For years, businesses have thrived without worrying about corporate taxes. However, with the recent introduction of corporate tax, things have changed slightly to align with global standards and support the country’s growing economy. 

    The good news? Not all businesses need to pay corporate tax. The UAE government has introduced various exemptions to support free zones, government entities, and other qualifying businesses. 

    If you’re running a business in the UAE, understanding these exemptions can help you save money, stay compliant, and make the most of what the UAE has to offer. 

    So, let’s break down everything you need to know about UAE corporate tax exemptions, including who qualifies, what the rules are, and how your business can benefit. 

    What is Corporate Tax in the UAE?

    Corporate tax, also known as business profits tax, is a form of direct tax applied to the profits earned by businesses. In the UAE, corporate tax was introduced to align with global tax practices, promote transparency, and support the country’s economic development goals. 

    1. UAE Corporate Tax Rates:

    • 0%: For taxable income up to AED 375,000. 
    • 9%: For taxable income exceeding AED 375,000. 

    2. Taxable Income:

    Corporate tax applies to the net profits of businesses, taking into account allowable deductions and expenses. 

    3. Exemptions and Incentives:

    Certain entities and activities are exempt from corporate tax, including: 

    • Qualifying Free Zone Persons (QFZPs) engaged in qualifying activities.    
    • Income derived from international trade. 
    • Income from the extraction and export of natural resources. 
    • Income from specific financial services. 

    4. Who is Subject to Corporate Tax?

    Corporate tax applies to: 

    • UAE-based businesses operating on the mainland. 
    • Free zone businesses earning taxable income outside of qualifying activities. 
    • Foreign businesses with a permanent establishment in the UAE. 

    Corporate Tax Exemption in the UAE

    UAE Corporate tax exemption refers to the legal exclusion of certain businesses or entities from paying corporate tax on their profits. This exemption is granted based on eligibility criteria, such as the type of business activity, location, or ownership structure. 

    Entities That Can Benefit from Tax Exemptions in UAE

    • Free Zone Businesses: Businesses in free zones with qualifying activities and adherence to economic substance regulations. 
    • Government Entities: Non-commercial entities owned or operated by the government. 
    • Charitable and Non-Profit Organizations: Organizations providing public benefit activities and approved by the Federal Tax Authority (FTA). 
    • Investment Funds: Funds involved in collective investment schemes, subject to specific criteria. 
    • Small and Medium Enterprises (SMEs): Entities below a certain profit threshold. 

    Who Qualifies for UAE Tax Exemption?

    Businesses or entities that qualify for corporate tax exemption in the UAE include: 

    1. Businesses in Designated Free Zones

    Free zone entities can qualify for a 0% corporate tax rate on income from eligible activities. 

    Qualifying Conditions:

    • They must maintain economic substance requirements, such as having physical office space and relevant resources. 
    • Revenue must stem from permitted activities like manufacturing, services, or logistics. 
    • Compliance with regulations issued by the UAE Ministry of Finance is mandatory. 
    • Any income derived from mainland UAE may be subject to regular corporate tax rates unless it meets specific exemptions. 

    2. Government Entities

    UAE government departments, agencies, and other entities engaged in sovereign functions are exempt from corporate tax. Activities conducted in the public interest fall within this exemption. 

    3. Government-Controlled Entities

    Companies wholly owned by the government that undertake mandated projects or activities are often exempt. 

    4. Extractive Natural Resource Businesses

    Companies involved in oil, gas, and other mineral extraction activities. However, this exemption applies only if they are subject to Emirate-level taxation on their extractive income. 

    5. Non-Extractive Natural Resource Businesses

    These include operations related to the processing, transportation, or refining of natural resources. They may qualify for exemptions if they meet specific regulatory requirements. 

    6. Charities and Public Benefit Organizations

    Non-profit organizations that are officially registered as charities or public benefit entities in the UAE and meet specific criteria. They must not engage in unrelated commercial activities beyond incidental income. 

    7. Small Businesses (Income Below AED 375,000)

    Businesses earning less than AED 375,000 in taxable income are exempt from corporate tax. This exemption supports SMEs, ensuring smaller enterprises can grow without a heavy tax burden. Such businesses must still file returns but won’t be taxed if their income stays under this threshold. 

    8. Investment Funds

    Funds like Real Estate Investment Trusts (REITs) and qualifying investment vehicles are often exempt. They must meet conditions like transparency, beneficial ownership, and regulatory compliance. 

    9. Personal and Individual Income

    Salaries, dividends, capital gains, and other personal income unrelated to business activities remain untaxed. This ensures that individuals are not subjected to corporate tax unless engaging in business activities. 

    Documents Required to Apply for Corporate Tax Exemptions in the UAE

    To apply for UAE corporate tax exemptions, businesses typically need to submit the following documents: 

    • Certificate of Incorporation 
    • Trade license 
    • Audited financial statements 
    • Proof of income 
    • Proof of eligibility (Free zone status, government ownership, or charitable purpose) 
    • Other relevant documents (as required by the tax authorities) 

    How to Apply for Corporate Tax Exemption in UAE?

    Applying for UAE corporate tax exemptions involves a clear process that ensures eligible businesses and entities can benefit from the exemptions while staying compliant with the country’s tax regulations. Here’s a step-by-step guide: 

    1. Determine Eligibility

    Before starting the application process, confirm if your business qualifies for a corporate tax exemption. Eligibility depends on factors such as: 

    • Business type (e.g., free zone entity, charitable organization). 
    • Activities undertaken by the business. 
    • Ownership structure (e.g., government-owned). 

    2. Register with the Federal Tax Authority (FTA)

    All businesses in the UAE, including those eligible for tax exemption, must register with the FTA. Complete the corporate tax registration process online through the FTA portal. Submit the required details and documents as part of the registration. 

    3. Submit an Application for Exemption

    After registration, submit a formal application for corporate tax exemption through the FTA portal or the relevant free zone authority. Ensure your application includes: 

    • All supporting documents. 
    • A detailed explanation of your business activities and how they align with exemption criteria. 

    4. Review and Approval

    Once submitted, the FTA or the respective authority will review your application. The review process typically involves verification of documents and evaluation of compliance with regulations. 

    5. Receive Confirmation of Exemption

    If approved, you will receive confirmation of your corporate tax-exempt status. Retain this document as it may be required for future compliance checks or renewals. 

    6. Maintain Compliance

    To retain your tax-exempt status, ensure: 

    • Regular submission of audited financial statements. 
    • Adherence to economic substance regulations, if applicable. 
    • Prompt reporting of any changes in business structure or activities. 

    Maximize Savings with Shuraa Tax

    Understanding UAE corporate tax exemptions can make a big difference for your business. These exemptions help you save money, stay competitive, and focus on growing your company in one of the world’s most business-friendly environments. 

    If you think your business might qualify for a corporate tax exemption, now is the time to explore your options. Taking advantage of these exemptions can help you cut costs and keep your operations smooth and compliant. 

    At Shuraa Tax, we’re here to make the process easy for you. Our team of friendly and experienced accountants, auditors, and tax advisors can guide you through every step—from checking your eligibility to filing the paperwork and staying compliant. 

    Let us handle the tax side of things so you can focus on running your business. Contact Shuraa Tax today at +971 508912062 or info@shuraatax.com, and we’ll help you get started. 

  • Identifying a Contract with a Customer (IFRS 15) in UAE

    Identifying a Contract with a Customer (IFRS 15) in UAE

    In today’s fast-changing business world, it’s essential for companies to report their earnings clearly and accurately. One key way to do this is by following IFRS 15: Revenue from Contracts with Customers, a global standard for recognizing revenue. IFRS 15 standard helps businesses know when and how to recognize the money they earn from contracts with their customers.

    A big part of IFRS 15 is understanding contract identification, the first step in figuring out when a business should start recognizing revenue. For businesses in the UAE, knowing how to identify a contract correctly is essential for staying on the right side of the law and maintaining good financial practices. As companies in the UAE grow and expand, it’s increasingly important to follow IFRS 15 to avoid potential problems and keep financial records accurate.

    Let’s understand why complying with the International Financial Reporting Standard (IFRS) 15 is becoming a must for businesses in the UAE.

    What is IFRS 15?

    IFRS 15 is an international accounting standard that sets out how and when to recognize revenue from contracts with customers. It was developed by the International Accounting Standards Board (IASB) and became effective on January 1, 2018. The goal of IFRS 15 is to provide a clearer and more consistent way for businesses to recognize revenue across different industries and regions.

    The primary objectives of IFRS 15 are:

    1. To enhance comparability of revenue recognition practices across different industries and jurisdictions.
    2. To enhance the transparency of financial reporting by providing clear guidance on how to recognize revenue.
    3. To reduce diversity in revenue recognition practices and improve consistency in financial reporting.
    4. To improve the relevance of financial information by reflecting the transfer of promised goods or services to customers in a manner that is economically significant.

    Industries Most Affected by IFRS 15 in the UAE

    Several industries in the UAE are significantly impacted by the implementation of IFRS 15, including:

    • Telecommunications: Complex contracts with various services, including voice, data, and broadband.
    • Construction: Long-term contracts with multiple phases and revenue recognition over time.
    • Technology and Software: Licensing, subscription, and maintenance revenue models.
    • Retail: Sales, warranties, and loyalty programs.
    • Real Estate: Property sales, leasing, and development projects.

    Key Principles Governing Revenue Recognition (Five-Step Model)

    IFRS 15 introduces the following five-step model to recognize revenue:

    1. Identify the Contract(s) with a Customer

    A contract must be legally enforceable and approved by both parties, with clear rights, payment terms, and obligations.

    Example: You run a consultancy service provider. When a client signs a contract for advisory services, that contract outlines what services you’ll provide and what the client will pay.

    2. Identify the Performance Obligations in the Contract

    A performance obligation is a promise to transfer a good or service to the customer. This step involves identifying each distinct good or service that must be delivered.

    Example: In the consultancy contract, you promise to provide Accounting, AML & Banking Services. Each of these tasks is a separate performance obligation.

    3. Determine the Transaction Price

    The transaction price is the amount the company expects to receive for the transfer of goods or services. It may include variable amounts such as discounts, rebates, or performance bonuses.

    4. Allocate the Transaction Price to Performance Obligations

    If the contract involves multiple goods or services, the total transaction price must be allocated to each performance obligation based on its relative stand-alone selling price.

    Example: If Accounting typically costs AED 2,000, AML is AED 1,500, and Banking is AED 1,500, you allocate the AED 5,000 transaction price accordingly based on the services provided.

    5. Recognize Revenue when (or as) the Performance Obligation is Satisfied

    Revenue is recognized when the company transfers control of the good or service to the customer, either at a point in time or over time, depending on the terms of the contract.

    Criteria for Identifying a Contract under IFRS 15

    To identify a contract with a customer under IFRS 15, businesses must ensure that the agreement meets five specific criteria:

    1. Approval and Commitment: Agreement Between Parties

    Both parties must approve and commit to the contract’s terms, whether in writing, verbally, or implied by actions. A clear, mutual agreement is required for the contract to be enforceable.

    2. Rights to Goods or Services: Identifiable Obligations

    The contract must clearly define what goods or services are being provided. Both the business and the customer should know what is expected from each party.

    3. Payment Terms: Clearly Defined Consideration

    The contract must specify the payment amount and schedule. This ensures the business knows how much and when it will be paid for the goods or services.

    4. Commercial Substance: Expected Impact on Cash Flows

    The contract must have commercial substance, meaning it affects the company’s financial position or cash flow in a meaningful way.

    5. Collectability: Probable Collection of Consideration

    The business must expect to collect the agreed payment from the customer. If there’s doubt about the customer’s ability to pay, the contract may not meet the criteria.

    Practical Steps for Contract Identification in the UAE

    To comply with IFRS 15 in the UAE, businesses must:

    1. Analyzing Contracts in Various Sectors

    Analyze sector-specific contracts (real estate, retail, construction) for clear performance obligations. For instance,

    • Real estate contracts, like property sales or leases, should clearly define performance obligations (e.g., property delivery or maintenance) and when revenue can be recognized.
    • Retail contracts, such as single sales or supply agreements, need to outline the delivery of goods and post-sale services to determine revenue recognition timing.
    • Construction contracts, often long-term, should break down milestones and tasks to recognize revenue as work progresses.

    2. Dealing with Verbal and Informal Contracts

    In the UAE, verbal agreements are common. For these:

    • Ensure mutual understanding of terms, including payment and obligations.
    • Document verbal agreements in writing (e.g., email) to clarify performance obligations and payments.
    • Be cautious, as informal contracts may lack the necessary detail for IFRS 15 compliance.

    3. Contracts with Government Entities

    Government contracts in the UAE often have specific terms and regulations. When dealing with these:

    • Understand special terms such as payment schedules and milestones.
    • Ensure the contract meets IFRS 15 criteria, especially regarding collectability and commercial substance.
    • Identify performance obligations related to public service or regulatory requirements.

    Read Also: IFRS Advisory Services in UAE

    How Can UAE Businesses Stay Compliant with IFRS 15?

    Compliance with IFRS 15 is crucial for UAE businesses to ensure accurate financial reporting and avoid regulatory penalties. Experienced auditors and accountants play a vital role in helping businesses implement IFRS 15. They:

    • Review contracts to ensure all performance obligations and revenue recognition criteria are met.
    • Provide guidance on accounting treatments for complex transactions.
    • Conduct regular audits to verify compliance with IFRS 15 and other accounting standards.

    Non-compliance with IFRS 15 in UAE can lead to significant penalties, including:

    • Fines imposed by regulatory authorities.
    • Reputational damage and loss of investor trust.
    • Legal consequences if financial misstatements result in disputes or fraud claims.

    How Shuraa Tax Can Help

    Professional services from Shuraa Tax ensure seamless IFRS 15 implementation. Shuraa tax offers:

    • Expert analysis of contracts and advice on revenue recognition.
    • Customized solutions for IFRS compliance tailored to specific industries.
    • Ongoing support to update accounting practices in line with regulatory changes in the UAE.

    Trusted audit firms like Shuraa Tax can make the process easier. From reviewing contracts to aligning with UAE regulations, our professional services ensure smooth implementation and help you avoid penalties. Let Shuraa handle the complexities, get in touch today at +971 508912062 or info@shuraatax.com.

  • VAT on Commercial Property in the UAE

    VAT on Commercial Property in the UAE

    Understanding VAT on Commercial Property in UAE is essential for businesses and property investors operating the UAE’s real estate market. The UAE’s introduction of Value Added Tax (VAT) 2018 significantly changed commercial real estate transactions. VAT is now applicable on the sale, lease, and particular services related to commercial properties.

    Let’s break down the basics, making it easy to grasp how VAT affects commercial property dealings, the registration process, and the responsibilities of property owners and tenants.

    What is VAT Registration in the UAE?

    VAT registration is the process that allows businesses to legally collect VAT on taxable goods and services on behalf of the UAE government. Commercial property transactions fall under the VAT regulations and attract a 5% VAT rate. Businesses need to register for VAT if they meet the turnover threshold requirements.

    Types of VAT Registration

    There are mainly two types of VAT registration in UAE, they are as follows:

    1. Mandatory Registration: Required if a business’s taxable supplies exceed AED 375,000 annually.
    2. Voluntary Registration: Available for businesses with taxable supplies or expenses above AED 187,500 annually but below the mandatory threshold.

    Understanding Commercial Property for VAT Purposes

    In the UAE, commercial property refers to any property not intended for residential use. Examples include offices, shops, hotels, warehouses, and factories. Unlike residential property, which is typically VAT-exempt or zero-rated. VAT on commercial property in UAE applies to both sales and leases which makes it crucial for owners and tenants to understand their obligations.

    VAT-Applicable Transactions on Commercial Property

    Understanding VAT on commercial property transactions is essential for businesses to ensure compliance and avoid unexpected costs.

    1. Sales and Leases: Both the sale and lease of commercial property are subject to VAT at 5%.
    2. Related Services: Maintenance, utility charges, and real estate agent fees associated with commercial property also attract VAT.

    VAT on the Lease of Commercial Property in UAE

    Landlords must charge 5% VAT on rent when leasing commercial real estate. The VAT cost typically falls on the tenant, who pays it on top of the rent. For example, if annual rent is AED 200,000, an additional AED 10,000 (5%) would be charged as VAT.

    VAT Registration Requirements for Landlords

    Landlords who lease commercial properties must register for VAT if their taxable income (including rent and related services) exceeds AED 375,000 within the last 12 months. Registered landlords can also recover VAT on associated expenses, such as maintenance and utilities.

    VAT Payment Process for Buying Commercial Real Estate in UAE

    Purchasing commercial real estate in the UAE involves a specific VAT payment process. For transactions involving a commercial property sold by a supplier other than the developer, the buyer must pay the VAT directly to the Federal Tax Authority (FTA) before completing the ownership transfer at the Land Department.

    Steps for VAT Payment on Commercial Property

    The steps for VAT payment on commercial property are as follows:

    1. The buyer pays the 5% VAT to the FTA.
    2. The buyer receives a Payment Transaction Number as proof upon payment.
    3. The buyer provides this to the Land Department to complete the transfer.

    VAT Deregistration for Commercial Properties

    VAT deregistration allows businesses to cancel their VAT registration with the FTA when they no longer meet registration requirements. For example:

    1. A business’s taxable supplies or expenses fall below AED 187,500 annually.
    2. They cease taxable activities.

    To avoid penalties, businesses must apply for deregistration within 20 business days from the qualifying date. All tax dues and returns should be settled before applying.

     Obligations of Commercial Property Owners and Tenants

    Owners and tenants of commercial property have specific responsibilities under UAE VAT law:

    1. VAT Registration: Owners of non-residential buildings must register if taxable supplies exceed AED 375,000 annually.
    2. Record-Keeping: All transaction documents must be maintained for at least five years.
    3. Filing VAT Returns: VAT-registered owners must file tax returns regularly and settle any VAT due.

    How Shuraa Tax Can Help with VAT on Commercial Property in UAE

    Navigating VAT regulations for commercial properties can be complex, but Shuraa Tax provides expertise to simplify compliance. Our experienced team assists with VAT registration, compliance, and deregistration, helping you avoid potential penalties.

    Contact Shuraa Tax today for assistance on VAT obligations related to commercial property in the UAE:

    +971 508912062

    info@shuraatax.com

    FAQs

    Q1. Is VAT applicable on rent-free periods?

    Yes, VAT applies to the entire lease value, even with rent-free incentives. It is calculated based on the total lease term.

    Q2. Can tenants recover VAT paid on rent?

    If the tenant is VAT-registered and uses the property solely for business, they may recover the VAT paid as input tax.

    Q3. What VAT rate applies to mixed-use buildings?

    For mixed-use buildings, VAT is charged proportionally based on the commercial portion of the property.

    Q4. Do landlords need to register for VAT?

    Landlords must register if their taxable supplies, including rental income, exceed AED 375,000 annually.

    Q5. Are there penalties for non-registration?

    Yes, failure to register on time can lead to fines, so timely compliance with VAT obligations is essential.

  • Feasibility Study Company in Dubai, UAE (2026) 

    Feasibility Study Company in Dubai, UAE (2026) 

    Planning to start a business? One of the most important steps is consulting a feasibility study company in Dubai. A feasibility study is a detailed assessment that helps you understand if your business idea is practical and profitable. It looks at things like market demand, costs, technical requirements, and legal regulations, giving you a clear picture of whether your business can succeed. 

    By identifying opportunities and potential challenges early on, a feasibility study helps you make smart decisions, use your resources wisely, and reduce risks. 

    Dubai is a top destination for businesses and investors worldwide. Its strategic location, modern infrastructure, and business-friendly policies make it a great place for businesses of all kinds. However, with a competitive market and specific regulations, it’s important to have a local expert guide you through the process. Working with a feasibility study company in Dubai ensures you get accurate insights about the market, legal requirements, and financial aspects, helping you prepare and set up your business for success. 

    What is a Feasibility Study in Dubai, UAE? 

    A feasibility study is an in-depth analysis that evaluates the practicality and potential success of a business idea or project. Conducting a feasibility study in Dubai is an essential step for entrepreneurs and investors looking to establish a new venture. The purpose of this study is to determine whether the business concept is viable, taking into account various factors that could influence its success. 

    Key Components of a Feasibility Study

    1. Market Analysis

    • Assessing the size of the target market and its projected growth rate.
    • Understanding the specific needs and preferences of potential customers.
    • Analyzing the competition and their strengths and weaknesses.
    • Identifying emerging trends and opportunities within the industry. 

    2. Financial Analysis 

    • Estimates the total investment required, including initial capital and operating costs.
    • Projects potential revenue, profit margins, and return on investment (ROI).
    • Conducts a break-even analysis to determine how long it will take to become profitable.

    3. Technical Feasibility

    • Identifying the necessary technology and infrastructure.
    • Assessing the availability of resources (e.g., manpower, equipment).
    • Evaluating the project’s potential for efficient operations.

    4. Legal and Regulatory Considerations

    • Reviews UAE’s business laws and regulations relevant to the business type.
    • Assesses licensing requirements, permits, and industry-specific regulations.
    • Ensures compliance with local, national, and international standards to avoid legal issues.

    Why Choose a Feasibility Study Company in Dubai? 

    Choosing a feasibility study company in Dubai is a smart move for entrepreneurs and investors aiming to launch a business in this dynamic market. Here’s why partnering with a professional feasibility company can make a significant difference: 

    1. Local Market Expertise

    A feasibility study company in Dubai has in-depth knowledge of the local market, including industry trends, customer behavior, and competitive dynamics. With access to reliable data sources and market insights, these companies provide accurate and up-to-date information to help you make informed decisions.

    2. Tailored Solutions 

    A local feasibility study company can provide tailored solutions based on your unique business objectives and the specific context of the Dubai market. They can ensure that the study aligns with local cultural norms and expectations. 

    3. Time and Cost Efficiency

    Conducting a feasibility study on your own can be time-consuming and may lead to inaccurate results if you lack local knowledge and resources. A feasibility study company in Dubai streamlines the process, allowing you to focus on other critical aspects of your business while ensuring the study is conducted efficiently and professionally. 

    4. Strategic Planning and Risk Mitigation  

    A professional company not only provides a feasibility study but also offers strategic advice based on the findings. This support helps you develop a well-structured business plan, minimizing risks and maximizing opportunities. 

    5. Post-Study Support 

    After completing the feasibility study, many companies offer ongoing support and consulting services, helping you implement the recommendations and navigate the next steps. 

    6. Enhanced Credibility with Investors and Stakeholders 

    A comprehensive and professionally conducted feasibility study adds credibility to your business proposal when seeking investors or partnerships. It demonstrates that you have taken a thorough, data-driven approach to assess your business idea. 

    7. Regulatory Compliance and Licensing Support 

    A professional feasibility study company ensures that your business plan aligns with local requirements and guides you through the licensing process, minimizing the risk of legal issues. 

    How to Conduct a Feasibility Study in Dubai? 

    When you engage a feasibility study company in Dubai, they follow a structured approach to evaluate your business idea comprehensively. Here’s how they typically conduct a feasibility study: 

    1. Understanding the Business Concept 

    The process begins with a meeting to discuss your business idea, objectives, and specific needs. The company seeks to understand what you aim to achieve with your business, including target markets and potential products or services. 

    2. Market Research 

    The company conducts thorough research to analyze market trends, customer preferences, and overall demand for your products or services. They define the demographics, psychographics, and buying behaviors of potential customers to understand market segments better. The feasibility study team assesses key competitors, their market positions, strengths, and weaknesses. 

    3. Technical Feasibility Assessment 

    The company identifies all necessary resources, including technology, equipment, and personnel, to operate your business effectively. They evaluate potential locations in Dubai based on factors such as accessibility, costs, and proximity to target customers and suppliers. The team investigates potential suppliers and partners to ensure reliable sources for essential materials and services. 

    4. Detailed Financial Analysis 

    The company calculates all initial costs, including setup expenses, licenses, permits, and operational overheads. They create detailed forecasts of revenue, expenses, and profitability over a defined period (usually three to five years). 

    5. Legal and Regulatory Evaluation

    The company conducts research on the legal requirements for starting and operating a business in Dubai. They provide insights on necessary licenses, permits, and regulations, ensuring your business plan aligns with UAE laws. 

     6. Analyzing Findings and Generating Recommendations 

    The company gathers all research and analysis into a comprehensive feasibility report, detailing their findings and assessments. Based on the study’s findings, the feasibility study company outlines practical recommendations for moving forward. 

    7. Business Plan Development 

    With insights from the feasibility study, the company assists you in developing a detailed business plan that includes strategies, goals, and financial forecasts. 

    8. Continuous Support and Consultation 

    How to Get the Best Feasibility Services in Dubai, UAE? 

    Shuraa Tax is a leading provider of tax and consultancy services in the UAE. With over two decades of experience, Shuraa has established itself as a trusted partner for entrepreneurs and businesses looking to understand the complexities of setting up and operating in Dubai and the wider UAE. 

    Our team at Shuraa Tax comprises qualified tax agents, accountants, auditors, and finance advisors who are well-versed in local regulations, industry standards, and market dynamics. Our expertise allows us to offer tailored solutions that meet the unique needs of businesses across various sectors, ensuring compliance while maximizing growth opportunities. 

    Our expertise encompasses various tax-related matters, including: 

    • Corporate tax: Advising on corporate tax compliance, planning, and optimization. 
    • Transfer pricing: Conducting transfer pricing studies and ensuring compliance with international transfer pricing regulations. 
    • Tax dispute resolution: Representing clients in tax disputes and negotiations with tax authorities. 
    • Expatriate tax: Providing tax advice to expatriates working or living in the UAE. 

    Shuraa Tax also assists you to get the best feasibility study services in Dubai to help businesses assess the tax implications of their proposed projects or ventures in the UAE. This includes: 

    • Tax impact analysis 
    • Structuring advice 
    • Tax planning 
    • Cost-benefit analysis 
    • Compliance assessment 
    • Risk assessment 
    • Post-Study support 

    Partner with Shuraa for a Bright Business Future in Dubai 

    In today’s competitive world, conducting a feasibility study and understanding UAE taxation system is essential for any business looking to succeed in Dubai. These essentials steps help you understand if your business idea is practical and provide insights into market trends, financial expectations, and legal requirements.  

    Shuraa knows how challenging it can be to start and grow a business in Dubai. Our team of experts is here to provide you with accurate and comprehensive taxation services tailored to your specific needs. By working with us, you’ll benefit from our deep understanding of the local market, which helps you make informed business decisions. Our comprehensive taxation services include VAT, corporate tax, bookkeeping, accounting, excise, etc. 

    Contact us today at +971508912062 or email us at info@shuraatax.com to start your journey toward a successful business in this exciting market. 

    Frequently Asked Questions 

    1. How long does a feasibility study typically take in Dubai? 

    The duration of a feasibility study in Dubai can vary depending on the complexity of the project and the amount of data required. However, a typical study may take anywhere from 4 to 8 weeks to complete. 

    2. Does a feasibility study help start-up companies in Dubai? 

    Yes! A feasibility study is crucial for start-ups as it assesses the viability of business ideas, identifies potential challenges, and helps entrepreneurs make informed decisions. 

    3. Why choose a feasibility study company in Dubai? 

    Choosing a local feasibility study company ensures expert guidance tailored to the UAE market. They understand local regulations, market dynamics, and consumer behavior, helping you navigate challenges effectively. 

    4. How much does a feasibility study cost in Dubai? 

    Costs vary based on the project’s scope but generally range from a few thousand to tens of thousands of dirhams. At Shuraa, we help you get the competitive pricing that suits your budget. 

    5. Can I conduct a feasibility study on my own? 

    While possible, conducting a feasibility study on your own can be challenging. Professional companies have the expertise and resources for more accurate insights. 

    6. How are feasibility studies conducted in Dubai? 

    Feasibility studies in Dubai typically begin with an initial assessment to outline the project plan and evaluate its goals. A projected financial overview, including potential income and expenses, is prepared. This is followed by detailed market research to gather relevant data about industry conditions and customer demand. 

    Read More

     

  • Understanding VAT Reimbursement and Disbursement in the UAE: A Comprehensive Guide 

    Understanding VAT Reimbursement and Disbursement in the UAE: A Comprehensive Guide 

    Value Added Tax (VAT) has become an integral part of the UAE’s tax system since its introduction in 2018. It affects both businesses and individuals, so it’s important for everyone to understand how it works. Two important parts of VAT are reimbursement and disbursement—these processes help people manage their tax payments and stay compliant with the law. 

    In simple terms, VAT reimbursement allows businesses and eligible individuals to recover VAT paid on expenses related to their operations, while VAT disbursement involves recovering exact amounts paid on behalf of clients without additional VAT charges. 

    If you’re a business owner looking for a tax refund or an individual eligible for VAT reimbursement on expenses in the UAE, knowing these processes is essential. A Shuraa tax, we will assist you through everything you need to know about VAT reimbursement and disbursement in the UAE, so you can handle them easily and stay on the right side of the rules.

    VAT Reimbursement in the UAE

    VAT reimbursement in the UAE is a process whereby businesses and individuals can claim a refund of the Value-Added Tax (VAT) they have paid. This is typically applicable when the VAT paid is not recoverable as input tax against taxable supplies or when a surplus of input tax exists. 

    Eligibility Criteria for VAT Reimbursement

    Several types of entities may be eligible to claim VAT reimbursement in the UAE:

    Businesses

    Companies registered for VAT in the UAE have paid VAT on business-related expenses, such as office supplies, rent, and professional services. 

    Tourists

    Non-UAE residents who have purchased goods from VAT-registered retailers wish to claim VAT refunds when exiting the country. 

    Learn more about how you can claim VAT refund in Dubai as a tourist: VAT Refund in Dubai for Tourists  

    Government Entities and Diplomatic Missions

    Some government bodies and diplomatic missions may be eligible for VAT refunds on purchases made in the UAE. 

    Foreign Businesses

    Under certain conditions, foreign companies with no business presence in the UAE can also reclaim VAT incurred on expenses during their operations in the UAE. 

    Generally, to be eligible for a VAT refund: 

    • The VAT must have been paid on eligible business expenses. 
    • The entity must be registered for VAT with the FTA and have an active VAT number. 

    The claim should be submitted within the set time frame and accompanied by proper documentation, such as receipts and invoices. 

    Common Scenarios Leading to VAT Reimbursement Claims

    VAT reimbursement claims are typically made in several scenarios, including:  

    1. Business Purchases

    Companies reclaim VAT on eligible expenses like office rent, utilities, equipment purchases, marketing services, and other operational costs.

    2. Tourist Refunds  

    Tourists shopping in the UAE can claim back VAT on goods purchased from registered retailers when they leave the country through designated refund points.

    3. Conferences and Events 

    Businesses participating in exhibitions, conferences, or business events in the UAE can claim VAT paid on entry fees and related services.

    4. Cross-border Trade

    Companies involved in importing and exporting goods may be eligible for VAT refunds on cross-border transactions if they meet the FTA’s conditions. 

    5. Excess VAT Paid

    If a business has paid more VAT than it is entitled to collect, it can claim a refund for the excess amount

    The VAT Reimbursement Process in the UAE 

    The VAT reimbursement process in the UAE involves several key steps: 

    1. Register on the FTA Portal 

    Ensure that your business is registered with the FTA and has an active account [https://tax.gov.ae/en/taxes/Vat/refunds.aspx]. Tourists can apply for VAT refunds through designated refund points at airports and other exit points. 

    2. Collect and Prepare Documentation 

    Businesses need to gather and prepare the necessary documentation to support their reimbursement claim. This typically includes: 

    • Tax registration certificate 
    • VAT returns 
    • Invoices for purchases and sales 
    • Bank statements 
    • Any other relevant supporting documents 

    3. Submit the Claim 

    Log in to the FTA’s online portal, complete the VAT refund application form, and upload the required documents. 

    4. Review and Approval 

    The FTA reviews the submitted claim and may request additional information if needed. Once approved, the FTA processes the refund. 

    5. Receive the Refund 

    If the claim is approved, the VAT amount will be reimbursed through the specified payment method, such as a bank transfer or other available options. 

    VAT Disbursement in the UAE 

    VAT disbursement in the UAE refers to the recovery of an expense that a business has paid on behalf of a client. When a business incurs a cost directly related to providing a service or product to a client and later recovers that exact amount without any markup, this transaction is classified as a disbursement. 

    When it comes to VAT on reimbursement of expenses in UAE, it’s essential to distinguish it from disbursement. Reimbursement occurs when a business incurs an expense related to a service or product it provides, and then charges the client for that cost. Unlike disbursements, reimbursements are generally considered taxable supplies under the UAE VAT regime. This means that VAT may apply when a business recovers these costs from its client. 

    Key Features of VAT Disbursement: 

    • Exact Recovery: The amount recovered from the client is exactly the same as the amount paid, with no additional charges.
    • No VAT Implications: Since disbursements are not treated as taxable supplies, they do not attract VAT when the client repays the business. 

    To qualify as a disbursement under UAE VAT law, a recovery of expense must meet the following conditions: 

    1. The expense must be incurred directly for the benefit of a client.
    1. The amount recovered by the client must be the exact same amount that was paid by the business, with no additional markup or profit included.
    1. The reimbursement must not involve the supply of any goods or services. If there is a supply element, the reimbursement may be subject to VAT.
    1. The business should not recover input tax (VAT) associated with the expense paid on behalf of the client, as disbursements do not qualify for input tax recovery. 

    Example of VAT Disbursement in the UAE 

    A marketing agency, XYZ Marketing, has arranged a photoshoot for its client, ABC Enterprises. The agency hires a professional photographer and pays AED 1,050 for the service. This amount includes AED 50 VAT (5% of AED 1,000, the base cost of the service). The agency incurs this expense directly on behalf of ABC Enterprises. 

    • Total Amount Paid by XYZ Marketing: AED 1,050 (including AED 50 VAT).
    • Base Cost of the Photoshoot Service: AED 1,000.
    • VAT Paid: AED 50. 

    When XYZ Marketing requests reimbursement from ABC Enterprises: 

    • XYZ Marketing charges ABC Enterprises exactly AED 1,050, the same amount it paid the photographer. 
    • This transaction is considered a disbursement, not a supply, so no additional VAT is added by XYZ Marketing when billing ABC Enterprises. 
    • ABC Enterprises pays XYZ Marketing AED 1,050, covering the expense exactly as incurred. 

    Difference Between VAT Disbursement and VAT Reimbursement 

    While both terms involve recovering costs, there are distinct differences between VAT disbursement and VAT reimbursement: 

    1. Nature of the Transaction 

    • VAT Disbursement: It involves the recovery of expenses incurred on behalf of a client without any markup. The payment is treated as a pass-through and not as a supply, so no VAT is charged on the recovery.
    • VAT Reimbursement: This refers to claiming back VAT that a business has paid on its own expenses. When businesses incur costs that include VAT, they can file a claim with the Federal Tax Authority (FTA) to recover the VAT portion if the expenses are eligible. 

    2. VAT Treatment 

    • VAT Disbursement: The disbursed amount is not subject to VAT because it is not considered a supply. For example, if a business pays AED 500 (including VAT) on behalf of a client and recovers that amount, it does not charge any additional VAT.
    • VAT Reimbursement: Involves a business recovering VAT from the FTA on its business-related expenses. This means if a business pays AED 1,000 for supplies and VAT is included, it can claim back the VAT amount from the FTA if the supplies are eligible. 

    3. Examples 

    • VAT Disbursement Example: A company pays AED 1,050 (including AED 50 VAT) for a service on behalf of a client and recovers exactly AED 1,050 from the client.
    • VAT Reimbursement Example: A company incurs AED 1,000 in expenses for office supplies that include AED 50 VAT. The company can file a claim to recover the AED 50 VAT from the FTA. 

    How Shuraa Tax Can Help with VAT Reimbursement and Disbursement 

    Understanding VAT reimbursement and disbursement in UAE is really important for businesses and individuals who want to manage their expenses effectively. Knowing how these processes work can help you recover costs and stay compliant with VAT rules, which are essential for maintaining good cash flow. 

    If you ever feel overwhelmed by VAT regulations or have questions, it’s a great idea to seek professional help. At Shuraa Tax, we’re here to guide you through all things VAT, including how to handle reimbursement and disbursement. Our experienced team has the experience to help you navigate these processes and make sure you’re meeting all requirements while maximizing your potential refunds. 

    Contact us today at +971508912062 or email us at info@shuraatax.com to find out how we can help you. 

    Frequently Asked Questions 

    1. What is VAT on reimbursement of expenses in the UAE? 

    VAT on reimbursement of expenses in the UAE applies when a business incurs costs related to a service or product it provides and then charges the client for these costs. In the UAE, such reimbursements are generally considered taxable supplies. 

    2. Can tourists claim VAT reimbursement in the UAE? 

    Yes, tourists can claim VAT reimbursement in the UAE. The UAE has a Tourist Refund Scheme that allows eligible tourists to get a refund on the VAT they have paid on goods purchased during their stay. 

    3. What is the difference between VAT reimbursement and VAT disbursement? 

    VAT reimbursement involves claiming back VAT that a business has paid on its expenses if those expenses are eligible under VAT rules. VAT disbursement, on the other hand, refers to the recovery of an exact amount that a business has paid on behalf of a client without charging any additional VAT, as it is not treated as a taxable supply. 

    4. Are all expenses eligible for VAT reimbursement in the UAE? 

    Not all expenses are eligible for VAT reimbursement in the UAE. Only business-related expenses that meet the FTA’s criteria, such as costs incurred for taxable supplies, can be claimed. 

    5. How much VAT is refunded in the UAE? 

    You can typically claim a VAT refund of 85% of the total VAT amount paid in the UAE, after deducting a fee of AED 4.80 per tax-free tag. This refund is available to tourists and visitors who meet certain criteria, such as being non-residents, purchasing eligible goods, and exporting them out of the UAE within a specified timeframe.

  • VAT on Courier Services in the UAE

    VAT on Courier Services in the UAE

    In 2018, the UAE introduced Value-Added Tax (VAT), which is a 5% tax added to most goods and services sold in the country. This includes VAT on courier services, which are an important part of the UAE’s economy. With so many businesses relying on fast and reliable delivery services, understanding how VAT affects courier services is important for both businesses and individuals.

    Courier services play a key role in the UAE, helping businesses deliver packages to customers locally and around the world. Whether you’re running an e-commerce business or sending packages across the UAE, knowing how VAT is applied to these services can help you avoid surprises and stay compliant with the law.

    So, let’s break down everything you need to know about VAT on courier services in the UAE.

    Is VAT Applicable to Courier Services In UAE?

    Yes, VAT on courier services in the UAE is typically applied at the standard rate of 5%. Whether you’re using local delivery or sending packages internationally, most courier companies must register for VAT and charge their customers accordingly. However, the way VAT is applied varies for domestic vs. international services.

    Domestic vs. International Courier Services VAT in UAE

    Domestic Courier Services:

    For domestic courier services in the UAE, a 5% VAT is charged to both individuals and businesses. For example, if you’re sending a package from Dubai to Abu Dhabi, the courier company adds 5% VAT to the delivery fee, ensuring that the tax is properly applied.

    International Courier Services:

    For international courier services in the UAE, the VAT rate is usually zero-rated (0%). Although these services are subject to VAT, no VAT is collected from the customer. This applies when shipping from the UAE to countries like the USA, making international shipments more cost-effective for businesses and consumers.

    VAT Exemptions for Courier Services

    In the case of international courier services, while they are zero-rated, they are not fully exempt from VAT. A zero-rated service still requires the courier company to report the transaction for VAT purposes, even though no VAT is charged to the customer. 

    Most courier services, whether domestic or international, are not fully exempt from VAT. International services may qualify for the zero-rated VAT (0%), but they still need to be reported for VAT purposes, while domestic services are taxed at the standard 5%.

    How is VAT on Courier Services Calculated?

    To calculate VAT on courier services in the UAE, simply add 5% to the delivery fee for domestic shipments. For example, if a courier charges AED 200, an additional AED 10 (5%) VAT is applied, bringing the total to AED 210.

    For international deliveries, since the service is zero-rated, no VAT is added to the courier fees. For international shipments, no VAT is added to the courier fee, so if the charge is AED 300, you pay exactly that amount, with no extra taxes.

    VAT Registration for Courier Services

    Courier service providers must register for VAT if their annual turnover exceeds AED 375,000. Providers earning less than this amount can voluntarily register if their turnover exceeds AED 187,500. Once registered, couriers must charge VAT on eligible services and file regular returns with the Federal Tax Authority (FTA).

    VAT Registration Process:

    1. Courier service providers must apply for VAT registration through the Federal Tax Authority (FTA) portal.

    2. The business will need to provide details such as:

    • Company trade license.
    • Financial records showing turnover.
    • Details of the business activities.

    3. Once registered, the business will receive a VAT registration number (TRN), which must be included on all VAT invoices issued to customers.

    Failure to register for VAT when required can result in significant penalties. The FTA can impose fines for late registration, failure to charge VAT correctly, or not filing VAT returns on time.

    Input Tax Credits for Courier Service Providers

    Courier service providers in the UAE can claim input tax credits on VAT paid for business expenses related to their services. These include VAT incurred on fuel, vehicles, packaging materials, and other operational costs.

    By claiming input tax credits, courier companies can reduce their VAT liability, allowing them to deduct the VAT paid on these expenses from the VAT collected from customers.

    VAT on Imported Goods via Courier

    When importing goods into the UAE, VAT is charged on the value of the items, including any customs duties. The courier company typically collects the VAT and remits it to the FTA, ensuring compliance with UAE tax regulations.

    However, there may be specific exemptions or reduced VAT rates for certain types of imported goods, depending on their classification and intended use. It’s important to consult with a VAT experts such as Shuraa Tax to determine the correct VAT treatment for imported goods.

    VAT on Goods Shipped Within the UAE

    For goods shipped within the UAE, VAT is applied both to the value of the goods and the delivery service if the courier company is VAT-registered. The VAT treatment depends on whether the transaction is business-to-business (B2B) or business-to-consumer (B2C):

    • B2B Transactions: In B2B transactions, the supplier of the goods is generally responsible for accounting for VAT on the sale of the goods. The courier service provider is not typically required to collect or remit VAT on the value of the goods themselves.
    • B2C Transactions: In B2C transactions, the courier service provider is usually responsible for collecting and remitting VAT on the value of the goods, in addition to the delivery fee.

    Taxes Applicable to Delivery Services in the UAE

    When running a delivery service in the UAE, you may be subject to the following taxes:

    1. Value-Added Tax (VAT)

    The UAE charges 5% VAT on most goods and services, including domestic courier services, while international shipments are zero-rated for VAT purposes.

    2. Customs Duties

    Duties apply to goods entering the UAE, typically between 5% and 10%. Couriers may help facilitate customs payments.

    3. Corporate Tax

    A 9% corporate tax is levied on profits exceeding AED 375,000. Profits below this threshold are not taxed.

    4. Excise Tax (If Applicable)

    If your delivery service involves the transport of excise goods like tobacco, sugary drinks, or energy drinks, excise tax will apply.

    5. Social Security and Insurance Contributions

    While the UAE doesn’t have traditional social security taxes, delivery service businesses must ensure their employees have health insurance, which is mandatory under UAE law.

    Need Help with VAT on Courier Services? Contact Shuraa Tax Today!

    Staying VAT-compliant is crucial for businesses using courier services in the UAE. If you need assistance navigating VAT regulations or have questions about how VAT impacts your business, reach out to Shuraa Tax today! We’ll help ensure you’re fully compliant with all VAT requirements.

    If you find all this a bit overwhelming, you’re not alone! Getting professional advice is a smart move. At Shuraa Tax, we offer a range of tax services to help your business meet all VAT requirements easily.

    Don’t hesitate to reach out to us today at +971508912062 or info@shuraatax.com and see how we can support you.

    Frequently Asked Questions

    1. How does VAT apply to courier services in the UAE?

    VAT is applicable to courier services in the UAE at a standard rate of 5% for domestic shipments. For international courier services, the transportation of goods is typically zero-rated, meaning no VAT is charged.

    2. What VAT rate applies to importing and exporting goods?

    When importing goods into the UAE, a 5% VAT is generally applicable, along with any customs duties. For exported goods, the VAT rate is zero-rated, meaning that no VAT is charged when goods leave the UAE.

    3. How does VAT apply to e-commerce businesses using courier services?

    E-commerce businesses that use courier services are responsible for charging 5% VAT on domestic shipments. For international deliveries, VAT is typically zero-rated.

    4. What are the record-keeping requirements for courier service providers in the UAE?

    Courier service providers in the UAE are required to maintain detailed records of their VAT transactions, including invoices, receipts, and payment records. These records should be kept for a period of five years from the end of the tax period in which the transaction occurred.

  • VAT Registration Process in Saudi Arabia

    VAT Registration Process in Saudi Arabia

    Value Added Tax (VAT) is now a regular part of running a business in Saudi Arabia. Since it was introduced, VAT has applied to most goods and services, which means almost every business needs to understand how it works. Even if you are starting a new company or already running one, knowing the basics of VAT is important to avoid mistakes and stay on the right side of the law. 

    VAT registration in Saudi Arabia is the first step in following the tax rules. Once you are registered, you can legally charge VAT to your customers and also recover VAT on certain business expenses. Registering on time helps you avoid penalties and gives your business a more professional and trustworthy image. 

    Some businesses must register for VAT because their annual turnover crosses the required limit, while others can choose to register even if it’s not compulsory. Knowing if you need to register and how the process works can make a big difference for your business. 

    What is VAT (Value Added Tax)? 

    VAT in Saudi Arabia is an indirect tax applied to most goods and services sold, as well as on imports. Every time a business sells a product or service (or imports goods), VAT is added at the applicable rate. The business collects that tax from its customers and then remits it to the government. 

    Current VAT Rate in KSA: 

    The standard VAT rate in Saudi Arabia is 15%. 

    • Standard Rate: 15% (Applies to most goods and services). 
    • Zero-Rated: 0% (Applies to exports, international transport, and qualifying medicines/medical goods). 
    • Exempt: No VAT is charged (Applies to residential real estate rentals and specific financial services). 

    VAT was first introduced in Saudi Arabia on January 1, 2018, at a rate of 5%. However, to address the economic impact of the global pandemic and stabilize revenue, the government increased the standard rate from 5% to 15%, effective July 1, 2020. 

    Who Needs to Register for VAT in Saudi Arabia? 

    VAT registration in Saudi Arabia depends on the annual value of your taxable supplies (sales). The Zakat, Tax and Customs Authority (ZATCA) has set specific revenue thresholds that determine whether registration is required, optional, or not needed at all. 

    1. Mandatory VAT Registration: 

    If a business (resident in Saudi Arabia) has taxable supplies (goods/services, imports, etc.) that exceed SAR 375,000 in the past 12 months or is expected to exceed SAR 375,000 in the coming 12 months, VAT registration becomes mandatory.  

    Once this threshold is surpassed, you have a 30-day window to complete the registration process with the authority. 

    2. Sector-Specific Mandates: 

    Regardless of whether a business meets the revenue threshold. The VAT registration in KSA is compulsory for specific sectors, including: 

    • Suppliers of designated goods and services: Businesses providing products or services specified by ZATCA must register. 
    • Importers: Companies importing goods into Saudi Arabia must register for VAT. 
    • Businesses using the reverse charge mechanism: Registration is mandatory if your business is responsible for paying VAT on goods or services received from another entity. 

    3. Voluntary VAT Registration: 

    Businesses whose taxable supplies (or incurred expenditures) are between SAR 187,500 and SAR 375,000 in the previous 12 months can opt for voluntary VAT registration. Voluntary registration can be beneficial for smaller businesses – for example, to claim input-VAT on purchases, improve credibility, or prepare for future growth. 

    4. Exemptions/Special Cases/When Registration Is Not Needed: 

    Businesses that exclusively make “Exempt Supplies” are not required to register for VAT. Unlike “Zero-Rated” supplies (where you register but charge 0%), “Exempt” supplies are completely outside the VAT network. 

    Common Exempt Categories include: 

    • Residential Real Estate: Rental or sale of residential property (intended for permanent dwelling). 
    • Financial Services: Margin-based financial products (e.g., interest on loans, life insurance policies). 
    • Govt. Bodies: Public bodies acting in their official capacity (not competing with the private sector). 

    Note: If you make both taxable and exempt supplies, you must register if your taxable portion exceeds the SAR 375,000 threshold. 

    5. Group VAT Registration: 

    Related businesses can apply to register as a single “VAT Group.” This treats them as one taxable person for VAT purposes. 

    Eligibility: 

    • Two or more legal persons resident in KSA. 
    • They must be under common control (e.g., one entity owns 50% or more of the others). 
    • At least one member must individually meet the VAT registration eligibility. 

    Benefits: 

    • File only one consolidated VAT return for the whole group. 
    • Transactions between group members are disregarded (no VAT is charged on intra-group sales), improving cash flow. 

    Documents Required for VAT Registration in Saudi Arabia 

    To complete your Saudi Arabia VAT registration, you need to submit a few basic business and identity documents through the ZATCA portal. This includes: 

    • Commercial Registration (CR) Certificate 
    • National ID (for Saudi owners) or Iqama & Passport (for expatriate owners) 
    • Bank Account Details (IBAN & bank name) 
    • Business Address Proof / National Address Registration 
    • Details of Business Activities 
    • Financial Records (past 12 months revenue or expected annual turnover) 
    • Zakat or Income Tax Registration Details (if applicable) 
    • Authorized Signatory Details (if someone is applying on behalf of the business) 
    • Import/Export License (if the business is involved in trading) 
    • Any Additional Supporting Documents requested by ZATCA 

    What is the VAT Registration Process in Saudi Arabia? 

    VAT registration in Saudi Arabia is completed online through the ZATCA (Zakat, Tax and Customs Authority) portal. Here’s an overview: 

    Step 1: Create an Account on the ZATCA Portal 

    The first step is to create your business account on the official ZATCA website. You will need your Commercial Registration (CR) number, a valid mobile number, and email address.  

    After submitting these details, you will receive a verification code to activate your account. Once activated, this account will be used for all future tax services, including VAT filing and payments. 

    Step 2: Log In and Select VAT Registration 

    After logging into your ZATCA account, go to the Tax Services section and choose VAT Registration. The system will guide you to the VAT registration application form. Make sure you select the correct type of registration (mandatory or voluntary) based on your business turnover. 

    Step 3: Enter Business Information 

    In this step, you must enter your complete business details, including: 

    • Legal business name 
    • Commercial Registration details 
    • Business address and National Address 
    • Nature of business activity 
    • Date of business commencement 
    • Estimated or actual annual revenue 

    Step 4: Add Owner and Authorized Person Details 

    You will then be required to provide details of the business owner or authorized signatory, such as: 

    • National ID (for Saudis) or Iqama & Passport (for expatriates) 
    • Contact number and email address 
    • Position in the company 

    Step 5: Enter Financial & Bank Details 

    Next, you must enter your business bank account details, including: 

    • Bank name 
    • IBAN 
    • Account holder name 

    You will also be asked to declare your taxable sales, taxable expenses, and whether you deal in standard-rated, zero-rated, or exempt supplies. These financial details help ZATCA assess your VAT obligations correctly. 

    Step 6: Upload Required Documents 

    At this stage, you must upload clear copies of all required documents, such as: 

    • Commercial Registration Certificate 
    • National ID / Iqama & Passport 
    • National Address 
    • Bank account document or IBAN letter 
    • Any additional documents requested based on your business activity 

    Step 7: Review and Submit the Application 

    Before final submission, carefully review every section of the application. Even small mistakes in CR numbers, email IDs, or financial figures can delay approval. Once you are confident everything is correct, submit the VAT registration application through the portal. 

    Step 8: Application Review by ZATCA 

    After submission, ZATCA reviews your application and uploaded documents. If all information is correct, your application will be approved directly. If any clarification or correction is required, you will receive a notification through your ZATCA portal and registered email asking for additional details or document resubmission. 

    Step 9: Receive VAT Registration Certificate 

    Once your application is approved, you will receive your VAT Registration Certificate electronically through the portal. This certificate contains your VAT Registration Number (VAT ID).  

    From this point onward, your business is legally allowed to charge VAT on taxable supplies, issue VAT-compliant invoices, and file VAT returns as per the required schedule. 

    VAT Responsibilities After Registration 

    Once your business is registered for VAT in Saudi Arabia, you must follow several ongoing compliance rules set by ZATCA to avoid penalties and keep your business running smoothly. 

    • Issuing VAT-Compliant Invoices: After registration, you must issue proper VAT invoices for all taxable sales. These invoices should clearly mention your VAT registration number, the VAT amount charged, the date, and full buyer and seller details. 
    • Charging and Collecting VAT: You are required to charge 15% VAT on applicable goods and services and collect it from your customers. This VAT does not belong to the business, it must later be paid to ZATCA as part of your VAT return. 
    • Filing VAT Returns on Time: All VAT-registered businesses must file VAT returns regularly (monthly or quarterly, depending on your turnover). The return includes details such as total sales, VAT collected, VAT paid on business expense, nat VAT payable or refundable. 
    • Paying VAT to ZATCA: If your VAT return shows a payable amount, you must pay the VAT within the deadline. Late payments attract fines and additional penalties, so timely payment is very important. 
    • Maintaining Proper Records: You must keep all VAT-related records, such as, sales invoice, purchase invoice, bank statements, and VAT returns. These records should generally be kept for at least 6 years, as ZATCA may request them during audits. 
    • Updating Business Details on the ZATCA Portal: If any business details change, such as address, activity, authorized signatory, or bank account, you must update the information on the ZATCA portal without delay. 

    VAT Deregistration in Saudi Arabia (When & How) 

    VAT deregistration in Saudi Arabia is the process of officially cancelling your VAT registration with ZATCA when your business is no longer required to remain registered. This is just as important as registration, because failing to deregister on time can still lead to penalties and compliance issues.  

    When Can You Apply for VAT Deregistration? 

    You can apply for VAT deregistration in Saudi Arabia under the following situations: 

    • Business Closure: If your business has completely shut down. 
    • Turnover Falls Below the Voluntary Threshold: If your annual taxable turnover drops below SAR 187,500. 
    • Change in Business Activity: If your business no longer makes taxable supplies and only deals in VAT-exempt supplies. 
    • Business Sale or Merger: If your business is sold, merged, or restructured in a way that affects VAT registration. 

    Once you become eligible, you must usually apply for deregistration within the time limit set by ZATCA to avoid penalties. 

    Step-by-Step VAT Deregistration Process in Saudi Arabia: 

    VAT deregistration is also done online through the ZATCA portal. Here’s how the process works: 

    1. Log in to the ZATCA Portal: Sign in using your registered CR number and login credentials. 
    2. Select VAT Deregistration: Go to the VAT services section and choose the VAT Deregistration option. 
    3. Choose the Reason for Deregistration: Select the appropriate reason such as business closure, reduced turnover, or change in business activity. 
    4. Enter the Effective Deregistration Date: You must mention the date from which your business stopped making taxable supplies. 
    5. Upload Supporting Documents: You may be asked to upload documents such as business closure proof, updated financial statements, and commercial registration cancellation (if the business is closed). 
    6. Submit the Application: After reviewing all details, submit your deregistration request. 
    7. Final VAT Return Filing: Before deregistration is fully approved, you must file your final VAT return and clear any outstanding VAT dues. 
    8. Deregistration Approval by ZATCA: Once ZATCA reviews and approves your request, your VAT registration will be officially cancelled. 

    Penalties for Late VAT Registration in Saudi Arabia 

    If a business fails to register for VAT on time when it is required, ZATCA can impose financial penalties. These penalties are meant to ensure strict compliance with Saudi tax laws.  

    • Late VAT Registration: A fixed penalty of SAR 10,000 for failing to register within the required time. 
    • Charging VAT Without Registration: If a business collects VAT without being registered, penalties can go up to SAR 100,000. 
    • Late VAT Return Filing: A penalty ranging from 5% to 25% of the VAT due. 
    • Late VAT Payment: A charge of 5% per month on the outstanding VAT amount. 

    Penalty Relief in 2025: 

    ZATCA is offering a temporary penalty exemption initiative until 31 December 2025, allowing businesses to reduce or waive certain fines if they register correctly, submit overdue returns, and pay pending VAT dues. 

    Make Your VAT Registration Simple & Stress-Free 

    VAT registration plays a big role in running a business smoothly in Saudi Arabia. It helps you stay legally compliant, avoid fines, issue proper tax invoices, and manage your business finances in a better way. If you don’t want to deal with the paperwork and technical steps on your own, Shuraa Tax is here to support you. 

    We offer complete taxation services across the UAE and the Middle East, and we make your VAT registration process quick, easy, and stress-free. From start to finish, our experts handle everything for you, so you can focus on growing your business with confidence. 

    Commonly Asked Questions 

    1. How do I obtain a Tax Identification Number (TIN) in Saudi Arabia? 

    You get your TIN automatically once your VAT registration is approved by ZATCA. It is included in your VAT registration certificate. 

    2. What is the timeline for VAT registration in KSA? 

    Once you submit your application correctly, VAT registration in KSA is usually completed within 5 to 15 working days, depending on document verification. 

    3. Is VAT registration mandatory for all businesses in Saudi Arabia? 

    No, VAT registration is mandatory only if your annual taxable turnover exceeds SAR 375,000. Below this, registration may be voluntary. 

    4. Can I apply for VAT registration online? 

    Yes, VAT registration in Saudi Arabia is completely online through the ZATCA portal. 

    5. What happens if I register for VAT late? 

    Late registration can lead to a SAR 10,000 penalty, along with other fines if VAT rules are not followed. 

    6. Can a small business register for VAT voluntarily? 

    Yes, businesses with turnover between SAR 187,500 and SAR 375,000 can apply for voluntary VAT registration.