Shuraa Tax Blog

Author: Ritish Sharma

  • VAT Registration UAE Fees and Penalties

    VAT Registration UAE Fees and Penalties

    VAT (Value Added Tax) was introduced in the UAE on January 1, 2018, to help the country reduce its dependence on oil revenue. With a 5% tax on most goods and services, VAT is something every business in the UAE needs to be aware of. For businesses that meet the required turnover, VAT registration in the UAE is mandatory. It also allows companies to reclaim VAT on their business expenses, which helps keep things running smoothly.

    However, failing to register or follow VAT rules can lead to serious fines and penalties. That’s why it’s essential to understand the VAT registration fees in the UAE and what can happen if you’re not compliant. Here we’ll break down the fees for VAT registration in the UAE, the penalties for not following the rules, and how you can avoid them.

    VAT Registration Thresholds in the UAE

    The VAT registration threshold in the UAE is AED 375,000. This means that businesses with an annual turnover exceeding AED 375,000 are generally required to register for VAT.

    The VAT registration thresholds in UAE are as follows:

    1. Mandatory VAT Registration

    Threshold: AED 375,000

    Businesses and individuals with an annual taxable turnover exceeding AED 375,000 must register for VAT. This includes both the supply of taxable goods/services and imports.

    2. Voluntary VAT Registration

    Threshold: AED 187,500

    Businesses with a turnover below AED 375,000 but exceeding AED 187,500 can choose to voluntarily register for VAT. This is beneficial for businesses that want to reclaim VAT on their expenses even if they are not required to register.

    3. Zero VAT Registration

    Businesses with an annual turnover below AED 187,500 are not required to register for VAT. However, they can still opt for voluntary registration if they wish to reclaim VAT on their inputs.

    VAT Registration Fees in UAE

    In the UAE, registering for VAT is free, but there’s a catch – if you want an attested registration certificate, you’ll need to pay around AED 250. And, of course, there are penalties if you don’t play by the tax rules.

    Think of VAT registration as getting a business license – it’s mandatory for all traders and businesses involved in manufacturing or producing goods and services. The good news is that online VAT registration is quick and easy, and it’s becoming super popular among business entrepreneurs.

    VAT registration can be overwhelming, especially for smaller businesses. That’s where the Shuraa Tax comes in! Our expert team provides affordable VAT registration services, handling the entire process from start to finish.

    In addition to the basic registration fees, businesses may also be required to pay additional fees in certain circumstances. These may include:

    • Group registration fees: If multiple businesses are part of a group, they may be required to pay a group registration fee.
    • Late registration fees: Businesses that fail to register for VAT within the required timeframe may be subject to late registration fees.

    It’s essential to note that VAT registration fees may change over time. Businesses should consult with Shuraa tax professionals or visit the UAE Federal Tax Authority’s website for the most up-to-date information on VAT registration fees.

    VAT Penalties in the UAE

    The Federal Tax Authority (FTA) in the UAE has established strict penalties for businesses that fail to comply with VAT regulations. These penalties are put in place to ensure that businesses meet their tax obligations.

    Here’s a breakdown of the common VAT penalties in the UAE:

    1. Failure to Register for VAT

    • Penalty: AED 10,000

    Businesses that are required to register but fail to do so within the specified time frame will face a hefty fine.

    2. Late VAT Return Filing

    • Initial Penalty: AED 1,000 for the first offense
    • Repeat Offenses: AED 2,000 for subsequent late filings within 24 months

    Filing VAT returns late can lead to these escalating fines if not addressed promptly.

    3. Late VAT Payment

    The following fines apply based on the delay in payment:

    • 2% of the unpaid tax immediately after the due date
    • 4% if the tax is not paid within 7 days
    • 1% daily thereafter, up to a maximum of 300% of the unpaid tax

    Delayed payments can quickly accumulate significant fines.

    4. Submission of Incorrect VAT Returns

    • Penalty: AED 1,000 for the first time and AED 2,000 in case of repetition.

    Incorrect VAT returns, whether intentional or unintentional, attract penalties based on the amount of unpaid tax and the nature of the error.

    5. Failure to Maintain Proper Records

    • Penalty: AED 10,000 for the first offense and AED 20,000 for repeat offenses

    Proper financial and VAT-related records must be maintained for at least five years. Failing to do so can lead to these substantial fines.

    6. Failure to Display Prices Inclusive of VAT

    • Penalty: AED 5,000

    Businesses are required to display all prices inclusive of VAT. Failure to do so results in this penalty.

    7. Failure to Issue VAT Invoices

    • Penalty: AED 2,500 per invoice

    Businesses must issue VAT-compliant invoices for every taxable transaction. Non-compliance can result in fines for each invoice not issued properly.

    8. Other VAT Penalties

    There are various additional penalties for violations such as tax evasion, providing incorrect information, or obstructing an audit by the FTA. These can range from financial fines to more serious legal consequences.

    9. Consequences of Repeated Violations

    Repeated offenses or willful non-compliance can result in more severe penalties, business suspensions, or legal action by the authorities.

    It’s essential to note that these penalty amounts are subject to change. Additionally, the severity of the penalty may depend on the nature and extent of the non-compliance. Businesses that engage in repeated or deliberate non-compliance may face harsher penalties.

    How to Avoid VAT Penalties?

    Understanding and complying with VAT laws in the UAE is crucial to avoid penalties. Here are some key strategies to help businesses stay compliant:

    1. Accurate Record Keeping

    Maintain detailed records of all VAT-related transactions, including invoices, receipts, and payments. Use a reliable accounting system to track VAT input and output.

    2. Timely VAT Returns

    Submit VAT returns on time to avoid late submission penalties. Use a VAT compliance software to help you prepare and submit returns accurately.

    3. Understanding VAT Laws

    Stay updated on VAT laws and regulations through the UAE Federal Tax Authority’s website or by consulting with tax professionals such as Shuraa Tax.

    4. Proper Invoice Issuance

    Issue corrects and complete invoices for all goods and services sold. Include all necessary details on invoices, such as the date, invoice number, seller’s details, buyer’s details, description of goods or services, quantity, price, and VAT amount.

    5. Effective Internal Controls

    Implement strong internal controls to prevent errors and fraud. Regularly review and update internal controls to ensure they remain effective.

    Shuraa Services for VAT Registration and Compliance

    Shuraa Tax makes VAT registration and compliance in the UAE simple and hassle-free. With expert guidance, accurate VAT return filings, and ongoing compliance support, we ensure your business avoids costly penalties.

    If you need help with VAT registration, maintaining records, or staying updated on the latest tax regulations, Shuraa’s team of professionals provides tailored solutions to meet your needs. Trust Shuraa to handle your VAT obligations so you can focus on growing your business confidently and compliantly.

    Contact us today at +971508912062 or info@shuraatax.com, to learn more about how we can assist you.

  • A Guide to VAT Registration in the UAE

    A Guide to VAT Registration in the UAE

    In the UAE, products and services supplies are subject to a tax known as the value-added tax (VAT). According to Federal Tax Authority (FTA) regulations, companies with yearly revenues of more than AED 375,000 must register for VAT on a mandatory basis.

    FTA registration or VAT registration in UAE is mandatory for businesses that meet certain criteria, such as exceeding a specific annual turnover threshold. By registering for VAT, businesses can reclaim the VAT they have paid on purchases, improve their financial transparency, and enhance their credibility with customers. The process of VAT registration in the UAE involves submitting various documents and information to the Federal Tax Authority (FTA) and obtaining a unique Tax Registration Number (TRN).

    But sometimes, the process of obtaining a VAT certificate in the UAE can feel overwhelming. Therefore, we are here to assist you with the VAT registration process, in this blog we will help you understand the importance of VAT registration for businesses in the UAE and provide an overview of the registration process.

    VAT Registration Thresholds in the UAE

    The general VAT registration threshold in the UAE is AED 375,000 (approximately USD 102,000) per year. This means businesses with an annual turnover exceeding this amount must register for VAT. However, voluntary registration threshold is AED 187,500.

    Circumstances that May Trigger Early Registration

    In certain circumstances, businesses may be required to register for VAT in UAE even if their annual turnover is below the general threshold. These circumstances may include:

    1. Voluntary Registration

    Businesses may voluntarily register for VAT if they wish to claim input tax credits on their purchases or if they believe it will benefit their business operations.

    2. Importation of Goods

    Businesses importing goods into the UAE are generally required to register for VAT, regardless of their annual turnover.

    3. Supply of Goods or Services to VAT-Registered Persons

    If a business supplies goods or services to another VAT-registered person, it may be required to register for VAT, even if its annual turnover is below the threshold.

    4. Government Contracts

    Businesses awarded government contracts may be required to register for VAT, regardless of annual turnover.

    How to Register for VAT in the UAE for a New Company

    Registering for VAT in the UAE is a straightforward process if you follow these steps:

    Step 1: Check Eligibility

    • Determine if your business meets the criteria for VAT registration.

    • Check if your annual taxable turnover exceeds the mandatory registration threshold set by the UAE VAT law.

    Step 2: Document Preparation

    Gather all required documents, including:

    • Trade license
    • Memorandum of Association (if applicable)
    • Emirates IDs or passports of authorized signatories
    • Bank account details and proof of bank account
    • Business contact information (address, PO Box, etc.)

    Step 3: Create an e-Services Account with the FTA

    • Visit the Federal Tax Authority website at tax.gov.ae.

    • Click “Register” to set up an e-Services account.

    • Enter your email address and create a secure password.

    • Verify your email by clicking the link sent to your inbox.

    • Once verified, log in to your account using your credentials.

    Step 4: Fill Out the VAT Registration Form

    • Log in to your e-Services account.

    • Select the option for VAT registration.

    • Provide accurate details about your business, including:

      • Business name and contact details

      • Bank account information

      • Estimated annual taxable sales and purchases

    • Upload necessary documents, such as:

      • Trade license

      • Memorandum of Association (if applicable)

      • Emirates IDs or passports of authorized signatories

    Step 5: Submit Your Application

    • Review the information you entered to ensure it is correct.

    • Submit your VAT registration form online through the FTA portal.

    Step 6: Pay the Registration Fee

    • The FTA will calculate your VAT registration fee based on your estimated taxable sales and imports.

    • Choose a payment method, such as online banking or credit card, and complete the payment.

    Step 7: Receive Your VAT Certificate

    • The FTA will review your application and documents.

    • Once approved, you will receive your VAT certificate, which includes your unique Tax Registration Number (TRN).

    Step 8: Start Collecting and Reporting VAT

    • After registration, charge VAT on all taxable sales and issue VAT-compliant invoices.

    • Use the FTA portal to file VAT returns within the specified deadlines.

    Step 9: Claim Input Tax Credits

    • If you pay VAT on business-related purchases, you can claim input tax credits.

    • File claims through the FTA portal as part of your VAT returns.

    Step 10: Maintain Proper Records

    • Keep detailed records of all sales, purchases, and VAT transactions.

    • These records will help you file accurate returns and prepare for any FTA audits.

    VAT Registration Fees in the UAE

    Smaller businesses with an annual turnover of less than AED 100,000 are charged a flat rate of AED 1,500. Larger businesses may have to pay up to AED 10,000 depending on their turnover. It’s essential to note that these fees are subject to change. For the most accurate and up-to-date information, you should consult with our tax professional.

    By following these steps, you can ensure a smooth VAT registration process and compliance with UAE tax regulations.

    Related Insights: UAE VAT Changes: Key Amendments and Updates Explained

    How to Pay VAT in UAE?

    VAT payments in the UAE are typically made through electronic means. This ensures efficiency and transparency in the tax collection process.

    1. Calculate Your VAT Liability

    Calculate your VAT liability as a first step. To accomplish this, sum up the VAT you charged for your taxable supply and subtract the VAT you paid for your business costs and purchases.

    2. Submit Your VAT Return

    You must file your VAT return after determining your VAT responsibility. With the FTA’s e-Services platform, you may submit your VAT return online. Details such as your VAT registration number, taxable supplies, input VAT, and output VAT must be included.

    3. Check Your Tax Liability

    Review the VAT return to determine your net tax liability. If you have a refund due, the FTA will process it accordingly.

    4. Make Payment (if applicable)

    If you have a net VAT liability, you’ll need to make the payment.

    The FTA portal provides various payment options, including:

    • Credit Card: You can use a credit card to pay your VAT liability directly through the portal.
    • Electronic Funds Transfer (EFT): You can initiate an EFT from your bank account to the FTA’s designated account.
    • Direct Debit: Set up a direct debit mandate to allow the FTA to automatically withdraw the VAT liability from your bank account.

    5. Obtain Payment Confirmation

    Once you’ve made the payment, you’ll receive confirmation from the FTA. This confirmation serves as proof of payment.

    6. Keep Records

    Maintain records of your VAT payments, including payment confirmations and bank statements. These records will be useful for audits and future references.

    It’s crucial to remember that in the UAE, VAT returns and payments are due every three months. After the conclusion of each tax period, you have 28 days to file your VAT return and pay your VAT bill. You risk fines and penalties if you don’t file your VAT return or pay your VAT liability on time. Hence, it’s crucial to make sure you adhere to all VAT requirements in the UAE.

    Who Should Register for VAT in the UAE?

    In the UAE, a company’s ability to register for VAT is determined by the amount of taxable supplies it makes. Standard-rated supplies, zero-rated supplies, received reverse charges, and imported items are all examples of taxable supplies.

    1. Mandatory Registration

    If a company’s total value of taxable imports and supplies inside the UAE reaches the statutory registration level of AED 375,000 within the preceding 12 months or within the next 30 days, then the company required mandatory registration for VAT. This indicates that once a company reaches this threshold, it must register for VAT; otherwise, penalties may apply.

    2. Voluntary Registration

    If a company’s total value of taxable imports and supplies inside the UAE surpasses the voluntary registration level of AED 187,500 within the past 12 months or during the next 30 days, it may elect to register for VAT voluntarily.

    If a company’s vatable costs surpass the voluntary registration level, it may also decide to register voluntarily. This implies that even if a company does not exceed the level required for registration, it may still opt to register for VAT voluntarily. This may have certain advantages, such as the ability to deduct or reclaim input VAT.

    3. Non-resident Registration

    Regardless of the aforementioned thresholds, non-resident companies that make taxable supplies in the UAE are required to register for VAT. This implies that regardless of the amount of their taxable supply, a non-resident firm that offers taxable products or services to non-VAT registrant in the UAE must register for VAT.

    What are the VAT Exemptions in the UAE?

    Zero-Rated Supplies

    Certain goods and services are subject to a 0% VAT rate, including:

    Exports outside the GCC

    • International transportation
    • Supply of crude oil and natural gas
    • First supply of residential real estate
    • Specific areas like healthcare and education

    Exempted Supplies

    Some goods and services are entirely exempt from VAT, such as:

    • Certain financial services
    • Residential properties
    • Bare land
    • Local passenger transport

    VAT Calculation and Reporting Methods

    Businesses must calculate VAT on their sales and purchases accurately. The VAT rate in the UAE is currently 5%.

    Sales: VAT is calculated as 5% of the total sales value.

    Purchases: Businesses can claim input tax credits for VAT paid on purchases used for business purposes.

    VAT returns must be filed electronically through the FTA portal. The returns should include details of sales, purchases, input tax credits, and the net VAT liability or refund.

    Record-Keeping Requirements

    Businesses are required to maintain detailed records of all VAT-related transactions. These records should include:

    • Sales invoices: Invoices issued to customers, including the date, value of goods or services, and VAT amount.
    • Purchase invoices: Invoices received from suppliers, including the date, value of goods or services, and VAT amount.
    • Input tax credit claims: Documentation supporting input tax credit claims, such as purchase invoices and bank statements.
    • VAT returns: Copies of filed VAT returns.
    • General ledger: A general ledger recording all business transactions, including VAT-related entries.

    Tax Group Registration for VAT in UAE

    Tax group registration is a mechanism that allows a group of related companies to be treated as a single entity for VAT purposes. This can simplify compliance and reduce administrative burdens for the group. 

    The following requirements must be satisfied to qualify for Tax Group registration in the UAE:  

    Related Companies

    All members of the group must be related companies, meaning they have a common controlling shareholder or group of shareholders.

    No Third-Party Interference

    There should be no third-party interference in the management or control of the group.

    Same Tax Period

    The financial year for each company in the group must be the same. This implies that each company in the group must have the same financial year-end dates.

    Consistent Accounting System

    A uniform accounting system must be used by all the group’s businesses. They must thus employ the same accounting procedures and tools.

    UAE VAT Executive Regulations

    The UAE VAT Executive Regulations are a set of detailed rules and guidelines that provide further clarification and guidance on the implementation of the Value-Added Tax (VAT) law in the United Arab Emirates (UAE). These regulations cover various aspects of VAT, including:

    VAT Registration:

    The Executive Regulations offer comprehensive instructions on the VAT registration procedure, which also includes the registration threshold, the necessary paperwork, and the registration deadlines.

    VAT Calculation:

    The methods for calculating VAT on sales and purchases, including the treatment of goods and services, and the applicable VAT rates.

    Input Tax Credits:

    The rules for claiming input tax credits, which are deductions for VAT paid on purchases used for business purposes.

    Record-Keeping:

    The types of records that businesses must maintain to support their VAT returns and to demonstrate compliance with VAT regulations.

    Exemptions and Zero-Rated Supplies:

    The goods and services that are exempt from VAT or subject to a zero VAT rate.

    Penalties and Interest:

    The penalties and interest that may be imposed for non-compliance with VAT regulations.

    Key Takeaways for VAT Registration

    Registering for VAT in the UAE is an important step for every business to stay compliant with local tax laws. By understanding the steps involved, getting all the required documents ready, and carefully filling out the registration form, you can complete the VAT registration process without any hassle. Make sure to double-check all information, meet deadlines, and follow the rules to avoid any fines or penalties.

    If you find the process confusing or need help, it’s always a good idea to get professional advice. At Shuraa Tax, we have a team of friendly and experienced tax agents, accountants, auditors, and financial advisors based in Dubai who are ready to help you with all your tax needs. We can guide you through the VAT registration process and ensure your business meets all the necessary requirements.

    Contact us today at +971508912062 or by email at info@shuraatax.com and make VAT registration in the UAE easy and stress-free.

    Frequently Asked Questions

    1. How to Register for VAT in the UAE?

    1. Visit the Federal Tax Authority (FTA) website and submit an online application.
    1. Provide necessary documents such as trade license, passport copies, and bank statements.
    1. The FTA will review your application and notify you of the decision.

    2. How to Maintain Compliance Post-Registration?

    • Record Keeping: Maintain accurate records of all transactions, invoices, and VAT calculations. 
    • Periodic Returns: Submit VAT returns quarterly or monthly, depending on your turnover. 
    • Payments: Pay any VAT due to the FTA within the specified deadline. 
    • Audits: Be prepared for potential audits by the FTA to ensure compliance. 

    3. How to Deregister from VAT in the UAE?

    To deregister from VAT in the UAE, follow these steps: 

    1. Submit a deregistration application to the FTA, providing reasons for the deregistration. 
    1. Ensure all VAT liabilities are settled before deregistration is approved. 
    1. Submit a final VAT return to account for any outstanding amounts. 

    4. What Happens if I Don’t Register for VAT When Required?

    Failure to register for VAT when obligated can result in penalties, including fines and potential legal action. 

    5. Can a Sole Proprietor Register for VAT in the UAE?

    Yes, sole proprietors can register for VAT if their business activities meet the required turnover threshold or other criteria. 

    6. Can I Claim Input Tax Credit in the UAE?

    Yes: Businesses can claim input tax credit (ITC), which is the VAT paid on purchases of goods and services used for business purposes. This reduces the amount of VAT payable on their sales.

  • A Guide to Anti-Money Laundering AML Compliance in UAE

    A Guide to Anti-Money Laundering AML Compliance in UAE

    Money laundering is a serious issue that affects economies around the world, including the United Arab Emirates (UAE). To combat this illegal activity, AML (Anti Money Laundering) compliance is crucial. The UAE has implemented stringent anti-money laundering (AML) regulations, establishing a robust framework to combat money laundering and terrorist financing.

    These measures are aligned with international standards set by organizations like the Financial Action Task Force (FATF). Adherence to these regulations is not only a legal requirement but also a fundamental responsibility for businesses operating within the UAE’s borders.

    Failure to comply with AML laws can have severe consequences. Non-compliance can lead to hefty fines, legal penalties, and damage to a business’s reputation. In extreme cases, it can even result in the closure of operations. Therefore, Understanding the importance of AML compliance in the UAE and adhering to UAE AML laws is essential for businesses and individuals alike.

    What is Anti-Money Laundering (AML)?

    Money laundering is the process of disguising the illegal origin of funds through a series of transactions designed to conceal their true source. It involves three primary stages:

    • Placement: The initial introduction of dirty money into the financial system.
    • Layering: Complex transactions to obscure the money’s trail.
    • Integration: Reintroducing the laundered funds into the legitimate economy.

    Common Money Laundering Techniques

    1. Smurfing

    Breaking large sums of money into smaller amounts to avoid reporting requirements.

    2. Cash Couriers

    Physically transporting large sums of cash across borders.

    3. Invoice Fraud

    Inflating or falsifying invoices to conceal hidden payments.

    4. Real Estate Transactions

    Using real estate as a vehicle to launder money.

    5. Shell Companies

    Establishing fictitious companies to disguise the true ownership of funds.

    Types of Suspicious Activities

    1. Large cash transactions

    Depositing or withdrawing substantial amounts of cash without a reasonable explanation.

    2. Unusual activity patterns

    Inconsistent or irregular transaction behavior that deviates from a customer’s typical financial profile.

    3. Structured transactions

    Breaking up large transactions into smaller amounts to avoid reporting requirements.

    4. Suspicious third-party activity

    Involving unrelated or shell companies in transactions.

    5. High-risk jurisdictions

    Engaging in business with entities or individuals from countries known for money laundering or terrorist financing.

    The Role of AML Regulations in Combating Financial Crimes

    AML laws play a crucial role in preventing and detecting money laundering activities. They establish standards for financial institutions and businesses to identify, report, and prevent suspicious transactions. These regulations help to maintain the integrity of the financial system, protect the economy, and combat criminal activities such as terrorism and drug trafficking.

    By implementing effective Anti-money laundering measures, the UAE has strengthened its financial system and enhanced its reputation as a global business hub. These regulations contribute to a more secure and transparent environment for businesses and investors operating within the country.

    AML Laws and Regulations in the UAE

    The United Arab Emirates (UAE) has a strong Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) regime in place. The primary legislation governing AML/CFT in the UAE is Federal Decree Law No. (20) of 2018. This law outlines the obligations of financial institutions, designated non-financial businesses and professions (DNFBPs), and other entities to prevent and detect money laundering and terrorist financing.

    1. Federal Decree-Law No. 20 of 2018

    This comprehensive law sets out the legal framework for AML/CFT (Combating the Financing of Terrorism) in the UAE. It covers a wide range of topics, including customer due diligence, record-keeping, suspicious activity reporting, and penalties for non-compliance.

    2. Cabinet Decisions No. (10) of 2019 and No. (74) and (58) of 2020

    The UAE government has issued several Cabinet Decisions to strengthen the AML/CFT regime further. These decisions address specific issues such as implementing international sanctions and the obligations of registrars and legal persons.

    3. UAE Central Bank’s AML Guidelines

    The UAE Central Bank has issued detailed guidelines that provide guidance to financial institutions on how to comply with the AML/CFT laws and regulations. These guidelines cover various aspects of AML compliance, such as risk assessment, customer due diligence, transaction monitoring, and record-keeping.

    4. Financial Action Task Force (FATF)

    The UAE is a member of the FATF, an intergovernmental body that sets international standards for AML/CFT. The UAE is committed to implementing the FATF’s recommendations to ensure that its financial system is not used for money laundering or terrorist financing.

    The UAE’s AML regulations are overseen by the Central Bank of the UAE (CBUAE) and the Financial Intelligence Unit (FIU), ensuring adherence to UAE money laundering laws. The CBUAE is responsible for supervising financial institutions, while the FIU is responsible for receiving and investigating SARs.

    The UAE has been actively working to strengthen its AML/CFT regime in recent years. In 2020, the UAE issued a new law that increased the penalties for money laundering and terrorist financing. The UAE has also been working to improve its cooperation with other countries in the fight against money laundering and terrorist financing.

    The DFSA is the financial services regulator for the Dubai International Financial Centre (DIFC), a financial free zone in Dubai. It has its own AML/CFT regulations that apply to financial institutions operating in the DIFC.

    Key Aspects of the UAE’s AML/CFT Regime

    Here are some of the key requirements to the UAE’s AML/CFT regime:

    1. Designated Non-Financial Businesses and Professions (DNFBPs)

    The law covers a wide range of DNFBPs, including real estate agents, lawyers, auditors, and trust and corporate service providers, requiring them to comply with AML/CFT regulations.

    Designated Non-Financial Businesses and Professions (DNFBPs) generally includes:

    • Real estate agents and brokers
    • Dealers in precious metals and stones
    • Trust and corporate service providers
    • Auditors and independent accountants
    • Lawyers, notaries, and other legal professionals
    • Virtual asset service providers (VASPs)

    2. Know Your Customer (KYC) and Customer Due Diligence (CDD)

    Financial institutions (banks, insurance companies, investment firms, etc.) and DNFBPs are required to implement robust KYC and CDD procedures to identify and verify customers and assess their risk profile.

    3. Suspicious Activity Reporting (SAR)

    Entities subject to the law are required to report suspicious transactions or activities to the Financial Intelligence Unit (FIU).

    4. Record-Keeping

    Financial institutions and DNFBPs must maintain adequate records to support their AML/CFT compliance efforts.

    5. Sanctions Compliance

    The UAE has implemented measures to comply with international sanctions regimes and prohibit transactions with sanctioned individuals and entities.

    AML Penalties and Consequences of Non-Compliance

    Non-compliance with AML regulations in the UAE can have severe consequences for businesses and individuals. These penalties can range from financial fines to legal action and damage to reputation.

    1. Fines

    Businesses and individuals can face hefty fines for non-compliance. The amount of the fine can vary depending on the severity of the violation.

    2. Asset Forfeiture

    The government may seize assets that were acquired through money laundering or terrorist financing.

    3. Criminal Charges

    Individuals and businesses that engage in money laundering or terrorist financing can face criminal charges which may lead to imprisonment and fines.

    4. Damage to Reputation

    Non-compliance can damage a business’s reputation and make it difficult to attract customers and investors.

    5. Loss of Trust

    Customers, partners, and suppliers may lose trust in a business that does not comply with AML regulations.

    6. Regulatory Scrutiny

    Non-compliance can attract increased scrutiny from regulatory authorities, leading to additional costs and burdens.

    7. Loss of Licenses

    In extreme cases, a business may lose its license to operate in the UAE if it repeatedly violates AML laws.

    AML Compliance Checklist for Businesses in the UAE

    Here is a checklist for businesses in the UAE to ensure they are compliant with AML laws and regulations, protect their reputations, and avoid costly penalties.

    Risk Assessment

    • Conduct a comprehensive risk assessment to identify potential money laundering risks within your business.
    • Classify customers and transactions based on risk levels.
    • Develop a risk-based approach to your AML program.

    Customer Due Diligence (CDD)

    • Obtain and verify customer identification documents.
    • Conduct enhanced due diligence for high-risk customers, such as politically exposed persons (PEPs).
    • Monitor customer activity for suspicious transactions.

    Transaction Monitoring

    • Implement a robust transaction monitoring system to identify suspicious activity.
    • Establish thresholds and rules for triggering alerts.
    • Investigate and report suspicious activity to the relevant authorities.

    Record-Keeping

    • Maintain accurate and up-to-date records of customer information, transactions, and identification documents.
    • Retain records for the required statutory period.

    Staff Training and Awareness

    • Provide regular training to staff on AML laws, regulations, and procedures.
    • Ensure staff understand their roles and responsibilities in AML compliance.
    • Conduct awareness campaigns to promote a culture of compliance.

    AML Program Development and Implementation

    • Develop a written AML policy and procedures.
    • Appoint a responsible officer to oversee AML compliance.
    • Implement a system for reporting and investigating suspicious activity.
    • Conduct regular reviews and updates to your AML program.

    Ongoing Monitoring and Review

    • Continuously monitor customer activity and identify emerging risks.
    • Review and update your AML program as needed.
    • Conduct internal audits to assess compliance.

    External Audits and Regulatory Reporting

    • Undergo regular external audits to verify compliance.
    • Submit required reports to the relevant regulatory authorities.
    • Cooperate with regulatory investigations as needed.

    Partner with Experts for AML Compliance

    Effective AML compliance is not a one-time event but an ongoing process that requires constant attention and adaptation. Businesses in the UAE must stay informed about the latest regulatory developments, continuously assess their risk exposure, and implement measures to prevent money laundering and terrorist financing.

    Also, seeking expert advice can help businesses understand the complexities of AML compliance and ensure they are meeting all their obligations. Shuraa Tax is a leading provider of taxation and legal services in the UAE. Our team of experienced professionals can help businesses of all sizes understand and comply with AML regulations. Whether you need assistance with risk assessments, customer due diligence, or transaction monitoring, we can provide the expertise and support you need to stay compliant.

    Don’t let AML compliance be a burden. Contact Shuraa Business Setup today at +971508912062 or info@shuraatax.com.

  • UAE Corporate Tax Registration Deadline 2026: Complete Guide

    UAE Corporate Tax Registration Deadline 2026: Complete Guide

    The Corporate tax registration deadline has been announced in the UAE by the FTA, and businesses need to take note of this deadline. The deadline for corporate tax registration in the UAE depends on the license issuance date, so businesses must ensure they meet this deadline to avoid any penalties or issues with the tax authorities.

    It’s always better to be prepared and take care of these responsibilities in a timely manner to maintain smooth operations and avoid any unnecessary complications.

    UAE Corporate Tax Structure

    The UAE introduced a federal corporate tax (CT) effective for financial years starting on or after 1 June 2023. The tax is applied to the taxable income of businesses operating in the UAE.

    Generally, all businesses and commercial activities in the UAE are subject to corporate tax, with some exceptions. Taxable persons include:

    • Companies incorporated or established in the UAE.
    • Foreign companies with a fixed place of business in the UAE.
    • Certain non-resident juridical persons without a permanent establishment.
    • Resident natural persons conducting business activities, if their annual income exceeds AED 1 million.

    Tax Rates and Exemptions

    Tax Rates:

    • 0% for taxable income up to AED 375,000.
    • 9% for taxable income above AED 375,000.

    Exemptions:

    • UAE government entities.
    • UAE government-controlled entities.
    • Extractive businesses.
    • Non-extractive natural resource businesses.
    • Qualifying public benefit entities.
    • Qualifying investment funds.
    • Public and private pension funds.
    • Juridical persons wholly owned by exempt persons.
    • Other persons as determined by the Cabinet.

    Deadline for Corporate Tax Registration in UAE for Taxable Persons

    The following table provides a general overview of corporate tax registration timeline in the UAE:

    Type of Taxable Person License Issuance Date Deadline for Registration Additional Notes
    Resident Juridical Person Before 1 March 2024 Staggered deadlines based on license issuance date (See table below or FTA guidelines) May require interim tax returns
    Resident Juridical Person On or after 1 March 2024 Within 3 months of incorporation, establishment, or recognition Applies to free zones and mainland companies
    Non-Resident Juridical Person with Permanent Establishment Before 1 March 2024 Within 9 months of establishment PE income subject to UAE corporate tax
    Non-Resident Juridical Person with Nexus On or after 1 March 2024 Within 3 months of establishing nexus Nexus based on specific criteria (e.g., income threshold)
    Resident Natural Person Turnover exceeds AED 1 million in a calendar year By 31 March of the following year Individuals engaged in business activities

    Specific deadlines may vary based on individual circumstances. It is essential to consult with a tax professional or refer to the FTA website for the most accurate information.

    Deadlines for Resident Juridical Persons in 2024

    The UAE Federal Tax Authority (FTA) introduced Decision No. 3 of 2024, which outlines specific deadlines for corporate tax registration in UAE. These deadlines are based on the date of license issuance.

    License Issuance Date Registration Deadline
    January – February 31 May 2024
    March – April 30 June 2024
    May 31 July 2024
    June 31 August 2024
    July 30 September 2024
    August – September 31 October 2024
    October – November 30 November 2024
    December 31 December 2024

    Implications of Late Tax Registration in the UAE

    Here’s what happens if a business misses the corporate tax registration deadline in the UAE:

    1. Penalties

    The FTA imposes financial penalties for late registration, which can be AED 500 per day of delay, up to a maximum of AED 100,000. These penalties can vary depending on the duration of the delay.

    2. Interest Charges

    In addition to penalties, businesses might face interest charges on unpaid taxes.

    3. Legal Consequences

    Persistent non-compliance could lead to more severe legal actions.

    4. Reputational Damage

    Failure to comply with tax regulations can damage a business’s reputation and credibility.

    Steps to Register for Corporate Tax in the UAE

    Registering for corporate tax in the UAE is primarily done through the EmaraTax portal. Here’s a general outline of the process:

    Step 1. Create an EmaraTax Account

    Visit the EmaraTax portal (https://tax.gov.ae/en/services/corporate.tax.registration.aspx)

    Register with your email ID and phone number or UAE Pass.

    Step 2. Add Taxable Person

    Once logged in, you’ll see a screen listing Taxable Persons linked to your profile. If there are no Taxable Persons, create a new one by providing necessary details like legal name, trade name, license number, and legal structure.

    Step 3. Initiate Corporate Tax Registration

    Select ‘Register’ under the Corporate Tax section on the dashboard. Follow the on-screen guidelines and instructions.

    Step 4. Provide Entity Details

    Complete the online application form, providing detailed information about your business, including:

    • Entity details (legal structure, name, trade license)
    • Identification details (trade license copy, passport copies of owners)
    • Business activities
    • Owners or shareholders information
    • Contact details
    • Authorized signatory details

    Step 5. Review and Submit

    Carefully review all entered information for accuracy. Declare the accuracy and completeness of the information provided. Submit the Corporate Tax Registration application.

    Step 6. Obtain Tax Registration Number (TRN)

    Upon successful registration, you will receive a TRN, which is essential for tax compliance.

    We highly recommend consulting UAE tax experts at Shuraa Tax for the most accurate and up-to-date information, as tax regulations may change.

    Secure Your Business’s Tax Future with Shuraa

    Meeting the corporate tax registration deadline in the UAE is crucial to avoid hefty penalties and ensure smooth business operations. Timely registration also helps you manage your finances better and sets your business up for long-term success.

    If the process seems overwhelming, you don’t have to handle it alone. At Shuraa Tax, we’re here to help. Our team of experienced accountants, auditors, and tax advisors in Dubai is ready to take care of all your tax and accounting needs. We’ll guide you through the registration process, assess your current financial situation, and help you plan your taxes and bookkeeping effectively.

    Let us take the stress out of corporate tax registration so you can focus on growing your business. Reach out to Shuraa Tax today at +971508912062 or info@shuraatax.com, and we’ll make sure everything is done accurately and on time.

    Frequently Asked Questions (FAQs)

    What is the deadline for corporate tax registration in the UAE?

    Deadlines for Corporate Tax Registration: If your total turnover exceeds 1 million for the year 2025 then you must comply with Corporate Tax Registration by 31 March 2026.

    Corporate Tax Filing: After the tax registration you must file your Corporate Tax Return by 30 September 2026.

  • FTA Audit Checklist

    FTA Audit Checklist

    The Federal Tax Authority (FTA) in the UAE plays a crucial role in ensuring compliance with tax regulations and guidelines. It is responsible for overseeing tax-related activities and ensuring that businesses and individuals meet their tax obligations. FTA compliance is essential for businesses operating in the UAE to avoid penalties, fines, and other potential consequences of non-compliance.

    However, the audit process can be complex and time-consuming, which makes it essential for businesses to be well-prepared. Therefore, we are here to provide a comprehensive FTA audit checklist to help you understand the audit process, identify key focus areas, and implement best practices for FTA compliance.

    What is an FTA audit in the UAE?

    An FTA audit is a formal examination conducted by the UAE Federal Tax Authority (FTA) to verify a business’s compliance with VAT laws. It’s a thorough assessment of a company’s financial records, transactions, and VAT returns to verify that all tax liabilities have been accurately calculated and paid.

    The FTA uses various methods to select businesses for audits. Some common triggers include:

    1. Risk-based selection

    Businesses exhibiting high-risk profiles, such as those in specific industries or with unusual transaction patterns, are more likely to be audited.

    2. Random selection

    The FTA may conduct random audits to maintain a general level of compliance.

    3. Specific complaints or information

    If the FTA receives complaints or information about a business’s potential non-compliance, it may initiate an audit.

    4. Follow-up audits

    Businesses that have been audited previously and found with non-compliance issues may be subject to follow-up audits.

    Phases of an FTA Audit

    Typically, an FTA audit consists of the following phases:

    1. Notification

    The FTA sends a formal notification to the business, outlining the audit scope, required documents, and the audit timeline.

    2. Document request

    The FTA requests relevant financial records, VAT returns, invoices, and other supporting documentation.

    3. On-site visit

    FTA auditors may visit the business premises to conduct interviews, inspect records, and verify information.

    4. Data analysis

    Auditors analyze the provided documents and data to identify potential discrepancies or non-compliance issues.

    5. Findings and recommendations

    The FTA issues a report detailing the audit findings, including any tax liabilities, penalties, or recommendations for improvement.

    Detailed FTA Audit Checklist

    This FTA audit checklist is a comprehensive document outlining the key areas and specific items that the FTA is likely to examine during an audit. A typical FTA audit checklist in the UAE would cover the following areas:

    1. Registration and Identification

    • Verify the accuracy of your business activity codes: Ensure that the codes assigned to your business accurately reflect your activities. Incorrect codes can lead to discrepancies in tax calculations.
    • Ensure correct usage of the Tax Registration Number (TRN): The TRN is a unique identifier for your business. It must be used correctly on all tax-related documents.
    • Review group registration details (if applicable): If your business is part of a group, ensure that the group registration is accurate and up to date.

    2. Taxable Supplies and Exemptions

    • Confirm the correct classification of all supplies: Determine whether your goods or services are standard rated, zero-rated, or exempt. Incorrect classification can result in significant tax implications.
    • Verify eligibility for zero-rated and exempt supplies: Understand the criteria for zero-rating and exemptions. Ensure that your business meets the requirements for any claimed zero-rating or exemption.
    • Understand and comply with the reverse charge mechanism: If applicable, ensure that you are correctly applying the reverse charge mechanism for specific transactions.

    3. Input Tax and Credit

    • Ensure eligibility for input tax claims: Not all purchases qualify for input tax recovery. Verify that your input taxes are eligible for deduction.
    • Verify the accuracy of input tax calculations and recovery: Ensure correct calculation and recovery of input tax to avoid potential underclaims or overclaims.
    • Review input tax adjustments for correctness: Any adjustments made to input tax should be accurate and supported by proper documentation.

    4. Fixed Assets

    Fixed assets are tangible or intangible resources owned by a business with a useful life of more than one year. Depreciation is the systematic allocation of the asset’s cost over its useful life. Input VAT incurred on the purchase of fixed assets can generally be recovered as input tax, but specific rules and conditions apply.

    Capital goods scheme: This scheme allows businesses to claim input tax on the acquisition of certain capital goods in full, rather than recovering it through depreciation. Specific criteria must be met to qualify for this scheme.

    5. E-commerce

    Businesses engaged in e-commerce may be required to register for VAT depending on their revenue and the nature of their activities. Compliance obligations include timely VAT returns, accurate reporting of sales, and proper invoicing.

    Understand the distance selling threshold and its implications for VAT registration. Ensure compliance with import and export procedures, including customs duties and VAT.

    6. Record Keeping and Invoicing

    Maintain comprehensive and organized financial records of all transactions, including:

    • Invoicing system and procedures
    • Purchase and sales records
    • Inventory management
    • Fixed asset register
    • Bank statements and reconciliations
    • Electronic records and data backup

    Ensure your invoices comply with FTA regulations regarding content and format. Store your records securely and for the required retention period.

    7. Returns and Payments

    File your VAT returns on time and accurately to avoid penalties. Verify the correct calculation and payment of tax liabilities. Understand potential interest and penalties for non-compliance. Be aware of the consequences of late or incorrect filings and payments.

    8. Specific Industry Considerations

    • Address industry-specific VAT challenges: Some industries have unique VAT challenges. Ensure you understand and comply with relevant regulations.
    • Stay updated on relevant VAT rulings and clarifications: The VAT landscape can change. Stay informed about the latest updates to ensure compliance.

    While a checklist can be a helpful tool, it’s essential to consult with a tax professional to ensure that your specific business needs are addressed.

    Common FTA Audit Mistakes and Penalties

    Understanding common FTA audit mistakes and their associated penalties is crucial for businesses to avoid costly repercussions. Here are some common FTA audit mistakes:

    • Misclassifying products or services can lead to incorrect VAT rates being applied.
    • Claiming ineligible input tax, errors in calculations, or incorrect documentation can result in penalties.
    • Lack of proper documentation, incomplete records, or failure to retain records for the required period can lead to audit issues.
    • Incorrect depreciation calculations, input VAT recovery on ineligible assets, or non-compliance with the capital goods scheme can result in penalties.
    • Failure to register for VAT when required, incorrect application of the distance selling threshold, or non-compliance with import/export procedures can lead to audit findings.

    The severity of penalties depends on the nature and extent of the non-compliance. The FTA has the discretion to impose penalties based on the specific circumstances of each case.

    Take Control of Your FTA Audit

    Using the FTA audit checklist is a great way to get your business ready for an audit and make sure you follow UAE tax rules. Remember, while checklists are invaluable tools, they cannot replace expert advice. The complexities of VAT regulations often require tailored solutions.

    At Shuraa Tax, we have a team of experts who can take care of all your tax and accounting needs. Our corporate tax return filing services are some of the bests in the UAE. Our tax consultants in Dubai will look at your current finances and help you plan and manage your taxes and bookkeeping. Contact us today at +971508912062 or drop us an email at info@shuraatax.com to schedule a consultation and discover how Shuraa Tax can assist your business.

    Related Posts:

    Audit Services in Dubai, UAE
    Stock Audit Services in Dubai
    Internal Audit Services in Dubai, UAE
    External Audit Services in Dubai, UAE
    Financial Audit Services in Dubai, UAE

    Frequently Asked Questions

    1. How to file VAT returns in the UAE?

    VAT returns must be filed electronically through the FTA portal. The process involves:

    • Logging into your FTA portal account.
    • Accessing the VAT return filing section.
    • Providing accurate details about taxable supplies, input tax, and output tax.
    • Submitting the return before the due date.

    2. What is the tax period?

    The standard tax period in the UAE is a calendar month. Businesses must file VAT returns for each tax period by the 28th day of the following month. However, some businesses may be eligible for quarterly filing.

    3. What does the tax consultant review about the VAT Returns?

    A tax consultant typically reviews your VAT returns for accuracy, completeness, and compliance with FTA regulations. They check for correct calculations, classification of supplies, input tax claims, and overall compliance.

    4. How often does the FTA conduct audits?

    The FTA conducts audits on a selective basis, considering factors such as business size, industry, and risk profile. The frequency of audits varies, and there’s no guaranteed timeframe between audits.

  • Non-Recoverable Tax on Entertainment Services in UAE

    Non-Recoverable Tax on Entertainment Services in UAE

    The UAE’s taxation system is one of the most favorable tax systems in the world. In fact, it levies no federal income tax – a fact that may come as a surprise to you. This is also one of the significant reasons that draw hundreds and thousands of expats to this region.

    However, all businesses in the UAE must levy VAT (Value Added Tax) on all taxable goods. The good part is that the VAT paid on purchases of products and services used for business activities in the UAE can be recovered by registered companies. Unfortunately, this is not for all services. VAT on some special services expenses cannot be recovered by the companies. For instance, entertainment service expenses.

    Entertainment services include a wide range of activities, including concerts, live performances, movie screenings, and more. Understanding how non-recoverable tax applies to these services is crucial for businesses operating in the entertainment industry, as it can have a significant impact on their bottom line.

    What is Non-Recoverable Tax?

    Non-recoverable tax refers to the portion of Value Added Tax (VAT) paid by a business that cannot be claimed back as a credit against the VAT charged to customers. Essentially, it’s a tax expense that directly impacts the business’s profitability.

    In contrast, recoverable tax is the VAT paid on purchases directly related to the business’s taxable supplies. This amount can typically be offset against the VAT collected from customers, effectively neutralizing the tax burden.

    Common examples of non-recoverable VAT in the UAE include: 

    • VAT paid on entertainment expenses (e.g., tickets to events, lavish meals)
    • VAT on personal use of company vehicles
    • VAT on goods and services used for exempt supplies

    A non-recoverable tax directly impacts a business’s profitability. As it cannot be offset against the VAT collected, it increases the overall cost of operations. Consequently, it can reduce profit margins if not managed effectively. 

    What are Entertainment Services Under UAE Law?

    Under UAE VAT law, entertainment services are broadly defined as any service that primarily aims to provide pleasure, diversion, or amusement. Here are some common examples of entertainment services: 

    • Restaurants and cafes
    • Cinemas, theatres, and concert venues
    • Nightclubs, bars, and lounges
    • Sports events
    • Amusement parks and theme parks
    • Gaming and betting activities

    Non-Recoverability of Tax on Entertainment Services

    The UAE VAT law explicitly states that input tax incurred on entertainment services is generally non-recoverable. This means that businesses cannot claim back the VAT they paid on entertainment expenses as a credit against the VAT they charge their customers.

    Article 53 of the UAE VAT Executive Regulations outlines the specific provisions for non-recoverable tax on entertainment services. Primarily, it states that VAT paid on entertainment services provided to anyone other than the business’s employees is non-recoverable. This includes

    • Customers
    • Potential customers
    • Officials
    • Shareholders
    • Owners

    When Can VAT on Entertainment Services Offered to Employees Be Recovered?

    While the general rule is that VAT on entertainment services is non-recoverable, there are specific circumstances where VAT on entertainment services provided to employees can be recovered.

    To claim back the VAT on entertainment services offered to employees, a business must demonstrate that:

    • The employer has a legal or contractual obligation to provide the services to employees.
    • Providing the services is considered a normal business practice within the industry or specific role.
    • The entertainment services are directly linked to the employee’s well-being, motivation, or performance.

    For example, a company provides lunch for its employees during mandatory training sessions. This could be considered a recoverable expense if it can be demonstrated that the meals are directly related to the training and are not excessive in cost.

    However, the taxable entity will not be reimbursed for taxes paid on events such as Iftar parties given to staff members and employees, goodbye celebrations, staff birthday parties, music festivals, gala dinners, birthday parties, wedding parties, etc.

    It’s essential to note that even if the VAT on entertainment services provided to employees is recoverable, it doesn’t automatically mean that the entire cost is deductible for tax purposes. Other tax rules and regulations may apply.

    Circumstances Under Which Tax on Entertainment Services Might Be Recoverable

    There are specific exceptions where businesses can claim back the tax paid:

    Business Meetings 

    If a business meeting includes a meal or refreshments as a necessary part of the meeting, the VAT on these expenses may be recoverable. The primary purpose of the gathering should be conducting business, and the entertainment element should be incidental. 

    Staff Training and Development 

    If entertainment is directly linked to a staff training or development program and is essential for achieving the program’s objectives, the associated VAT might be recoverable. 

    Employee Welfare 

    VAT on entertainment services provided to employees can be recovered if it’s considered a normal business practice or a legal or contractual obligation. Examples include meals provided in a company canteen, refreshments during working hours, or health and wellness activities directly linked to employee performance.

    Conditions for Claiming Recoverability: 

    • The expenses must have a direct and necessary link to the business’s core activities.
    • Detailed records, including invoices, receipts, and expense reports, should be maintained to support the claim.
    • The claim should adhere to all relevant VAT laws and regulations. 

    It’s essential to note that the burden of proof lies with the business to demonstrate that the VAT on entertainment services is recoverable. Tax authorities may scrutinize these claims, and businesses should be prepared to provide detailed evidence to support their position. 

    How Businesses Can Identify Non-Recoverable Expenses 

    Accurately identifying non-recoverable expenses is crucial for effective tax planning. 

    • Clearly classify all expenses into categories such as direct costs, operating expenses, and entertainment expenses.
    • Stay updated with the latest VAT rules and guidelines regarding entertainment services.
    • Scrutinize expense claims to ensure they align with VAT regulations and business objectives.
    • Utilize software or tools to track and categorize expenses efficiently. 

    Most Importantly – Seek expert advice! 

    Understanding non-recoverable tax on entertainment services in the UAE is important for any business. Knowing what counts as non-recoverable expenses and how they affect your cash flow and profits helps you manage your finances better. Keeping good records and tracking expenses carefully can save you from penalties and legal issues. 

    Given how complex VAT and tax rules can be, it’s smart to get expert help. At Shuraa Tax, we take care of all your business tax needs in the UAE, including VAT. Our experienced, in-house tax agents are ready to assist you in every way necessary. Let us handle your tax management, so you can focus on growing your business. 

    All you need to do is get in touch with us on info@shuraatax.com or call us on +971508912062.

  • Difference Between Zero Rated VAT and Exempted VAT in UAE

    Difference Between Zero Rated VAT and Exempted VAT in UAE

    The UAE’s Value Added Tax (VAT) system has become an essential part of everyday business. While most are familiar with the standard 5% VAT rate, things can get trickier when dealing with zero-rated and exempt supplies. Many businesses find themselves confused about the difference between these two categories which may lead to potential errors in VAT filing and record keeping.

    Therefore, understanding the difference between zero rated VAT and exempted VAT in UAE is crucial for businesses to ensure compliance with tax regulations and avoid any potential penalties.

    What is VAT?

    VAT, or Value Added Tax, is a type of consumption tax levied on the value added to goods and services at each stage of production and distribution. The tax is applied to the increase in value at each stage, not the total cost. Think of it like a tax on the work done at each step.

    The United Arab Emirates implemented VAT in January 2018. Here’s a basic overview:

    • General Rate: 5% on most goods and services.
    • Exceptions: Some essential goods and services are exempt or have a 0% rate (e.g., healthcare, education).
    • Registration: Businesses exceeding a threshold (currently AED 375,000) must register for VAT.
    • Input Tax Credit: Registered businesses can reclaim VAT they paid on their purchases.

    Zero Rated VAT in UAE

    Zero-rated VAT is a category within the UAE’s VAT system where a 0% VAT rate applies to specific goods and services. While these supplies are still considered taxable, the VAT amount is zero. A crucial benefit of zero-rated supplies is the ability to recover input tax (VAT paid on business expenses) incurred for these supplies. This helps businesses maintain cash flow.

    Examples of Zero-Rated VAT in the UAE

    Here are some of the main categories of zero-rated goods and services in the UAE:

    • Exports of goods and services outside the GCC (Gulf Cooperation Council).
    • International transportation and related supplies (e.g., fuel for international flights).
    • Supplies of certain means of transportation (new ships, aircraft for international use).
    • Precious metals like gold, silver, and platinum supplied for investment.
    • Newly built residential properties for the first 3 years of their existence.
    • Certain educational and healthcare services, along with related goods and services.

    How Businesses Handle Zero-Rated VAT

    Businesses making zero-rated supplies need to clearly identify them on invoices with a “Zero-Rated Sales (0.00%)” label. They must record these transactions in their VAT accounts and report them in VAT return filings.

    Importantly, they can claim input tax credit for VAT paid on expenses related to zero-rated supplies.

    Exempted VAT in the UAE

    Exempt VAT in the UAE means no VAT is charged at all on specific goods and services. Unlike zero-rated supplies, these transactions are completely outside the scope of VAT. Businesses supplying exempt goods and services don’t add VAT to their prices and don’t collect it from customers.

    A key difference from zero-rated supplies is that businesses cannot claim input tax credit (VAT paid on related expenses) for exempt supplies. This VAT becomes a cost of doing business.

    Businesses dealing primarily with exempt supplies may not be required to register for VAT if their total taxable supplies (excluding exempt ones) fall below the registration threshold (currently AED 375,000 annually).

    Examples of Exempt Supplies in the UAE

    • The sale or lease of residential properties (excluding commercial spaces within them)
    • Local passenger transport services (buses, taxis, metros, and ferries)
    • Bare land, a land without any buildings or structures on it
    • Certain financial services (such as issuance of securities or life insurance contracts)

    Exempt supplies can simplify record-keeping for businesses as they don’t need to calculate or collect VAT. However, the inability to recover input tax might increase overall business costs.

    Key Differences Between Zero Rated VAT and Exempted VAT in UAE

    The main difference between Zero-Rated VAT and Exempt VAT in the UAE is how they affect businesses. Here’s a breakdown of what that means:

    FeatureZero-Rated VATExempt VAT
    VAT Charged0% VAT rate, but still considered taxableNo VAT charged at all
    Business RegistrationRequired if exceeding the VAT registration thresholdMay not be required if primarily dealing with exempt supplies
    Input Tax RecoveryAllowed for VAT paid on expenses related to zero-rated suppliesNot Allowed – VAT on expenses becomes a cost
    Record KeepingNeed to identify and report zero-rated transactionsNo need to calculate or collect VAT
    Impact on BusinessesCan improve cash flow by recovering input tax (but requires record-keeping)May increase costs due to non-recoverable input tax (but simpler record-keeping)
    Impact on ConsumersMay lead to lower prices for zero-rated goods/services (especially exports)Generally, lowers prices for exempt goods/services (like housing and transport)

    Partial VAT Exemption in UAE

    A business might offer a bundle that includes both taxable and exempt supplies (e.g., a training course with a textbook). In such cases, the business needs to separate the taxable and exempt portions of the supply and apply VAT accordingly. They would charge VAT on the taxable portion (training course) and not on the exempt portion (textbook).

    Businesses that make both taxable and exempt supplies often incur mixed expenses that benefit both types of supplies. The UAE VAT law allows for approved methods to apportion the input tax (VAT paid on these mixed expenses) between the taxable and exempt supplies.

    Partner with Shuraa Tax for Your UAE VAT Needs

    Knowing the difference between Zero Rated VAT and Exempted VAT is very important for business owners in the UAE. It helps you manage your tax reporting, stay compliant with regulations, and plan your finances better. By understanding these two types of VAT, you can make sure your business runs smoothly and avoids any tax-related issues.

    For expert help with your taxes in the UAE, you can always turn to Shuraa. Our team at Shuraa Tax is ready to assist you with all your tax and accounting needs. Our tax consultants in Dubai will review your financial situation and help you plan your taxes and bookkeeping.

    Shuraa Tax offers the best VAT consultancy services in Dubai, including filing VAT returns, giving VAT advice, and assisting with all aspects of UAE VAT implementation. With Shuraa Tax, you can confidently handle your VAT matters and focus on growing your business.

    Frequently Asked Question

    1. What is the difference between zero-rated VAT and exempt VAT in UAE?

    Zero-rated VAT means a 0% VAT rate applies, but businesses can still claim input tax credit for VAT paid on expenses related to those supplies. Exempt VAT means no VAT is charged at all. However, businesses cannot recover input tax on expenses related to exempt supplies.

    2. What is a non-recoverable input tax?

    Non-recoverable input tax is the VAT portion of expenses that a business cannot claim back. This applies to VAT paid on expenses related to exempt supplies and some personal expenses not related to business activities.

    3. Do businesses have to register for VAT in the UAE if they only deal with zero-rated supplies?

    Yes, businesses making zero-rated supplies still need to register for VAT in the UAE. This is because they need to file VAT returns even though the VAT rate is 0%.

    4. What are the record-keeping requirements for zero-rated and exempt supplies?

    Businesses need to maintain separate records for both zero-rated and exempt supplies to ensure accurate reporting and potential input tax recovery for zero-rated supplies.

    5. Are there any penalties for incorrectly classifying a supply as zero-rated when it should be exempt (or vice versa)?

    Yes, incorrectly classifying a supply can led to penalties from the Federal Tax Authority (FTA). These penalties can include additional tax dues, interest charges, and administrative fines.

  • How to Calculate Tax Liability for Your Business

    How to Calculate Tax Liability for Your Business

    Tax liability is a crucial aspect of running a successful business, and understanding how to calculate it can save your company significant amounts of money. In the UAE, businesses are subject to corporate tax, which is implemented to ensure that companies contribute their fair share towards the country’s economy.

    As a business owner in the UAE, it is essential for you to understand how to calculate tax liability, have a solid grasp of tax calculations to minimize your tax liability and maximize your profits.

    By following our step-by-step approach, you’ll be able to determine your taxable income, identify potential exemptions, and ultimately calculate the exact amount owed to the authorities.

    What is the Tax Liability of a Company?

    Tax liability refers to the legal obligation of a business to pay taxes to the government. This tax is typically calculated based on the company’s taxable income, which is its gross income minus allowable deductions and expenses.

    How it works:

    1. Businesses keep track of their income and expenses throughout the year.
    1. They calculate their taxable income by subtracting allowable expenses from their total income.
    1. They apply the relevant tax rate to their taxable income to determine their tax liability.
    1. Businesses then need to file tax returns and make tax payments to the government by the deadlines set.

    Tax Liability of a Company in UAE

    The UAE introduced a federal corporate tax system in June 2023. Here’s a simplified explanation:

    • The standard corporate tax rate in the UAE is 9%.
    • Businesses with annual taxable profits not exceeding AED 375,000 (around $100,000) are subject to a 0% tax rate.
    • This tax applies to most businesses operating in the UAE mainland, excluding those in Free Zones with a qualifying corporate tax exemption.
    • Businesses operating in certain free zones may have different tax regulations.

    Taxable Income for UAE Corporate Tax

    Taxable income in the UAE corporate tax system refers to the profit amount a business uses to calculate its tax liability. It’s essentially the net profit remaining after deducting allowable expenses from the gross income.

    Gross Income

    This includes all the revenue a business generates from its operations, such as sales, service fees, and interest earned.

    Applicable Expenditures

    These are the ordinary and necessary expenses a business incurs to generate its income. Examples include:

    • Cost of goods sold (COGS)
    • Salaries and wages
    • Rent and utilities
    • Marketing and advertising expenses
    • Interest on business loans

    Important Note: Not all expenditures are automatically considered “applicable.” The UAE Ministry of Finance has specific guidelines on what qualifies as an allowable deduction.

    Allowable Deductions

    These are specific expenses explicitly permitted by the tax law to be subtracted from the gross income. These typically go beyond general business expenses and might include:

    • Depreciation on assets
    • Bad debts
    • Charitable contributions (with limitations)

    Exempt Income (if applicable)

    Certain types of income might be exempt from corporate tax under specific UAE regulations.

    Tax Rates and Brackets:

    The UAE corporate tax system has a single rate structure, not brackets. This means a flat rate of 9% is applied to the entire taxable income exceeding the threshold of AED 375,000. Businesses with taxable income below this threshold are subject to a 0% tax rate.

    Businesses operating in certain Free Zones (QFZs) may have different tax rules. Qualifying Free Zone Persons (QFZPs) might benefit from a 0% tax rate on their qualifying income, subject to specific criteria set by the UAE Corporate Tax law.

    The UAE tax regulations are still evolving. Businesses should stay updated on the latest information. Therefore, consult our tax professional at Shuraa Tax for specific guidance on calculating their taxable income.

    How to Calculate Tax Liability? Example Calculation

    “XYZ Company” operates in the UAE mainland with the following financials for the year:

    Gross Revenue: AED 1,500,000

    Cost of Goods Sold (COGS): AED 600,000

    Operating Expenses (Salaries, Rent, etc.): AED 450,000

    Step 1: Calculate Gross Profit

    Gross Profit = Gross Revenue – COGS

    Gross Profit = AED 1,500,000 – AED 600,000

    Gross Profit = AED 900,000

    Step 2: Subtract Allowable Operating Expenses (Assuming all expenses are allowable)

    Taxable Income = Gross Profit – Operating Expenses

    Taxable Income = AED 900,000 – AED 450,000

    Taxable Income = AED 450,000

    Step 3: Apply Tax Rate

    Exceeds Threshold: The taxable income (AED 450,000) surpasses the threshold (AED 375,000). We need to calculate the tax liability on the amount exceeding the threshold.

    Taxable income exceeding threshold: AED 450,000 – AED 375,000 = AED 75,000

    Corporate Tax Liability: AED 75,000 (taxable income exceeding threshold) * 9% (tax rate) = AED 6,750

    Therefore, based on this scenario, XYZ Company would have a corporate tax liability of AED 6,750 due to exceeding the tax threshold.

    Small Business Relief for UAE Corporate Tax

    Small Business Relief in UAE allows eligible businesses to be treated as if they haven’t generated any taxable income for specific tax periods. In simpler terms, it offers tax exemption within certain limits.

    Who Qualifies for Small Business Relief (SBR)?

    To claim SBR, your business must meet the following criteria:

    • Be a resident person for UAE corporate tax purposes.
    • Have a revenue of AED 3 million or less for the relevant tax period and all previous tax periods. This applies to tax periods ending before or on December 31, 2026.
    • Not be a Qualifying Free Zone Person (operating in a Free Zone without a corporate tax exemption) or a member of a Multinational Enterprise Group (MNE Group).

    If your business qualifies, you can elect for SBR by filing a notification with the Federal Tax Authority (FTA) within the tax return for the respective tax period.

    How to Reduce Tax Liability for Your Business in UAE?

    Here are some strategies you can consider to potentially reduce tax liability for your business in the UAE:

    1. The UAE’s corporate tax system is relatively new. It’s essential to stay informed about the latest regulations and updates issued by the Federal Tax Authority.
    1. Operating in a Free Zone with a valid corporate tax exemption can significantly reduce your tax liability.
    1. Proper bookkeeping practices ensure you have accurate records of income and expenses to support your tax filings and maximize allowable deductions.
    1. Understand which expenses are considered tax-deductible under UAE regulations. These typically include costs of goods sold, salaries, rent, utilities, and depreciation.
    1. Analyze your operating expenses and identify areas for potential cost reduction without compromising business operations. 
    1. If your business meets the criteria (revenue under AED 3 million and other conditions), claim SBR to enjoy tax exemption on your profits.

    And most importantly, a qualified tax professional like Shuraa Tax can provide personalized guidance on tax planning strategies to minimize your tax liability while ensuring compliance.

    Simplify Your Tax Compliance with Shuraa Tax

    Figuring out your tax liability of a company is important for keeping your business running smoothly and out of trouble with the law. If you make mistakes, it can cost you a lot of money in fines and you might miss out on tax savings. It’s essential to keep up with the latest tax rules and understand how they affect your business to avoid errors and get the most out of any tax liability. 

    At Shuraa Tax, we understand that dealing with taxes can be complicated. Our team of skilled accountants, auditors, and tax advisors in Dubai is here to help. We can look at your tax situation, make your bookkeeping easier, and take care of the filing process for you. By working with Shuraa Tax, you can lower your tax bill and have more time to focus on growing your business. 

    Contact Shuraa Tax today at +971508912062 or drop us an email at info@shuraatax.com.

  • Tax Residency Certificate in UAE

    Tax Residency Certificate in UAE

    Tax Residency Certificates (TRCs) are essential documents for individuals and businesses in the UAE. A TRC is a certificate issued by the UAE government that confirms an individual’s tax residency status in the country. This document is crucial for those looking to take advantage of Double Taxation Avoidance Agreements (DTAAs) between the UAE and other countries.

    These agreements ensure that individuals and businesses are not taxed on the same income in both their home country and the UAE.

    Therefore, it is important for you to understand the importance of TRCs in the UAE, how to obtain one, and why they are vital for those looking to understand the complex world of international taxation.

    What is a Tax Residency Certificate in UAE?

    A Tax Residency Certificate (TRC) in the UAE or Tax Domicile Certificate (TDC) is an official document issued by the Federal Tax Authority (FTA) that verifies your tax residency status to claim benefits under Double Tax Avoidance Agreements (DTAAs).

    But what exactly is DTAA?

    Imagine you’re an Indian citizen working in the UAE. You earn a salary in the UAE.

    Normally, you might have to pay taxes on that income in both India (because you’re a citizen) and the UAE (because you’re earning there). This is called double taxation.

    However, if India and the UAE have a DTAA in place, the agreement will determine which country has the right to tax your income. This could be based on factors like your residency status, the source of the income, or specific articles within the agreement.

    Tax Residency Certificates (TRCs) allow applicants to take benefits of Double Tax Avoidance Agreements (DTAA) on income signed by the UAE.

    The UAE has signed DTAAs with many countries to avoid residents being taxed on the same income in both countries. A TRC can help you get reduced or eliminated tax rates on certain types of income earned in another country, depending on the specific DTAA in place.

    Types of Tax Residency Certificate in the UAE

    There are two main types of UAE Tax Residency Certificates (TRCs):

    1. Domestic TRC

    This certificate is primarily used within the UAE. It can be helpful for various purposes, but it doesn’t directly relate to international tax treaties.

    2. TRC for DTA purposes (Double Tax Avoidance)

    This specific type of TRC is crucial for claiming benefits under agreements the UAE has signed with other countries to avoid double taxation. It proves your tax residency in the UAE for these international transactions.

    Who Can Apply for a Tax Domicile Certificate in the UAE?

    The eligibility to apply for a TRC or TDC in the UAE depends on whether you’re applying for a domestic TRC or a TRC for DTA purposes:

    Domestic TRC: Any resident or business entity in the UAE can apply, but it’s recommended to consult the Federal Tax Authority (FTA) for specific details on its purpose and uses.

    TRC for DTA purposes:

    Individuals:

    • Must have resided in the UAE for at least 183 days during the requested financial year.
    • Should have a valid UAE residence visa and Emirates ID.

    Businesses:

    An applicant applying for a tax residency certificate for treaty purposes must have established a business in the UAE for at least one year.

    Offshore companies generally cannot apply for a TRC as they aren’t considered established within the UAE’s tax system.

    Documents Required for Tax Residency Certificate

    The documents required for a TRC in the UAE vary depending on whether you’re applying as an individual or a business:

    For Individuals:

    • Passport copy
    • Valid UAE residence visa copy
    • Emirates ID copy
    • A certified copy of your residential lease agreement (Ejari or similar)
    • Latest salary certificate (if employed)
    • Latest & validated 6-month bank statement (stamped by the bank)
    • Entry and exit report from the Federal Authority of Identity and Citizenship (FAIC) or a local competent government entity (demonstrating at least 183 days of residence in the UAE)

    For Business:

    • Valid company trade license copy
    • Establishment contract certified by official authorities (if not a Sole Proprietorship)
    • Shareholders & manager passport copies
    • Shareholders & manager residence visa copies
    • Shareholders & manager Emirates ID copies
    • Certified copy of the latest audited financial statements/Audit Report
    • Latest and validated 6-month company bank statement (stamped by the bank)
    • Certified copy of company lease agreement or tenancy contract

    How to Apply for a TRC in the UAE

    Applying for a Tax Domicile Certificate or Tax Residency Certificate in the UAE involves a series of steps to verify your residency status for tax purposes. This includes:

    1. Registration

    Register with the Federal Tax Authority (FTA) through their online portal. Create an account if you do not already have one.

    1. Choose the relevant Tax Registration Number (TRN) or select “No TRN” if you don’t have one. (TRN might pre-fill details if available)
    1. Select “Type of Requested Certificate” and choose “Tax Residency Certificate.”
    1. Complete the online application form accurately.

    2. Submission of Documents

    Upload all the required documents to the FTA portal. Ensure all documents are clear and legible.

    3. Payment and Processing

    Once your application is complete, you’ll need to pay a processing fee online. The FTA will review your application and documents.

    4. Issuance of Tax Residency Certificate

    Once your application is approved, the TRC will be issued. You will be notified via the FTA portal, and you can download the certificate from there.

    The TRC submission fess is generally AED 50 for all applicants, regardless of their tax registration status.

    Consider seeking guidance from a tax professional like Shuraa tax if you have any complexities or require assistance throughout the application process.

    The processing time for a TRC application typically ranges from 2 to 4 weeks, but it can take longer depending on the completeness of your application and the FTA’s workload.

    Validity and Renewal of TRC

    The validity of a Tax Residency Certificate (TRC) in the UAE is typically one year from the date it’s issued.

    You’ll need to re-apply for a new TRC if you want to continue claiming tax residency benefits beyond the initial one-year validity period.

    The renewal process generally involves following the same steps as the initial application, including submitting updated documents and paying any applicable fees.

    Benefits of Getting Tax Domicile Certificate in the UAE

    There are several benefits to obtaining a Tax Residency Certificate (TRC), also referred to as a Tax Domicile Certificate, in the UAE:

    1. Avoiding Double Taxation

    A key advantage is the ability to claim benefits under Double Tax Avoidance Agreements (DTAAs) that the UAE has signed with over 76 countries. These agreements prevent you from being taxed on the same income in both the UAE and another country.

    2. Streamlining Import-Export Processes

    The TRC can be helpful for businesses involved in importing and exporting goods. It can assist in obtaining exemptions or reduced rates on import and export duties in specific situations.

    3. Legal Recognition of Tax Residency

    The TRC serves as an official document from the Federal Tax Authority (FTA) that confirms your tax residency status in the UAE. This can be valuable for various purposes, such as banking procedures or compliance requirements.

    4. Streamlining International Business

    The TRC can facilitate smoother cross-border business activities by providing evidence of your tax residency and potentially reducing tax hurdles. This can be beneficial for companies operating in multiple jurisdictions.

    5. Reduced Withholding Tax Rates

    Some countries levy withholding taxes on dividends, interest, and royalties paid to non-residents. With a TRC proving your UAE residency, you might qualify for reduced withholding tax rates under DTAAs.

    6. Improved Business Reputation

    Having a TRC demonstrates your commitment to tax compliance in the UAE, which can portray your business positively to potential partners, investors, and clients.

    Expert Guidance from Shuraa Tax

    Getting a Tax Residency Certificate in the UAE is very important for both individuals and businesses. It helps you benefit from tax treaties and avoid paying taxes twice. While the process is simple, you need to make sure you have all the right documents and meet the eligibility requirements.

    If you find this process challenging, it’s a good idea to consult with tax professionals. At Shuraa Tax, we are a team of experienced and qualified tax agents, accountants, auditors, and finance advisors based in Dubai, UAE. We help you with everything from evaluating your current finances to planning your taxes and keeping your books in order. We can assist you in gathering the necessary paperwork for your UAE Tax Residency Certificate and guide you through the application process.

    Trust Shuraa Tax to make the process of getting your Tax Residency Certificate easy and stress-free. Contact us today at +971508912062 or info@shuraatax.com.

    Frequently Asked Questions

    1. What is a Tax Residency Certificate (TRC) in the UAE?

    A TRC is an official document issued by the Federal Tax Authority (FTA) that verifies your tax residency status in the UAE. This can be helpful for claiming benefits under Double Tax Avoidance Agreements (DTAAs) signed by the UAE with other countries.

    2. How many days does it take to get the UAE Tax Residency Certificate?

    Processing times can vary, but typically it takes 2-4 weeks to receive your TRC after a complete application is submitted to the FTA.

    3. What is a Double Tax Avoidance Treaty (DTT)?

    A DTT (also known as Double Tax Avoidance Agreement) is an international treaty signed between two countries to prevent a situation where the same income gets taxed in both countries. A TRC can help you prove your residency for tax purposes under a DTT.

    4. Is a Tax Domicile Certificate the same as a TRC?

    Yes, in the UAE, the terms “Tax Residency Certificate” (TRC) and “Tax Domicile Certificate” are generally used interchangeably. They serve the same purpose of verifying your tax residency status in the UAE.

  • Value Added Tax (VAT) Exemptions in the UAE

    Value Added Tax (VAT) Exemptions in the UAE

    Value Added Tax (VAT) is a consumption tax levied on goods and services at each stage of the supply chain. It was introduced in the United Arab Emirates (UAE) on January 1, 2018, as part of the GCC (Gulf Cooperation Council) countries’ agreement to diversify their revenue sources. The standard VAT rate in the UAE is currently set at 5%.

    One important concept to understand when it comes to VAT in the UAE is exemptions. VAT exemption UAE refers to goods and services not subject to VAT. This is different from zero-rated supplies in UAE, which are still taxable at 0% but are considered outside the scope of VAT. Understanding the difference between exempt supplies in UAE and zero-rated supplies in UAE is crucial for both businesses and consumers in the UAE.

    What is VAT Exemption in UAE?

    VAT stands for Value Added Tax. It’s a tax levied on the consumption of goods and services in the United Arab Emirates. The standard VAT rate in UAE is 5%. This applies to most goods and services sold within the country. However, there are exceptions:

    Zero-rated supplies in UAE: These goods and services have a VAT rate of 0%. This includes exports outside the GCC (Gulf Cooperation Council) countries, international transportation, certain educational and healthcare services, and the first supply of residential property.

    Exempt supplies in UAE: These goods and services are not subject to VAT at all. This includes financial services, local passenger transport, and bare land supply

    How VAT is Calculated in the UAE?

    Curious about how VAT is calculated in the UAE? Here’s a simple breakdown to help you understand.

    VAT amount = Price of good or service x VAT rate (5%)

    For instance, let’s say a product costs AED 100. To calculate the VAT amount, you would do: VAT amount = AED 100 x 5% = AED 5

    The VAT amount in this case would be AED 5. Total price with VAT = Price of good or service + VAT amount

    Following the example above, the total price with VAT would be: Total price = AED 100 + AED 5 = AED 105

    So, the final price you pay for the product would be AED 105, which includes the AED 5 VAT.

    VAT Rates in the UAE: A Breakdown

    The UAE applies Value Added Tax (VAT) under three distinct categories:

    Standard Rate (5%)

    This applies to most goods and services, including consumer electronics, fashion, dining, and entertainment.

    Zero-Rated Supplies (0%)

    These transactions are taxable but at a 0% rate, allowing businesses to reclaim input VAT. Key examples include exports, international transportation, and specific healthcare and education services.

    Exempt Supplies

    These are entirely outside the VAT system, meaning VAT isn’t charged, and businesses cannot recover input VAT on related expenses. Examples include residential leases, sales of bare land, and certain financial services.

    Understanding these distinctions is crucial for businesses to manage VAT exemption UAE compliance and optimize tax recovery.

    UAE VAT Exemption List

    Below are the UAE VAT exemption list:

    Category VAT Percentage
    Healthcare (specific services) 0% (Exempt)
    General goods and services 5%
    Education (specific services) 0% (Exempt)
    Residential properties (first sale) 0% (Exempt)
    Export of goods and services 0% (Exempt)
    Local passenger transport 0% (Exempt)
    Residential rentals 0% (Exempt)
    Oil and gas industry 5%
    Precious metals (specific conditions) 0% (Exempt)
    Commercial properties 5%

    List of Common VAT-Exempt Goods and Services in UAE

    The list of common VAT- exempt good and services in UAE are as follows:

    Residential Properties

    Sales and rentals of residential buildings after the first supply are VAT-exempt in UAE. Commercial properties, however, are subject to the standard VAT rate. The first supply of residential properties is zero-rated, which means the developer can recover input VAT.

    Financial Services

    Services that do not involve an explicit fee or return, such as interest on loans and certain insurance policies, are VAT-exempt. However, financial services that charge a clear fee, such as banking and investment advisory services, may be subject to VAT.

    Transportation

    Domestic passenger transport, including intra-city flights, metro services, buses, and local public transport, is VAT-exempt in UAE. However, international transportation, including air and sea travel, falls under zero-rated supplies in UAE.

    Bare Land

    Transactions involving undeveloped land are VAT-exempt. However, sales of developed land or land with commercial buildings are subject to VAT.

    Healthcare and Education

    Specific healthcare services, such as preventative care, treatments, and essential medical supplies, are VAT-exempt. However, elective and cosmetic procedures are subject to VAT. Government-provided education services are also VAT-exempt, while private education services are typically zero-rated under specific conditions.

    Understanding Partial VAT Exemption

    In certain cases, a business transaction can include both taxable and exempt components. When this happens, VAT cannot be fully recovered on all associated costs, requiring a fair method of apportionment.

    For example, if you sell a package that includes a training course (taxable) and a book (exempt), you must divide the VAT accordingly. One simple way to do this is based on the price of each item.

    Let’s say the training costs AED 1,000 and the book costs AED 100. Since 90% of the total value is taxable, you can recover 90% of the VAT.

    Exception from VAT Registration UAE

    Some businesses may qualify for exception from VAT registration UAE if their supplies are mostly VAT-exempt or fall below the registration threshold of AED 375,000. Voluntary registration is possible for businesses with turnover above AED 187,500, allowing them to reclaim input VAT where applicable.

    How VAT Affects Businesses and Consumers

    For businesses, understanding VAT rules is important for managing costs.

    • Exempt supplies in UAE: Businesses cannot claim back VAT on these, making expenses higher.
    • Zero-rated supplies in UAE: Businesses can claim back VAT, helping them save money.

    For consumers, VAT exemptions and zero-rated goods mean lower prices on things like healthcare, education, and rent. Businesses engaged in VAT-exempt activities must carefully track their expenses and VAT obligations to ensure compliance with Federal Tax Authority (FTA) regulations.

    How to Apply for VAT Exemptions in the UAE

    If your business activity falls under the UAE VAT exemption list, the exemption applies automatically. You don’t need to register or apply for anything specific.

    However, businesses must maintain detailed records to prove their qualification for VAT exemption in UAE during audits by the Federal Tax Authority (FTA). Proper bookkeeping and VAT compliance are crucial to avoid penalties and ensure seamless tax operations.

    Shuraa Tax: Your Total UAE VAT Solution

    Understanding VAT exemptions in the UAE is essential for both businesses and consumers. Key VAT exemption list in UAE includes healthcare services, educational services, certain real estate transactions, financial services, and local passenger transport. Each category has specific rules that need to be followed to qualify for the exemption.

    Because VAT regulations can be complicated sometimes, it’s a good idea to consult with a tax professional. At Shuraa Tax, our team is ready to help with all your tax and accounting needs. Our tax consultants in Dubai will analyze your current financial situation and assist with tax planning, VAT compliance, and bookkeeping services.

    Shuraa Tax offers the best VAT consultancy services in Dubai, including VAT return filing, VAT registration, tax advisory, and complete support for UAE VAT exemptions.

    Get expert assistance today

    📞 Call: +(971) 44081900
    💌 WhatsApp: +(971) 508912062
    📧 Email: info@shuraatax.com