Shuraa Tax Blog

Author: Sadiqa Afreen

  • VAT on Healthcare Services

    VAT on Healthcare Services

    Healthcare is a vital sector, and understanding how taxation applies to it is equally essential for providers, clinics, hospitals, and patients alike. VAT on healthcare services is designed to balance public revenue needs while ensuring essential medical services remain accessible and affordable. In the UAE, the VAT framework treats healthcare differently from many other sectors, with specific provisions for zero-rated and exempt services.

    Knowing how VAT on healthcare services in the UAE works, what is taxable, what is exempt, and how it impacts pricing and compliance helps healthcare businesses stay compliant while continuing to deliver quality care without unnecessary financial strain.

    What are Healthcare Services in the UAE?

    Healthcare services in the UAE refer to a wide range of medical, diagnostic, preventive, and therapeutic services provided to individuals to maintain or restore health. These services are delivered through licensed hospitals, clinics, medical centres, pharmacies, and healthcare professionals, and include consultations, medical examinations, surgeries, laboratory testing, imaging services, treatment of illnesses, and preventive care.

    From a tax perspective, VAT on healthcare services is treated differently from that in many other sectors. Under UAE VAT law, the most essential medical services and treatments provided by recognised healthcare institutions are either zero-rated or exempt, ensuring affordability and accessibility for patients. Understanding how VAT on healthcare services in the UAE is applied is crucial for healthcare providers, as specific non-essential or cosmetic procedures may be subject to VAT. In contrast, core medical services remain largely tax-exempt under the law.

    Understanding VAT in UAE Healthcare

    Value Added Tax (VAT) in the UAE is applied at a standard rate of 5%, but healthcare services are treated differently from most other sectors. Instead of a one-size-fits-all approach, medical services fall into distinct VAT categories, each with its tax impact.

    Some healthcare services are exempt, meaning no VAT is charged to patients, and providers cannot recover VAT paid on related expenses. These typically include essential and preventative medical care.

    Other services are zero-rated, where VAT is charged at 0%. While patients do not pay VAT, healthcare providers can reclaim the VAT incurred on their operational expenses, significantly reducing overall tax liability.

    Lastly, certain services are standard-rated and attract VAT at 5%. This usually applies to non-essential or elective treatments, such as cosmetic procedures.

    Understanding how healthcare services are classified under VAT is crucial. The category directly influences service pricing, cash flow, and the amount of VAT a healthcare provider can recover. Given the complexity, having clarity on these distinctions helps ensure compliance and more innovative financial planning.

    What is the Rate of Tax under Healthcare Services?

    In the United Arab Emirates, the rate of tax under healthcare services depends on which tax you’re referring to, because healthcare services may be subject to Value Added Tax (VAT) or Corporate Tax. Here’s a clear breakdown:

    Value Added Tax (VAT) on Healthcare Services

    The UAE applies VAT on goods and services, but healthcare has special tax treatment:

    Healthcare Services VAT Rates

    0% VAT (Zero-rated)

    Healthcare services, including medical and preventive care, are generally zero-rated (0%). That means no VAT is charged to the patient, and the provider may be able to reclaim VAT on related costs.

    5% VAT (Standard rate)

    Healthcare services that are not considered necessary treatment, such as purely elective or cosmetic procedures, are generally taxable at the standard VAT rate of 5%.

    Summary of VAT treatment in healthcare

    Type of Service VAT Rate
    Essential healthcare services for treatment 0% (zero-rated)
    Preventive services (e.g., vaccinations) 0%
    Dental treatment 0%
    Elective/cosmetic healthcare 5%
    Medicines & medical equipment listed by the government decision* 0%; unlisted items 5%

    *Determination depends on whether medicines/medical equipment are listed in the Cabinet-approved list.

    Corporate Tax for Healthcare Businesses

    Healthcare businesses (clinics, hospitals, labs, equipment suppliers) in the UAE are subject to corporate tax on their profits, the same regime that applies to other companies:

    Corporate Tax Rates

    • 0% on taxable income up to AED 375,000.
    • The corporate tax rate is 9% on taxable income that exceeds AED 375,000.
    • 15% can apply to large multinationals under OECD BEPS Pillar 2 rules (for very large groups with global revenues > AED ~11.6 billion).

    Healthcare entities must pay corporate tax if they have taxable profits above the threshold, subject to specific free zone or public benefit exemptions.

    Quick Snapshot

    Tax Type Applies To Typical Rate in Healthcare
    VAT Sale of healthcare services 0% or 5% depending on service type
    Corporate Tax Profits of healthcare businesses 0% up to AED 375,000; 9% above

    VAT Treatment of Medical Services in the UAE

    VAT on medical services in the UAE isn’t one-size-fits-all. How a service is taxed depends on whether it is considered essential healthcare, a specialised treatment, or non-medical.

    1. VAT-Exempt Medical Services

    These services fall entirely outside the VAT net. No VAT is charged to patients, and providers cannot recover VAT on related expenses. They usually relate to core healthcare needs, such as:

    • Primary and essential medical care is recognised by the Ministry of Health.
    • Preventive healthcare aimed at avoiding illness or disease
    • Inpatient treatment provided by hospitals
    • Approved diagnostic services linked to medical care

    2. Zero-Rated Medical Services

    Zero-rated services are taxed at 0%. Patients aren’t charged VAT, but healthcare providers can reclaim VAT paid on their operational expenses. This category generally includes:

    • Approved medical treatments classified by health authorities
    • Selected medicines supplied for medical purposes
    • Specific medical equipment and devices are used in treatment and diagnosis

    3. Standard-Rated Medical Services (5% VAT)

    Services that are not considered medically necessary are treated as regular taxable supplies and are subject to 5% VAT. These commonly include:

    • Cosmetic and aesthetic procedures are carried out for appearance enhancement
    • Elective treatments are not required for medical reasons
    • Services related to wellness, lifestyle, or beauty are not considered essential healthcare.

    The Federal Tax Authority can detail and update VAT rules for healthcare. To ensure correct classification and compliance, it’s always advisable to seek guidance from VAT experts or professional tax advisors.

    VAT on Medicines and Pharmaceuticals in the UAE

    The VAT treatment of medicines in the UAE is designed to protect access to essential healthcare, but it does come with important distinctions that pharmacies and suppliers must understand.

    In general, prescription medicines are zero-rated for VAT. This means patients are not charged VAT at the point of sale, while pharmacies and distributors can still recover the VAT they incur on related expenses. This approach helps keep critical treatments affordable and supports the healthcare system.

    On the other hand, over-the-counter (OTC) medicines usually fall under the standard 5% VAT rate. Since these products are not always classified as essential or prescription-based, VAT is applied just like other consumer goods.

    Newly launched or specialised medications can create uncertainty, as their VAT classification may not be immediately defined. In such cases, pharmacies must closely follow updates and clarifications issued by the Federal Tax Authority (FTA) to ensure correct treatment.

    VAT Impact Across Healthcare Providers

    VAT does not affect all healthcare providers equally. Each segment of the healthcare industry faces different compliance challenges based on the nature of services offered, pricing models, and operational structure. Understanding these differences is key to avoiding errors and penalties.

    Hospitals and Medical Clinics

    Hospitals and clinics usually handle multiple VAT categories simultaneously, complicating compliance. Core medical care and inpatient treatments are generally exempt, while specific approved treatments and medicines may be zero-rated. At the same time, services such as cosmetic enhancements or non-essential elective procedures are subject to 5% VAT.

    Many hospitals also operate internal pharmacies, adding another layer of VAT responsibility. Clear invoicing, correct service tagging, and accurate VAT apportionment are essential to remain compliant.

    Pharmacies

    Pharmacies primarily deal with medicines, but VAT treatment depends on the type of product sold. Prescription medicines are usually zero-rated, while non-prescription or lifestyle-related products often fall under the 5% VAT category.

    The main challenge for pharmacies lies in correct product classification, especially when new drugs or health supplements enter the market. Regular monitoring of FTA updates and proper prescription validation systems are crucial.

    Diagnostic and Imaging Centres

    Diagnostic facilities offering blood tests, scans, X-rays, and imaging services typically charge 5% VAT on their services. While the services themselves are taxable, these centres must also consider VAT for expensive medical equipment, reagents, and consumables.

    Proper documentation helps ensure eligible input VAT is reclaimed without triggering compliance issues.

    Other Healthcare Practitioners (Dentists, Physiotherapists, Specialists)

    • For individual practitioners, VAT treatment depends heavily on the service’s purpose.
    • Dentists may provide exempt restorative treatments alongside standard-rated cosmetic procedures.
    • Physiotherapy and rehabilitation services may be exempt or taxable depending on whether they are medically necessary or elective.
    • Each provider must assess services individually rather than applying a blanket VAT rule.

    Common VAT Errors in Healthcare

    Due to overlapping VAT categories, healthcare businesses often fall into avoidable traps. Here’s how to stay ahead:

    1. Wrong VAT categorisation: Many providers incorrectly group services under a single VAT category.

    Solution: Maintain a detailed service-wise VAT classification sheet and update it whenever new services are added.

    2. Assuming all medicines are zero-rated: This is a frequent and costly mistake, especially for pharmacies.

    Solution: Verify the VAT status of products on a per-product basis, particularly for OTC medicines and supplements.

    3. Improper input VAT claims: Claiming VAT on expenses related to exempt services can result in penalties.

    Solution: Track expenses carefully and link input VAT claims only to zero-rated or standard-rated supplies.

    4. Poor documentation and record-keeping

    Incomplete records weaken your position during VAT audits.

    Solution: Organise VAT invoices, prescriptions, billing records, and contracts at all times.

    5. Lack of regulatory updates

    VAT rules evolve, and outdated practices increase risk.

    Solution: Monitor FTA announcements and schedule periodic VAT reviews.

    6. Untrained billing or finance staff

    VAT errors often occur at the operational level.

    Solution: Conduct regular VAT training for staff handling invoicing, billing, and accounts.

    7. Overlooking free zone VAT implications

    Operating in a free zone does not always mean VAT exemption.

    Solution: Understand whether your free zone activity is treated as mainland supply for VAT purposes.

    Get Assistance for VAT on Healthcare Services in the UAE with Shuraa Tax!

    Understanding VAT on healthcare services is no longer optional for medical providers operating in today’s regulated environment. The UAE has thoughtfully structured its VAT framework to protect access to essential healthcare while ensuring transparency and compliance across the sector. In the UAE, VAT on healthcare services includes different categories like zero-rated and exempt treatments, as well as standard-rated elective services, which affects pricing, cash flow, and planning for medical providers.

    For hospitals, clinics, pharmacies, and diagnostic centres, correctly applying UAE VAT to healthcare services goes beyond a simple tax calculation. It requires accurate service classification, proper documentation, careful input VAT recovery, and continuous monitoring of Federal Tax Authority updates. Even small errors in categorisation or recordkeeping can lead to penalties or lost VAT recovery opportunities.

    As healthcare services continue to expand and diversify, staying VAT-compliant ensures financial stability, regulatory confidence, and uninterrupted patient care. With expert guidance, healthcare businesses can handle VAT requirements efficiently while focusing on what truly matters, delivering quality healthcare without unnecessary financial or compliance risks.

    If you need professional support to manage VAT obligations in the healthcare sector, Shuraa Tax is here to help.

    📞 Call: +(971) 44081900

    💬 WhatsApp: +(971) 508912062

    📧 Email: info@shuraatax.com

    Our tax experts ensure your healthcare business remains compliant, efficient, and audit-ready under UAE VAT regulations.

  • VAT Treatment on Financial Services in the UAE

    VAT Treatment on Financial Services in the UAE

    VAT can feel confusing on its own, and when you add financial services to the mix, things get even trickier. VAT in UAE applies to most goods and services, but financial services don’t always follow the same rules. That’s because many of these services involve interest, margins, or complex fee structures, so the VAT treatment is a little different from regular transactions.

    If you’re a bank, insurance company, lender, fintech startup, or even a business that deals with financial transactions from time to time, understanding these VAT rules is really important. A small mistake like charging VAT when you shouldn’t, or missing VAT when it should apply, can lead to compliance issues or penalties. That’s why staying updated with the rules related to the VAT on financial services in the UAE and the latest Federal Tax Authority (FTA) guidelines matters.

    What Counts as Financial Services under UAE VAT Law?

    To get the tax treatment right, you first need to know if your activity actually qualifies as a “Financial Service” in the eyes of the Federal Tax Authority (FTA).

    According to UAE VAT Executive Regulations (specifically Article 42), Financial Services are broadly defined as services connected to dealings in money (or its equivalent) and the provision of credit. Essentially, if your business involves exchanging currency, providing loans, or managing accounts where money is stored, you are likely operating in this sector.

    Some of the common examples of financial services under UAE VAT regulations include:

    • Interest-based lending such as personal loans, business loans, and mortgages
    • Deposit-taking activities like savings accounts and fixed deposits
    • Money transfers and remittance services
    • Currency exchange services
    • Issuing, transferring, or trading securities, including shares, bonds, and Sukuk
    • Insurance services, both life and general insurance
    • Credit card services, including issuing cards or managing payments
    • Investment management services and brokerage activities

    Traditional Financial Services vs Fintech/Digital Financial Services

    The line between a “tech company” and a “finance company” is blurrier than ever. However, for VAT purposes, the distinction is vital because the nature of the income often dictates the tax rule.

    1. Traditional Financial Services: These are the classic banking activities. The revenue is usually generated through implicit margins (like interest spreads).

    For example, a traditional bank lends money for a house and charges 5% interest. This interest income is generally exempt from VAT.

    2. Fintech & Digital Financial Services: Fintech companies often provide financial services but charge for them differently, usually through explicit fees or subscriptions.

    For example, a digital payment app charges a “transaction fee” or a “platform subscription” to let users send money. Because this is a clear fee for a service (and not just an interest margin), it is often Standard Rated (5%).

    The FTA looks at what is being supplied, not just who is supplying it. Even if you call yourself a technology company, if you are facilitating financial transactions for a fee, you fall under these VAT rules.

    What is the VAT on Financial Services in the UAE?

    Financial services in the UAE don’t all fall under one type of VAT treatment. Depending on how the service earns its income – whether through margins, interest, or clear fees, it may be zero-rated, exempt, or standard-rated at 5%.

    A. Zero-Rated Financial Services (0% VAT)

    This is the most beneficial category for businesses. When a service is “Zero-Rated,” you charge the customer 0% VAT, but you are still allowed to claim back the VAT on your own business expenses (like software or rent).

    When does this apply? This mostly applies to exported services. If you are a UAE bank or financial institution providing services to a recipient who is outside the UAE (and outside the GCC VAT implementing states), the service is typically Zero-Rated.

    Examples:

    • Financial services provided to a non-resident client (e.g., a Dubai firm advising a client in London).
    • International money transfers where the transaction happens cross-border.

    B. Exempt Financial Services (No VAT Charged)

    “Exempt” means you do not charge VAT to the customer. However, there is a catch – if your revenue is exempt, you generally cannot claim back the VAT you paid on expenses related to that service. This effectively becomes a cost to the business.

    When does this apply? This category covers “passive” income where the bank or lender makes money through a margin or spread rather than a direct fee. It implies that the value is hidden in the interest rate or exchange rate.

    Examples:

    • Interest Income: Interest earned on loans, mortgages, or credit cards.
    • Life Insurance: Premiums for life insurance policies are typically exempt.
    • Issue of Securities: Issuing or transferring ownership of shares or bonds.
    • Currency Exchange Margins: The difference between the “buy” and “sell” rate of a currency (if no separate fee is charged).

    C. Standard-Rated Financial Services (5% VAT)

    This is the default category for most business services. Here, you charge the standard 5% VAT on the bill, and you can claim back the VAT on your business expenses.

    • When does this apply? This applies to services that are fee-based. If there is a specific charge for a specific action – like an administration fee, a commission, or a subscription- it is considered a standard commercial service and is taxed at 5%.

    Examples:

    • Bank Charges: Monthly account maintenance fees, wire transfer fees, or ATM withdrawal fees.
    • Card Fees: Annual membership fees for credit cards.
    • Advisory & Consultancy: Fees charged for investment advice or wealth management planning.
    • Brokerage Fees: Commissions charged by a broker for buying/selling stocks.
    • General Insurance: Unlike life insurance, policies for cars, health, and property are usually subject to 5% VAT.

    VAT Treatment on Fee-Based vs Margin-Based Transactions

    One of the biggest factors that decides how VAT applies to a financial service in the UAE is how the provider earns money from the transaction.

    Fee-Based Transactions – Standard Rated at 5%

    Fee-based transactions are the easiest to identify for VAT purposes. Here, the financial institution charges a clearly stated fee for the service. Since the payment is fixed and transparent, the UAE VAT Law treats these services as taxable at the standard rate of 5%.

    Examples of fee-based financial services include:

    • Loan processing or application fees
    • Credit card annual fees
    • Brokerage fees for buying or selling securities
    • Investment or fund management fees
    • Bank statement issuance charges
    • Administrative or service charges

    Why these are taxable:

    There is a direct, measurable fee that counts as “consideration,” making VAT calculation straightforward.

    Margin-Based Transactions – Exempt from VAT

    Margin-based transactions work differently. Instead of charging a fixed fee, the financial institution earns money from the margin or difference in price, such as interest or spread. Because there isn’t an explicit fee tied to the service, these transactions are treated as exempt from VAT.

    Examples of margin-based financial services include:

    • Interest earned on loans or credit facilities
    • Currency exchange margins
    • Trading securities where income comes from price differences
    • Returns on fixed deposits or savings accounts

    Why these are exempt:

    There’s no clear, identifiable fee that the FTA can tax. Since income is generated indirectly, VAT cannot be applied in the usual way.

    VAT Treatment on Islamic Finance Products in UAE

    Islamic finance works differently from conventional banking because it follows Sharia principles, which prohibit interest (riba). Instead of traditional lending, Islamic financial institutions use alternative contract structures like profit-sharing, leasing, or cost-plus financing.

    Even though these products look different from a legal or religious perspective, the UAE VAT Law focuses on the “economic substance” of the transaction, meaning how the product actually works in practice, not just what it is called.

    In other words: If an Islamic finance product serves the same purpose as a conventional financial product, the VAT treatment will usually be the same.

    How VAT Applies to Islamic Finance

    The FTA treats Islamic finance products just like their conventional counterparts, as long as the underlying economic activity is similar. So:

    • If the product is margin-based, it is typically exempt from VAT
    • If the product involves a clear fee, it is generally standard-rated at 5%
    • If the service is supplied to a non-resident and meets export conditions, it may be zero-rated

    Examples of Islamic Finance Products and Their VAT Treatment

    1. Murabaha (Cost-Plus Financing)

    In a Murabaha transaction, the bank buys an asset and sells it to the customer at a marked-up price, payable over time. The profit margin acts like interest in a conventional loan.

    Therefore, the income earned is usually exempt from VAT, unless there are additional service fees involved (which would be taxable at 5%).

    2. Ijara (Islamic Leasing)

    Ijara is similar to a leasing arrangement where the bank owns the asset and leases it to the customer. Lease rentals may be standard-rated at 5%, depending on the nature of the asset and terms. If the arrangement mimics interest-based financing, the margin element could be treated as exempt.

    3. Mudaraba (Profit-Sharing Partnership)

    In Mudaraba, one party provides capital and the other provides expertise, and profits are shared. Returns to the investor are similar to investment income. These are typically exempt, unless a clearly defined management fee is charged (which becomes standard-rated).

    4. Sukuk (Islamic Bonds)

    Sukuk represent ownership in an asset or project, and returns come from profit, not interest. The trading or issuing of Sukuk is treated like dealing in securities. Therefore, it is generally exempt from VAT. Any associated advisory or management fees remain taxable at 5%.

    VAT on Insurance Services in the UAE

    When it comes to insurance, the UAE VAT Law splits policies into two distinct worlds. The tax you pay depends entirely on what you are insuring – a life or a tangible asset.

    1. Life Insurance — Exempt from VAT

    Life insurance products are exempt from VAT in the UAE.

    This means:

    • No VAT is charged on premiums
    • Insurers cannot recover input VAT on related costs

    Life insurance policies usually include:

    • Whole life plans
    • Term life insurance
    • Takaful life products
    • Endowment and savings-linked life policies

    The income from life insurance is considered similar to other financial services that are interest or return-based, not fee-based. Since there’s no clear “service fee” component, VAT is not applied.

    2. General Insurance — Standard Rated at 5%

    All general or non-life insurance products are taxable at the standard 5% VAT rate. Unlike life insurance, general insurance involves clear premiums and specific risk-based services, making VAT applicable.

    General insurance includes:

    • Motor insurance
    • Health insurance
    • Property and home insurance
    • Travel insurance
    • Marine and cargo insurance
    • Liability insurance
    • Takaful general insurance

    These products offer a defined service (risk coverage) in exchange for a clear premium. Since there is a direct fee for the service, VAT applies in the usual way.

    VAT Compliance Requirements for Financial Service Providers

    To stay compliant and avoid penalties, financial services must follow clear rules around documentation, reporting, and classification.

    1. Proper Record Keeping: Providers must maintain clear records of all transactions – fee-based, margin-based, and cross-border, and keep them for at least five years.
    2. Issuing Tax Invoices (When Required): Tax invoices must be issued for standard-rated services. Exempt services don’t require an invoice, but internal records should still be kept.
    3. Correct VAT Classification of Services: Every service must be classified accurately as exempt, zero-rated, or standard-rated. Even a small mistake can cause compliance issues, so correct classification is essential.
    4. Filing Accurate VAT Returns: VAT returns must be submitted on time and must correctly show all VAT collected, VAT recoverable, and any adjustments related to exempt or zero-rated supplies.
    5. Input Tax Recovery and Apportionment: Since financial institutions make both taxable and exempt supplies, they must use an apportionment method to calculate how much input VAT they can recover.
    6. Applying the Reverse Charge Mechanism (RCM): When financial services are imported from outside the UAE, the business may need to apply the reverse charge mechanism. This requires them to account for VAT themselves, ensuring imported services are reported correctly.

    Stay on Track with the Right VAT Support

    VAT on financial services in the UAE can get complicated quickly. With different treatments for fees, margins, cross-border transactions, Islamic finance, and insurance, it’s easy for businesses to feel overwhelmed. If your business deals with financial activities in any form, it’s always a good idea to get proper guidance instead of trying to figure everything out on your own.

    At Shuraa Tax, we help businesses cut through the confusion. Our team helps businesses with everything – from VAT registration and advisory to compliance, return filing, and ongoing support. We make the rules easy to understand and handle all the technical work for you. If you ever need expert help with VAT, we’re just a call away.

    Commonly Asked Questions

    1. Are all financial services subject to VAT in the UAE?

    No. VAT on financial services in the UAE can be standard-rated (5%), exempt, or zero-rated, depending on the type of service and how the income is earned.

    2. What makes a financial service exempt from VAT?

    Services that earn income through interest, spreads, or margins, such as loans or trading in securities, are usually exempt because there is no clearly defined fee to tax.

    3. When is VAT charged at 5% on financial services?

    VAT applies at 5% when a financial service charges a clear, identifiable fee, such as advisory fees, processing fees, credit card charges, or brokerage fees.

    4. Are Islamic finance products treated differently for VAT?

    No. Islamic finance products follow the same VAT treatment as conventional products. The rules focus on the economic substance of the service, not the structure.

    5. Can financial institutions recover input VAT?

    They can recover input VAT on taxable supplies, but for exempt supplies, they must use an apportionment method to calculate how much VAT can be reclaimed. This is a key part of managing VAT on financial services in the UAE.

  • A guide to Corporate Tax Groups in the UAE

    A guide to Corporate Tax Groups in the UAE

    Corporate taxation in the UAE has transformed the business landscape, and one of the most beneficial frameworks introduced under the new tax regime is the corporate tax group concept. This arrangement allows eligible companies to be treated as a single taxable entity, making tax filing and compliance more efficient.

    In a guide to corporate tax groups in the UAE, we explore how forming a UAE corporate tax group can optimise tax responsibilities, reduce administrative burden, and support smoother financial management for businesses operating across multiple entities.

    What is a Corporate Tax Group?

    A Corporate Tax Group refers to a structure where two or more eligible companies are treated as a single taxable entity for corporate tax purposes. Instead of filing separate tax returns, the group submits one consolidated tax return, simplifying compliance and potentially reducing the overall tax burden.

    In the UAE corporate tax group framework, companies must share common ownership (at least 95% direct or indirect shareholding), follow the same financial year, and be resident of legal entities. When formed, a corporate tax group in the UAE allows businesses to offset profits and losses among group members, centralise tax management, and improve financial efficiency.

    Creating a corporate tax group is especially beneficial for organisations with multiple subsidiaries or diverse business operations seeking streamlined reporting and tax advantages under UAE Corporate Tax Law.

    Who Can Form a Tax Group in the UAE?

    To form a Tax Group in the UAE, the following conditions and eligibility criteria must be met:

    1. Legal Persons Only

    • The parent company and subsidiaries must be juridical persons (e.g., LLCs, PJSCs, free zone companies, etc.)
    • Natural persons (individuals) cannot form or be part of a tax group.

    2. UAE Tax Residents

    • All entities must be tax residents in the UAE.
    • Foreign companies can qualify only if they have a permanent establishment in UAE.

    3. Parent–Subsidiary Relationship

    The parent company must own at least 95% of the subsidiary’s share of capital, voting rights, and profits.

    • Same Financial Year: All group members must follow the same financial year for accounting and tax reporting.
    • Unified Accounting Standards: All companies must use the same accounting standards (such as IFRS).

    4. Corporate Tax Registration

    Each entity must be registered for UAE corporate tax before applying to form a tax group.

    These requirements ensure compliance and allow businesses to benefit from streamlined reporting and consolidated tax filings under a corporate tax group

    Main Objectives of Forming a Tax Group

    The main objectives of forming a tax group in the UAE are as follows:

    • Streamline corporate tax management by submitting one consolidated tax return instead of multiple filings.
    • Allow group entities to offset internal profits and losses to improve the overall taxable position.
    • Simplify the movement or transfer of assets, liabilities, and internal transactions between group companies without creating separate tax consequences.
    • Optimise and potentially reduce the total corporate tax payable across the entire group.

    Eligibility Criteria for Forming a Corporate Tax Group in the UAE

    Businesses can create a corporate tax group only if they fulfil specific regulatory requirements set out under the UAE corporate tax regime. These include:

    • Shared Ownership Structure: A single parent entity must control a minimum of 95% of the subsidiary’s shareholding, voting power, and profit entitlements. This control may be exercised directly or through multiple levels of ownership.
    • UAE Tax Residency Requirement: Every company within the group must be classified as a UAE tax resident. Foreign or non-resident entities cannot be part of the group structure.
    • Aligned Financial Reporting Timeline: All participating companies must operate on the same financial year calendar to maintain unified tax reporting.
    • Consistent Accounting Approach: Members must adhere to identical accounting frameworks, typically based on International Financial Reporting Standards (IFRS), to ensure accurate consolidation.
    • Entities Not Eligible to Join: Certain businesses are restricted from forming or joining a corporate tax group, such as Free Zone companies claiming the 0% Corporate Tax incentive (unless they voluntarily switch to 9%), regulated financial sector entities, and companies where the ownership threshold falls below 95%.

    Key Benefits of Forming a Corporate Tax Group in the UAE

    Setting up a corporate tax group in the UAE isn’t just about combining companies under one umbrella; it requires strategic planning, documentation, and regulatory approval.

    The UAE Corporate Tax Grouping process is structured to ensure transparency and accurate financial reporting across all participating entities. Here’s a clear roadmap to guide your corporate tax group formation:

    Step 1: Confirm Eligibility

    Before starting the registration process, verify that all companies meet the legal and financial criteria for a tax group, UAE corporate tax setup:

    • Every member must be a UAE tax resident and classified as a resident person under corporate tax law.
    • The parent entity should meet the minimum ownership and control requirements over each subsidiary.

    Step 2: Compile Required Documentation

    Prepare essential records and agreements that demonstrate structure and compliance:

    • Valid trade licences for the parent company and all subsidiaries.
    • Recent financial statements for each entity.
    • An organisational chart outlining ownership percentages.
    • A signed agreement confirming all parties’ consent to join the UAE corporate tax group.

    Step 3: File the Application with the FTA

    The parent company is responsible for applying electronically through the Federal Tax Authority portal. You will also need to indicate the intended first tax period for the group. During the review, the FTA may request additional evidence or clarification.

    Step 4: FTA Assessment & Decision

    The Federal Tax Authority examines the request to confirm eligibility and regulatory compliance. Formal approval is granted only if all requirements are met throughout the process.

    Step 5: Formation & Tax Registration

    Once approved, the tax group will officially be recognised from the date determined by the FTA. A unique Tax Registration Number (TRN/TIN) will be issued for the entire group, while each entity retains its individual TRN for internal administrative purposes. From this point, the parent company becomes legally responsible for tax filings, reporting, and payments on behalf of the group.

    Although the process is straightforward in theory, practical challenges can arise during audits or documentation reviews. Partnering with a certified corporate tax agent in Dubai, such as Shuraa Tax, can simplify compliance, reduce delays, and ensure accurate group procedures under the UAE corporate tax grouping regulations.

    Challenges of Forming a Tax Group in the UAE

    While tax grouping delivers many operational and financial advantages, it also comes with specific challenges that companies should evaluate before proceeding:

    1. Collective Tax Responsibility: Every entity within the group becomes jointly accountable for the total corporate tax due. If one company fails to meet its obligations, the burden may fall on the others.
    2. Financial Reporting Complexity: Creating consolidated accounts requires consistent accounting policies, coordinated financial management, and, often, external professional support, increasing time and costs.
    3. Complications During Structural Changes: Restructuring the group, such as adding a subsidiary or removing an existing member, can trigger tax consequences and require approval, documentation, and recalculation of taxable positions.

    Criteria for Transferring Tax Losses Within a Group

    Tax loss transfers can help balance profitability across group members, but only under specific conditions:

    • The company receiving the loss must be at least 75% owned (directly or indirectly) by the same parent company.
    • The receiving entity cannot be exempt from corporate tax and must not be based in a 0% Free Zone regime.
    • The losses transferred are limited; they cannot exceed 75% of the company receiving the transfer taxable income.

    The UAE corporate tax framework enables businesses with shared ownership to form tax groups to simplify compliance, reduce administrative effort, and optimise overall tax outcomes.

    With a clear understanding of requirements, procedures, and associated risks, companies can maximise the advantages of tax grouping and manage their corporate tax responsibilities more efficiently in the UAE.

    Empowering Businesses Through Strategic Tax Grouping

    In summary, forming a corporate tax group under the UAE corporate tax regime is a strategic way for businesses to simplify compliance, optimise tax planning, and streamline financial management.

    As explained in A Guide to Corporate Tax Groups in the UAE, UAE Corporate Tax Grouping enables eligible companies to file a single tax return, offset profits and losses, and improve overall tax efficiency. While there are regulatory requirements and challenges to consider, the long-term benefits make corporate tax group formation a valuable option for multi-entity businesses.

    For expert support with the tax group, UAE corporate tax setup and compliance, connect with Shuraa Tax today.

    📞 Call: +(971) 44081900

    💬 WhatsApp: +(971) 508912062

    📧 Email: info@shuraatax.com

    Frequently Asked Questions

    Q1. What does forming a Corporate Tax Group in the UAE mean?

    A corporate tax group allows multiple companies under the same ownership structure to be treated as a single taxable entity. Instead of filing several tax returns, the parent company submits one consolidated return for the entire group, simplifying compliance and tax administration.

    Q2. How is ownership eligibility assessed when creating a UAE Corporate Tax Group?

    To establish a corporate tax group, the parent entity must hold a minimum of 95% of the subsidiary’s equity, voting power, and rights to profits. This level of control ensures unified financial management and tax oversight across the group.

    Q3. Is it possible for a member of the company to leave the Corporate Tax Group?

    Yes, a subsidiary can be withdrawn or removed if it fails to meet the required conditions, for example, by falling below the ownership threshold or becoming a Qualifying Free Zone Person (QFZP). Any removal takes effect at the start of the following tax period.

    Q4. Are there challenges associated with forming a Corporate Tax Group in the UAE?

    One of the main limitations is that every member must follow the same financial year and accounting standards. This requirement may complicate internal restructuring and delay operational flexibility when expanding or reorganising the business.

    Q5. What are the key benefits of forming a Corporate Tax Group?

    Tax grouping enables offsetting profits and losses within the group, reduces overall tax payable, streamlines record-keeping, and avoids double taxation on internal transactions.

    Q6. Can Free Zone companies join a Corporate Tax Group?

    Free Zone entities may join only if they are not Qualifying Free Zone Persons (QFZPs). QFZP-status businesses cannot be part of a group to retain their 0% tax benefit.

    Q7. How does VAT registration differ from Corporate Tax Grouping?

    VAT groups and corporate tax groups are independent of each other. Even if companies are part of a VAT group, they must apply separately to form a corporate tax group under UAE corporate tax rules.

    Q8. Who is responsible for tax payments within a Corporate Tax Group?

    The parent company is legally responsible for submitting the tax return and paying the due corporate tax for the entire group, although internal agreements may allow cost-sharing among members.

    Q9. Does forming a Corporate Tax Group require approval?

    Yes, businesses must apply to the Federal Tax Authority (FTA). Grouping becomes valid only after formal approval has been granted.

    Q10. Can companies with different business activities join the same tax group?

    Yes, as long as all eligibility criteria are satisfied, including ownership thresholds, tax residency, and unified financial reporting.

  • UAE Corporate Tax Registration: Who Must Register?

    UAE Corporate Tax Registration: Who Must Register?

    Corporate tax has transformed the business landscape in the UAE, bringing the country in line with global transparency and tax standards. Whether you operate a multinational company, a free zone entity, a small consultancy, or a freelance business, understanding the UAE Corporate Tax Registration rules is essential for staying compliant and protecting your license.

    The new tax framework is governed by Federal Decree-Law No. 47 of 2022, and registration is managed through the Federal Tax Authority (FTA) via the EmaraTax digital portal. Once registered, companies receive a Tax Registration Number (TRN) and are required to file an annual return, usually within nine months from the end of the financial year.

    Many assume that registration is only required for businesses that actually pay tax. However, under the law, registration is mandatory even if your income is below the taxable limit, or you qualify for exemptions. It proves your compliance, enables access to reliefs, and strengthens trust with banks, partners, investors, and regulators.

    Failing to register can result in:

    • An AED 10,000 penalty
    • Potential licensing restrictions or renewal blocks
    • Reputational risk and compliance issues

    Who Is Required to Register for Corporate Tax in the UAE?

    The Corporate Tax Law defines a wide range of entities that must complete corporate tax registration UAE procedures. Key categories include:

    1. Mainland and Free Zone Companies

    All incorporated legal entities operating in the UAE must register, regardless of size, revenue, or tax rate. This includes:

    • Mainland companies, LLCs, PJSCs, PSCs, and other registered entities
    • Free Zone companies, including those eligible for 0% tax on qualifying income
    • Holding companies and special purpose vehicles
    • Dormant companies that hold an active commercial license

    If you possess a UAE trade license, you are required to register. Free zones are not exempt from registration; only the potential tax payment varies.

    2. Foreign Companies with Taxable Nexus

    Foreign companies must register if they have a taxable presence in the UAE through:

    • A Permanent Establishment (PE), such as a branch, office, or fixed site
    • Effective place of management in the UAE
    • Income derived from real estate or immovable property inside the UAE

    Foreign investors should evaluate whether strategic decisions or operations in the UAE trigger the need for registration.

    3. Individuals Earning More Than AED 1 million Annually

    Corporate tax also applies to natural persons conducting business activities in the UAE. Must register once annual UAE business income exceeds AED 1 million, including:

    • Freelancers & consultants
    • Influencers and online earners
    • Sole proprietorships and traders
    • Independent professionals under permits or licenses

    Not included: salary income, personal dividends, savings, returns on real estate owned personally.

    4. Independent Partnerships

    Professional partnerships such as:

    • Legal firms
    • Accounting & audit firms
    • Medical or engineering partnerships

    These partnerships are treated as single taxable entities, not as individual partners.

    Who Is Exempt from Corporate Tax Registration?

    Specific categories are exempt, but may still need to apply for a TRN:

    Exempt Category Notes
    Government entities Fully exempt by law
    Government-controlled sovereign entities Exempt for specific activities
    Approved charities & public benefit organisations Must apply for recognition
    Qualifying investment funds Must meet conditions to maintain exemption
    Extractive and non-extractive natural resource activities Taxed under separate regimes

    Note: Some exempt persons must still register to file annual declarations.

    Voluntary UAE Corporate Tax Registration

    Businesses can voluntarily register before they become liable. Benefits include:

    • Enhanced credibility with banks and investors
    • Better accounting structure and record keeping
    • Easier scaling and compliance readiness
    • Ability to claim future exemptions or reliefs

    Voluntary registration does not trigger tax payments until thresholds are met.

    EmaraTax Pre-Registration

    The FTA introduced pre-registration invitations within the EmaraTax portal, encouraging businesses to register before deadlines. If your company did not receive an invitation, you should register manually without delay to avoid penalties.

    Documents Required for Corporate Tax Registration

    Below are the documents required for corporate tax registration in the UAE:

    For Companies

    • Trade license copy
    • MOA / AOA or partnership agreement
    • Passport & Emirates ID for shareholders/directors
    • Contact information and registered business address
    • Financial year details
    • Financial statements (if requested)

    For Individuals

    • Emirates ID or passport
    • Trade license or permit (for business activities)
    • Proof of UAE business income
    • Contact information and address details

    Strategic Benefits of Early Registration

    • Banking and investor confidence
    • Access to Free Zone relief & Small Business Relief
    • Smooth license renewals
    • Avoidance of penalties and delays
    • Strong compliance reputation

    Large Multinationals & OECD Pillar 2 Alignment

    For multinational groups with revenues exceeding €750 million (approx. AED 3.15 billion):

    • The UAE has implemented the Domestic Minimum Top-Up Tax (DMTT) at 15%
    • Applies to financial years beginning 1 January 2025
    • Applies to groups with multiple international entities operating across jurisdictions

    Multinationals should:

    • Review structure and data systems
    • Register all constituent entities
    • Prepare transition readiness

    Expert Guidance With UAE Corporate Tax Registration

    Understanding who needs to register for UAE Corporate Tax is the first step; executing it correctly is crucial to avoid penalties and secure compliance confidence.

    Shuraa Tax supports SMEs, free zone companies, partnerships, investors, individuals, and multinationals with complete compliance management, including:

    Start your registration with expert support

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

    Frequently Aksed Questions

    Q1. Do all UAE businesses need to register for corporate tax?

    Yes. All companies must register, even if they have no profit.

    Q2. Do dormant companies need to register?

    Yes, if they still hold a valid trade license.

    Q3. Do small businesses below AED 375,000 profit need to register?

    Yes. Relief affects tax payable, not registration requirements.

    Q4. Are charities required to obtain a TRN?

    Most must register first and then apply for exemption.

    Q5. Can individuals register voluntarily below AED 1M?

    Yes, useful for credibility and growth readiness.

    Q7. Does registration mean tax must be paid?

    No. Filing is required, but payment depends on thresholds and reliefs.

    Q8. What is the penalty for late registration?

    AED 10,000.

    Q9. What if a business shuts down?

    Submit a deregistration request via EmaraTax.

  • France and UAE Double Tax Treaty: All You Need to Know

    France and UAE Double Tax Treaty: All You Need to Know

    Paying taxes in two different countries for the same income sounds unfair, right? That’s exactly why double tax treaties exist. These agreements between countries make sure you don’t end up paying tax twice on the same earnings. They clearly define where your income should be taxed – in the country where you earn it or the country where you live – making cross-border business and investment much simpler and fairer.

    The France–UAE Double Tax Treaty, first signed on 19 July 1989 and updated in 1993, is one such agreement. It sets out clear rules for how various types of income such as like salaries, dividends, capital gains, or business profits are taxed when money flows between France and the UAE. The treaty also explains what it means to be a “tax resident” and when a business is considered to have a “permanent establishment” in either country.

    This treaty is especially valuable for investors, expatriates, and companies working between France and the UAE. For example, French citizens or businesses earning in the UAE can enjoy more clarity and fewer tax obligations since the UAE does not impose personal income tax. Similarly, UAE residents or firms investing in France can benefit from reduced withholding taxes and fairer tax treatment.

    In simple terms, understanding this treaty can help you save money and plan your taxes smarter.

    What is a Double Tax Treaty?

    A Double Tax Treaty (DTT) is an agreement between two countries that ensures the same income isn’t taxed twice. Imagine you earn money in one country while living in another – without a treaty, both countries could ask you to pay tax on the same income. That’s where a DTT comes in to prevent this problem. Beyond protecting individuals and businesses from extra taxes, DTTs also encourage cross-border trade and investment.

    Overview of the France-UAE Double Tax Treaty

    The UAE and France Double Tax Treaty was signed in 1989 and came into effect in 1990. This agreement was created to make cross-border financial activities between the two countries simpler, fairer, and more predictable.

    Key Objectives:

    The treaty serves three main purposes:

    • Avoidance of double taxation: Ensures that individuals and businesses do not pay tax twice on the same income in both countries.
    • Prevention of tax evasion: Encourages transparency and cooperation between France and the UAE’s tax authorities.
    • Encouragement of mutual investment: Provides certainty and protection for investors, making it easier to invest or do business across borders.

    Taxes Covered Under the Treaty:

    The treaty mainly applies to income taxes and corporate taxes, covering various forms of income, including:

    • Salaries and wages
    • Business profits
    • Dividends, interest, and royalties
    • Capital gains

    Key Provisions of the France–UAE Double Tax Treaty

    The France–UAE Double Tax Treaty aims to prevent individuals and businesses from being taxed twice on the same income. Here’s a breakdown of the main provisions:

    1. Residence & Permanent Establishment

    • Resident: The treaty defines who is considered a “resident” of France or the UAE for tax purposes.
    • Dual residency: If a person or company qualifies as a resident in both countries, the treaty provides tie-breaker rules to determine primary residency.
    • Permanent establishment (PE): Businesses are considered to have a PE if they have a fixed place of business in the other country, which determines where business profits are taxable.

    2. Withholding Tax (WHT) Rates on Passive Income

    One of the most favourable aspects of the France-UAE DTT is the zero-rate withholding tax on key passive income streams flowing between the two countries.

    Type of Income Source Country WHT Rate (Treaty) Key Details
    Dividends 0% Dividends paid by a French company to a UAE resident (or vice-versa) are generally subject to a 0% withholding tax rate in the source country.
    Interest 0% Interest payments arising in one country and paid to a resident of the other are subject to a 0% withholding tax rate in the source country.
    Royalties 0% Royalties (payments for the use of intellectual property, patents, trademarks, etc.) are subject to a 0% withholding tax rate in the source country.

    Note: While the DTT sets the maximum rate for France to impose WHT on payments to the UAE, the UAE’s domestic law currently maintains a 0% WHT rate on most payments to non-residents (including dividends, interest, and royalties) under its Corporate Tax Law.

    3. Taxation of Capital Gains

    The treaty allocates the right to tax capital gains based on the nature of the asset being sold:

    • Immovable Property: Gains derived from the disposal of real estate (immovable property) are taxed in the country where the property is located (situs principle).
    • Real Estate Rich Companies: Gains from the alienation of shares in a company whose assets consist predominantly (typically more than 50% or 80%) of immovable property located in France are generally taxable in France.
    • Other Assets: Gains from the disposal of non-real estate assets, such as shares not related to property and other financial securities, are generally taxed only in the country where the seller is a tax resident (e.g., in the UAE if the seller is a UAE resident).

    4. Employment Income

    • UAE Residents: Employment income earned in the UAE is generally exempt from French tax, unless the individual performs services in France for more than 183 days in a year.
    • French Residents: Employment income earned in the UAE is generally exempt from French tax, subject to specific conditions.

    5. Taxation of Business Profits (Permanent Establishment – PE)

    The DTT uses the concept of a Permanent Establishment (PE) to determine when a company from one country must pay corporate tax in the other.

    • General Rule: Business profits of an enterprise of one country are only taxable in the other country if the enterprise carries on business through a PE situated in that other country. If a PE exists, only the profits attributable to that PE may be taxed in the host country.
    • Fixed Place PE: A PE typically includes a place of management, branch, office, factory, or workshop.
    • Construction/Installation Projects: A building site or construction, installation, or assembly project constitutes a PE only if it continues for a period of more than six months.
    • Dependent Agent PE: An enterprise is deemed to have a PE if a dependent agent habitually exercises authority to conclude contracts on behalf of the enterprise in the host country.

    6. Inheritance and Wealth Tax

    • Inheritance Tax: Covered under the treaty; however, French inheritance tax applies to French real estate.
    • Wealth Tax (IFI): Non-residents are subject to IFI only on French real estate; foreign assets are not taxed.

    7. Tax Residency and Treaty Benefits

    To claim treaty benefits, UAE residents must provide a Tax Residency Certificate issued by the UAE Federal Tax Authority. The treaty includes provisions to prevent abuse and ensure that benefits are not granted to entities lacking substantial economic activity.

    Who Benefits from the Treaty?

    The France–UAE Double Tax Treaty is designed to help individuals and businesses that have financial ties between the two countries. Here’s who can benefit:

    1. Expatriates and Employees

    Individuals living in one country but earning income from the other – like a French citizen working in the UAE or a UAE resident earning French dividends- can avoid being taxed twice. Salaries, pensions, and other personal income are covered, making it easier to plan finances and reduce tax liabilities.

    2. Businesses and Companies

    • Companies operating in both countries can benefit from lower withholding taxes on dividends, interest, and royalties.
    • Businesses with permanent establishments in the other country know exactly how their profits will be taxed, helping them make smarter investment and expansion decisions.
    • The treaty also encourages cross-border trade, making it easier for French and UAE businesses to collaborate without facing double taxation issues.

    3. Investors

    • Individuals or companies investing in property, stocks, or businesses in the other country benefit from reduced or exempt taxes on returns.
    • Investors enjoy legal certainty when it comes to tax obligations, making the France–UAE market more attractive for long-term investment.

    Avoidance of Double Taxation – How It Works

    One of the main goals of the France–UAE Double Tax Treaty is to ensure that income isn’t taxed twice. The treaty uses two common methods to achieve this: the exemption method and the credit method.

    1. Exemption Method

    Under the exemption method, certain types of income earned in one country are completely exempt from tax in the other country. For example, if a UAE resident earns income in France that falls under the treaty’s exemption rules, France may tax it, but the UAE will not. This method completely removes the risk of being taxed twice on the same income.

    2. Credit Method

    The credit method allows the country of residence to give a tax credit for taxes already paid in the other country. For instance, if a French resident earns income in the UAE and pays UAE taxes, France may still tax the income, but the French tax authority will deduct the UAE tax paid from the French tax liability. This ensures the total tax doesn’t exceed what would have been paid in one country alone.

    How to Claim Benefits Under the Treaty

    If you’re earning income or running a business between France and the UAE, you can take advantage of the treaty to avoid double taxation. Here’s how you can claim the benefits:

    1. Get a Tax Residency Certificate

    A tax residency certificate proves that you are a resident of either France or the UAE. This certificate is usually issued by your country’s tax authority and is required to apply for treaty benefits

    2. Determine the Type of Income

    Identify the income type (e.g., dividends, interest, royalties, business profits, employment income). The treaty provides different rules and exemptions depending on the type of income.

    3. Submit the Required Documentation

    Provide the tax residency certificate, proof of income, and any other supporting documents to the tax authority where you’re claiming relief.

    4. Apply for Tax Relief

    Depending on the method used (exemption or credit), request either a full exemption from double taxation or a tax credit for taxes already paid in the other country.

    5. Consult a Tax Expert

    The process can be complex, and small mistakes can delay or reduce your benefits. Firms like Shuraa Tax can guide you through every step, from preparing documents to submitting applications, ensuring you get the full benefit of the treaty.

    Benefits for French Businesses Investing in the UAE

    The France–UAE Double Tax Treaty provides several important advantages for French companies looking to invest or operate in the UAE:

    • Avoids double taxation: Profits earned in the UAE are generally taxed only in one country, reducing the overall tax burden and providing financial certainty.
    • No UAE withholding tax: Dividends, interest, and royalties paid to French businesses are exempt from withholding tax, allowing profits to be repatriated efficiently.
    • Clear rules on business profits: The treaty defines what constitutes a permanent establishment (PE), helping companies understand where their income is taxable and avoid disputes.
    • Encourages long-term investment: Reduced tax risks and clear regulations make the UAE an attractive destination for French businesses to expand, establish branches, or hold long-term stakes.
    • Simplifies cross-border operations: From paying employees to distributing profits or receiving royalties, the treaty provides guidance that streamlines financial and administrative processes.

    Maximize Treaty Benefits with Shuraa Tax Guidance

    The France–UAE Double Tax Treaty plays a vital role in simplifying taxation for individuals, expatriates, and businesses operating between the two countries. It helps avoid paying taxes twice and provides clear rules on how different types of income are taxed, making cross-border work and investment simpler and more predictable.

     That said, international tax rules can still be tricky. Getting advice from tax experts is important to make sure you’re following the rules, claiming all the benefits you’re entitled to, and planning your taxes in the best way. Firms like Shuraa Tax can help with treaty applications, paperwork, and smart tax planning so you don’t have to worry about mistakes.

    If you’re a French national or business operating in the UAE, Shuraa Tax can help you make the most of this treaty and ensure full compliance with UAE Corporate Tax regulations.

    For customised advice and assistance, you can reach out to Shuraa Tax:

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

    Commonly Asked Questions

    1. What is the France–UAE Double Tax Treaty?

    It’s an agreement between France and the UAE to prevent individuals and businesses from paying tax on the same income in both countries.

    2. Who can benefit from this treaty?

    French or UAE residents, businesses, and investors earning income or operating in the other country can benefit.

    3. What types of income does the treaty cover?

    It covers dividends, interest, royalties, business profits, employment income, capital gains, and real estate income.

    4. How does the treaty avoid double taxation?

    Through the exemption method (income taxed in only one country) and the credit method (tax paid in one country is credited in the other).

    5. Can French businesses investing in the UAE get tax relief?

    Yes. They may benefit from reduced withholding taxes, clear rules on business profits, and legal certainty when operating across borders.

  • How to Cancel VAT Registration in UAE?

    How to Cancel VAT Registration in UAE?

    If you’re a business owner in the UAE, you might reach a stage where staying VAT-registered is no longer necessary. Maybe your company’s revenue has fallen below the mandatory threshold, or perhaps you’ve stopped making taxable supplies altogether. In such cases, understanding how to cancel VAT registration in UAE becomes crucial.

    VAT cancelation, also referred to as how to deregister from VAT UAE, is not just about closing a tax account; it’s about ensuring your business remains fully compliant with the Federal Tax Authority (FTA) rules. The process involves submitting the correct application, settling any outstanding liabilities, and ensuring your tax returns are up to date. While it might sound complex at first, it’s actually a straightforward and manageable process when broken down step by step.

    In this guide, we’ll cover everything you need to know about VAT deregistration in the UAE, from eligibility conditions to the application process, timelines, and important points to watch out for, so you can smoothly handle your VAT exit without any penalties.

    When Should You Cancel Your VAT Registration in the UAE?

    Knowing when to cancel your VAT registration in the UAE is crucial for staying compliant and avoiding unnecessary penalties. VAT cancelation isn’t just paperwork; it reflects that your business no longer meets the conditions for VAT or chooses to step back voluntarily.

    You must apply for VAT deregistration in the UAE under these circumstances (as per Article 21 of the VAT Law):

    • Business activities have stopped: If your company has completely stopped supplying taxable goods or services, it’s time to deregister.
    • Turnover falls below the threshold: If your business turnover in the past 12 months was less than AED 187,500 and you do not expect it to exceed this threshold in the next 30 days, cancelation becomes necessary.

    In these cases, deregistering is mandatory.

    Voluntary VAT Deregistration

    Sometimes, businesses can choose to deregister even if it’s not strictly required. According to Article 22, a business may voluntarily apply for VAT deregistration if:

    • Taxable supplies in the previous 12 months were less than AED 375,000.

    However, Article 23 adds an important rule: a business that initially registered voluntarily cannot deregister within the first 12 months of registration.

    What is the Eligibility to Cancel VAT in the UAE?

    VAT cancelation in the UAE is a formal process that allows a business to cancel its VAT registration when it no longer meets the criteria for being a taxable person. Understanding VAT deregistration rules is essential to ensure compliance and avoid penalties.

    A business or individual can apply for VAT deregistration in the UAE under the following conditions:

    1. Business Stops Taxable Supplies: If your business ceases to provide goods or services subject to VAT, you are eligible to deregister. This includes firms that close operations entirely or pivot to activities not subject to VAT.
    2. Annual Revenue Falls Below Threshold: Businesses whose taxable supplies (and imports) fall below the mandatory VAT registration threshold, currently AED 187,500, may apply for voluntary cancelation.
    3. Temporary Suspension of Business Activities: If your business temporarily halts all taxable activities for more than six months, you may request VAT cancelation.
    4. Non-Trading Entities: Companies that were registered for VAT but never commenced trading can apply for deregistration immediately.
    5. Changes in Business Structure: If your company merges, dissolves, or is liquidated, it becomes eligible to cancel its VAT registration.

    It’s essential to comply with the VAT deregistration rules established by the Federal Tax Authority (FTA) to avoid fines or legal consequences. Businesses must submit accurate records of all taxable supplies and ensure that all outstanding VAT is paid before approval for deregistration is granted.

    Documents Required for VAT Cancelation in UAE

    If you’re planning to cancel your VAT registration in the UAE, it’s essential to understand the VAT deregistration rules and ensure all necessary documents are ready.

    The Federal Tax Authority (FTA) requires specific paperwork to process your request efficiently. Here’s a comprehensive guide to the documents required for VAT deregistration in UAE:

    • Most recent financial statements & turnover template
    • Copy of revoked trade or business license
    • Board resolution authorising VAT deregistration
    • Letter of liquidation (if closing)
    • Evidence suggests that business operations have ceased
    • Updated HR records & Ministry of Labour letter on employees
    • Sample invoices & letters confirming chargeable expenses
    • Previous and updated sales agreements or licenses
    • TRNs, correspondence mentioning TRNs, and Head Office Business Certificate
    • Diagram of business operations (suppliers, customers, countries)
    • Outline of suppliers, importers, and partners
    • Modified business setup agreement (if applicable)
    • Sealed letter confirming non-operation in the UAE (if required)

    By preparing these documents in advance, you ensure a smooth process when applying for VAT deregistration. Following the VAT deregistration requirements in UAE carefully helps avoid delays and ensures compliance with local tax laws.

    How to Cancel VAT Registration in UAE?

    Following VAT deregistration rules, here’s how you can deregister VAT in UAE step by step:

    Step 1: Log in to Your EmaraTax Account

    The first step is to access your EmaraTax account, which is the UAE’s official tax portal.

    • Use your registered username and password or log in using UAE PASS.
    • If two-factor authentication is enabled, you’ll receive a One-Time Password (OTP) via your email or mobile. Enter it to proceed.
    • New users: Click Sign Up to create an account and link to your business.

    Tip: Ensure your account details are up to date, including your email address and mobile number, as all VAT deregistration communications will be sent to this address.

    Step 2: Select Your Company Profile

    Once logged in, you’ll see a dashboard with a list of Taxable Persons linked to your account.

    • Select the company for which you want to cancel VAT registration and click ‘View’.
    • If your company isn’t listed, you’ll need to create a Taxable Person in EmaraTax by entering your company details, trade license, and VAT registration number.

    This step ensures you are deregistering the correct entity and prevents errors in the application.

    Step 3: Initiate VAT Deregistration Application

    Now it’s time to officially start the process of deregistering from VAT in the UAE:

    • On the company’s VAT dashboard, click Actions on the VAT tile.
    • Select Deregister to open the VAT deregistration form.

    Tip: This form is the central application where all your details, documents, and reasons for deregistration will be captured.

    Step 4: Update or Review Your Business Information

    Before submitting the deregistration application:

    • Click “Edit/Review” if you need to update details such as bank account, contact information, or company address.
    • Ensure that all essential documents, such as financial statements, are prepared.
    • Click ‘Proceed to De-Registration’ and then ‘Start’ to initiate the formal process.

    Note: If your business is registered under the Tourist Refund System (TRS), your VAT deregistration won’t be finalised until TRS deregistration is completed.

    Step 5: Provide Required Information and Upload Documents

    You will now need to fill in all necessary information and submit supporting documents.

    • Fill every mandatory field accurately to avoid rejections.
    • Upload documents in accepted formats, such as PDF or Excel.
    • Select the reason for deregistration: e.g., business closure, suspension of taxable activities, or turnover below the VAT threshold.
    • Depending on your selected reason, the system will display additional fields to capture specific details.

    Tip: Keep scanned copies of all documents ready before starting this step, as it saves a significant amount of time.

    Step 6: Specify Eligible Deregistration Date

    Next, you’ll enter the date from which your business becomes eligible for VAT deregistration.

    • Automatic date: EmaraTax often calculates this based on your business records.
    • Custom date: If you have a specific reason, you can request a different effective date.

    Important: This date determines your VAT liability period, so make sure it is accurate.

    Step 7: Enter Taxable Supplies and Expenses

    To support your deregistration, you must provide evidence of taxable supplies and expenses:

    • Use the Excel sheet provided in the system to record figures.
    • All amounts must be in AED (UAE Dirhams).
    • After completing the sheet, click Next Step to go to the Authorised Signatory section.

    Tip: Double-check your numbers, as errors in taxable supplies or expenses can cause delays in approval.

    Step 8: Verify Authorised Signatory

    This step ensures that the person applying is authorised:

    • Check the details of the Authorised Signatory listed in the system.
    • You can handle back and forth using the Previous and Next buttons to review details.
    • Confirm the signature, name, and designation.

    Tip: Only an authorised signatory can finalise the deregistration application.

    Step 9: Review and Submit the Application

    Finally, go through the entire application before submitting:

    • Review every detail, including personal information, business details, taxable supplies, and uploaded documents.
    • Once confirmed, click Submit.
    • After submission, EmaraTax will process your deregistration, and you will receive confirmation once it has been approved.

    Tip: Keep a copy of the submitted application and acknowledgement for your records.

    By following these steps carefully, you can complete the VAT deregistration process in the UAE smoothly while complying with the relevant VAT deregistration rules.

    Common Mistakes During VAT Deregistration in UAE

    Deregistering VAT in the UAE can seem straightforward, but businesses often stumble due to misunderstandings or oversights. Here are some of the most common mistakes:

    1. Applying Before Meeting Eligibility Criteria

    Many businesses attempt to deregister before meeting the requirements outlined by the Federal Tax Authority (FTA), such as having taxable supplies below the mandatory threshold or ceasing business operations altogether. Failing to meet these criteria may result in the rejection of your application.

    2. Incomplete or Incorrect Documentation

    Submitting documents with missing information, such as revoked trade licenses, financial statements, or employee details, can cause delays in the process. It’s essential to ensure all required documents are accurate, updated, and aligned with FTA guidelines.

    3. Neglecting Outstanding VAT Payments

    Some businesses overlook pending VAT liabilities or unfiled returns before applying for deregistration. Any unpaid VAT must be settled to avoid fines or rejection of the deregistration request.

    4. Incorrect Reporting of Supplies

    Errors in reporting taxable, zero-rated, or exempt supplies can lead to discrepancies. Accurate records of turnover and VAT transactions are crucial when deregistering.

    5. Failure to Update Business Records

    Failing to reflect changes in HR records, contracts, or financial agreements may create inconsistencies that raise red flags during FTA review.

    6. Ignoring VAT Deregistration Deadlines

    Businesses must apply for deregistration within a specified period after becoming eligible. Missing this window can result in penalties or continued VAT obligations.

    7. Not Using the Emara Tax Portal Properly

    Attempting deregistration outside the official online portal or not following the correct steps in the Emara Tax Account can lead to delays or rejected applications.

    8. Assuming Deregistration Cancels All Liabilities

    Some businesses mistakenly believe VAT deregistration eliminates all past liabilities. Any prior obligations or audits remain enforceable.

    Smoothly Handle Your VAT Exit with Shuraa Tax!

    Understanding how to cancel VAT registration in UAE may seem overwhelming at first, but with the proper guidance, it becomes a straightforward process. By following the VAT cancelation rules, meeting the eligibility criteria, and preparing all the necessary documents for VAT deregistration in the UAE, you can ensure a smooth exit without incurring penalties.

    Remember, whether you’re figuring out how to deregister for VAT in the UAE, learning how to deregister from VAT in the UAE, or handling the process of deregistering VAT in the UAE, staying compliant is key. Carefully following the VAT deregistration requirements in the UAE, from logging into your EmaraTax account to submitting accurate financial records, will save you time, stress, and unnecessary fines.

    For expert assistance and to make sure your deregistration process is handled seamlessly, turn to Shuraa Tax. Their team can guide you through every step and ensure your VAT exit is fully compliant with the Federal Tax Authority.

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

    Frequently Asked Questions

    1. What is the timeline for VAT deregistration approval in the UAE?

    After submitting your deregistration application on EmaraTax, the Federal Tax Authority (FTA) typically takes 20 business days to review and respond. However, this can vary based on:

    • The accuracy of your application and documents.
    • Whether you have outstanding liabilities or returns.
    • The need for any additional clarification or audits.

    It’s recommended to track your application status regularly and respond promptly to FTA requests.

    2. When is a business required to cancel VAT registration in the UAE?

    A business is mandated to cancel its VAT registration if it no longer meets the conditions set by the Federal Tax Authority (FTA). This includes situations where:

    • The business stops making taxable supplies, or
    • Its taxable turnover falls below AED 187,500 over the past 12 months and is not expected to exceed that amount in the next 30 days.

    3. Can a business apply for voluntary VAT deregistration in the UAE?

    Yes, a business may apply for voluntary deregistration if its taxable supplies over the past 12 months are less than AED 375,000. However, if the business registered voluntarily in the first place, it cannot deregister within the initial 12 months of registration, as per Article 23 of the UAE VAT Law.

    4. Can a business re-register for VAT in the future?

    Yes. If a deregistered business later meets the VAT registration threshold (currently AED 375,000 for mandatory registration), it may apply to re-register with the FTA through EmaraTax. It is important to note that previous non-compliance may impact the approval process.

    5. Is a final VAT return required before deregistration is approved?

    Yes. Before a deregistration request can be processed, the business must:

    • File all pending VAT returns
    • Submit a final VAT return up to the deregistration date
    • Pay any outstanding VAT liabilities

    The FTA will only approve the cancellation once the business is fully compliant and all obligations have been fulfilled.

  • UAE Corporate Tax Compliance: A Complete Guide

    UAE Corporate Tax Compliance: A Complete Guide

    The UAE has always been a favourite place for businesses thanks to its strong economy, modern infrastructure, and global connections. But in January 2022, the country made a big change by introducing a federal corporate tax law (Federal Decree-Law No. 47 of 2022, as amended). From 1 June 2023 onwards, companies in the UAE are required to follow this new system and pay tax on their business profits.

    This means UAE corporate tax compliance has now become a must for all businesses. It’s not only about avoiding penalties; staying compliant also helps companies build trust, keep their reputation strong, and run operations smoothly. On the other hand, ignoring these rules can lead to fines, legal troubles, and unnecessary financial risks.

    Therefore, we’ll explain everything you need to know about corporate tax in the UAE. We’ll cover who needs to pay, the tax rates, registration and filing process, penalties for missing deadlines, special rules for free zones, and practical tips to stay compliant.

    UAE Corporate Tax Overview

    Corporate tax is a direct tax on the profits earned by companies and businesses. In simple terms, it’s a percentage of a business’s net income that must be paid to the government. The UAE introduced this system to align with global standards, diversify revenue streams, and enhance transparency in its economy.

    Key Features of the UAE Corporate Tax System:

    • Introduced under Federal Decree-Law No. 47 of 2022 (as amended).
    • Standard tax rate of 9% on taxable income above AED 375,000.
    • 0% tax rate on profits up to AED 375,000 (to support small businesses and startups).
    • Free zone businesses can still enjoy 0% tax on qualifying income, provided they meet specific conditions.
    • Certain entities (like natural resource businesses and government bodies) are exempt from corporate tax.
    • Complies with OECD global tax standards and includes rules for transfer pricing and transparency.

    What is a Taxable Person?

    A taxable person is any individual or legal entity that is required to pay corporate tax in the UAE. This includes:

    • Resident juridical persons (like LLCs, PSCs, and PJSCs incorporated in the UAE).
    • Non-resident juridical persons with a permanent establishment in the UAE.
    • Natural persons (individuals) who carry on a business activity in the UAE and cross the income threshold set by the FTA.
    • Free zone entities that don’t meet conditions for qualifying income.

    In simple terms, if you’re earning business profits in the UAE (unless exempt by law), you fall under the definition of a taxable person.

    Who is Subject to UAE Corporate Tax?

    The corporate tax applies to a wide range of businesses and individuals with a business license in the UAE.

    • Mainland Companies: All UAE-registered businesses must comply, unless specifically exempt.
    • Free Zone Companies: Subject to corporate tax, but may continue to enjoy 0% on qualifying income if they meet the FTA’s requirements.
    • Offshore Companies: Also within the scope if they earn income from the UAE or manage operations here.
    • Foreign Companies/Individuals: Only taxed if they conduct trade or have a permanent establishment in the UAE.

    What are the UAE Corporate Tax Compliance Requirements?

    For businesses in the UAE, complying with corporate tax is essential to understand your obligations, meet deadlines, and keep proper financial records. Here’s a breakdown of the key requirements:

    1. Determining Your Corporate Tax Obligations

    Every business must first figure out whether it falls under the corporate tax regime. This means checking if you are a taxable person (mainland company, free zone entity, or non-resident with UAE operations) and understanding the applicable tax rates to your income, exemptions, and thresholds.

    2. Corporate Tax Registration with the Federal Tax Authority (FTA)

    All taxable businesses must register with the FTA and obtain a Tax Registration Number (TRN) before they start paying corporate tax. Key points include:

    • Registration can be done online through the FTA portal.
    • Even free zone companies may need to register if they earn non-qualifying income.
    • Failure to register on time can result in penalties and affect your ability to claim certain exemptions.
    • The FTA may require supporting documents, such as a trade license, passport copies of owners, and proof of business operations

    3. Corporate Tax Return Filing Deadlines

    Businesses must file annual corporate tax returns reporting their profits, deductions, and exemptions. Corporate Tax Returns are typically due 9 months after the end of the financial year.

    Returns must include a breakdown of taxable income, expenses, and any free zone qualifying/non-qualifying income. Late or inaccurate filings can result in financial penalties, interest on unpaid tax, or additional audits.

    4. Accounting and Bookkeeping Requirements

    Proper accounting is essential for smooth compliance. Businesses must:

    • Maintain accurate books of accounts, including ledgers, journals, and statements of income and expenses.
    • Follow International Financial Reporting Standards (IFRS) or approved local accounting standards.
    • Track all business transactions, including income, costs, assets, and liabilities.
    • Ensure digital or physical records are readily accessible for FTA review or audit.

    5. Maintaining Audited Financial Statements

    Many companies, especially those in free zones or large businesses, must maintain audited financial statements. Even when not mandatory, audits are highly recommended as they provide credibility and ensure accuracy when filing tax returns.

    6. Documentation & Record-Keeping

    Proper documentation is the backbone of compliance. Businesses must keep:

    • Financial records such as income statements, expense records, invoices, receipts, and bank statements.
    • Contracts and agreements with customers, suppliers, and related parties.
    • Transfer pricing documentation for intercompany transactions to show compliance with OECD guidelines.
    • Any supporting documents that justify deductions, exemptions, or special tax treatments.

    7. Payment of Corporate Tax

    Businesses must ensure that any corporate tax due is paid within the deadlines specified by the Federal Tax Authority (FTA). It is important to reconcile tax returns with actual payments to avoid discrepancies and ensure accuracy. Keeping proof of all tax payments is essential, as these records may be requested during an FTA audit or review.

    8. Transfer Pricing Compliance

    Businesses with related-party transactions must follow arm’s length principles, ensuring that pricing is consistent with what independent parties would agree upon. Companies are required to prepare transfer pricing reports when applicable.

    Remember, Shuraa Tax offers end-to-end corporate tax compliance services in the UAE, including tax registration, corporate tax return filing, advisory on exemptions, and transfer pricing documentation. Our expert team ensures your business meets all corporate tax compliance requirements.

    What are the Penalties for Non-Compliance?

    Non-compliance with UAE corporate tax regulations can lead to significant financial penalties. Here’s an overview of the key penalties businesses may face:

    1. Late Registration Penalty

    Failure to register for corporate tax within the prescribed timeline incurs a fixed penalty of AED 10,000, regardless of the business’s tax liability status. This penalty applies even if the business is not yet liable to pay tax.

    2. Late Filing of Tax Returns

    Businesses that miss the deadline for submitting their corporate tax returns face escalating monthly penalties:

    • AED 500 per month for the first 12 months of delay.
    • AED 1,000 per month if the delay extends beyond 12 months.

    3. Late Payment of Taxes

    If your corporate tax payment is delayed, a 14% annual penalty will start accruing from the day after the deadline. This continues until the full amount is paid, making it crucial to pay on time.

    4. Failure to Keep Proper Records

    Not maintaining accurate financial records or supporting documents can result in fines of AED 10,000 for the first offence and AED 20,000 if repeated within 2 years. Proper records are essential to support your filings and simplify any audits.

    5. Incorrect or Misleading Tax Returns

    Submitting an incorrect tax return can lead to AED 500 penalty, although this can often be avoided if the mistake is corrected before the filing deadline.

    Note: The FTA offers a penalty waiver for businesses that missed registration. If you submit your first corporate tax return within seven months of the end of your first tax period, the AED 10,000 registration penalty can be waived or refunded if already paid.

    Shuraa’s Corporate Tax Compliance Services

    Ensuring corporate tax compliance in the UAE is very important for every business. It helps you avoid fines, stay on the right side of the law, and keep your company running smoothly. From registering with the FTA to filing your tax returns and keeping proper records, each step matters for hassle-free compliance.

    Shuraa Tax is here to make the whole process easier. We offer comprehensive corporate tax compliance services in the UAE, including tax registration, filing corporate tax returns, guidance on exemptions, and transfer pricing documentation.

    Don’t let corporate tax obligations slow your business down. Contact Shuraa Tax today for expert guidance and enjoy smooth, stress-free compliance in the UAE.

    📞 Call: +(971) 44081900

    💬 WhatsApp: +(971) 508912062

    📧 Email: info@shuraatax.com

  • VAT on Educational Services in the UAE

    VAT on Educational Services in the UAE

    The UAE introduced Value Added Tax (VAT) on 1 January 2018, with a standard rate of 5% on most goods and services. The main aim was to create a new source of government revenue and reduce reliance on oil income. Under this system, businesses charge VAT on their sales and can also recover the VAT they pay on their purchases.

    When it comes to VAT on educational services in the UAE, the rules are slightly different. The UAE government has given special treatment to this sector to make sure learning stays affordable. For example, many core education services provided by qualifying institutions, like tuition fees, exams, and curriculum-related books, are zero-rated. This means no VAT is charged to parents, but schools can still claim back the VAT they spend on their costs.

    On the other hand, some services, such as student transport, are exempt, which means no VAT is charged, but schools cannot recover the VAT they pay on related expenses. There are also cases where the standard 5% VAT applies, like on school uniforms, electronic devices (laptops, tablets), canteen food, and extracurricular activities that require extra fees.

    What Is a “Qualifying Educational Institution”?

    In the UAE, not every school or training centre automatically gets special VAT treatment. To fall under the zero-rated category, an institution must be considered a “qualifying educational institution.”

    This includes:

    • Nurseries and preschools
    • Schools (primary and secondary)
    • Higher education institutions such as colleges and universities

    For an institution to qualify, it must meet two key conditions:

    • It should be owned by the federal or local government or receive at least 50% of its funding from them.
    • It must provide a recognised curriculum approved by the relevant authorities.

    If these conditions are met, many of the services offered by the institution, such as tuition fees and curriculum-related materials, can be treated as zero-rated under VAT.

    Zero-Rated VAT on Educational Services in the UAE

    Zero-rated educational services are those where VAT is applied at 0%. This means the institution does not charge VAT on the service, but it can still recover any VAT paid on its expenses. To qualify, the service must be provided by a Qualifying Educational Institution (nurseries, preschools, schools, or higher education institutions that are licensed and recognised by the UAE authorities).

    Examples of Zero-Rated Educational Services:

    • Tuition fees for nursery, primary, and secondary education.
    • Tuition fees for higher education programs (colleges, universities, and similar institutions).
    • Educational services that form part of a recognised curriculum approved by the relevant authority (KHDA, MOE, ADEK, or similar).

    Key Conditions:

    • The institution must be licensed by the competent authority in the UAE.
    • The service must relate directly to the delivery of the recognised curriculum.
    • Additional services (like school transport, uniforms, or extracurricular activities) do not qualify as zero-rated and are usually subject to 5% VAT.

    VAT Exempt Educational Services

    Not all education-related services qualify for the zero-rated VAT category. Some are treated as exempt, which means no VAT is charged to parents, but at the same time, the institution cannot recover the VAT it pays on its related costs.

    What Qualifies as Exempt:

    • Services that are not directly connected to the recognised curriculum.
    • Activities or offerings that go beyond the core purpose of education.

    Examples of Exempt Services:

    • Certain extracurricular activities (such as after-school clubs or hobby classes) if they are not an essential part of the curriculum.
    • Student transport services (home-to-school and back).
    • Student accommodation in dormitories or hostels.

    Difference Between Zero-Rated and Exempt:

    • Zero-rated services (0%): No VAT is charged, but the institution can still claim back the VAT it has paid on expenses.
    • Exempt services: No VAT is charged, but the institution cannot reclaim input VAT on related costs, which could increase overall expenses.

    Standard-Rated (Taxable) Educational Services in the UAE

    Even when an institution is recognised as a Qualifying Educational Institution, not all of its supplies fall under the zero-rated category. Certain goods and services provided by schools, colleges, or universities are treated as standard-rated, meaning they are subject to 5% VAT.

    Examples of Standard-Rated Educational Services:

    • School uniforms and clothing (including sports kits).
    • Electronic devices such as laptops, tablets, or calculators provided by the school.
    • Canteen services, including food and beverages sold to students.
    • Private tutoring or extra classes that are not part of the recognised curriculum.
    • Extracurricular activities that are charged separately and not directly linked to the curriculum.
    • Non-curriculum field trips (e.g., leisure outings).

    Commercial Activities Run by Institutions:

    If a school, university, or training centre operates commercial activities outside its core curriculum (e.g., renting out its facilities, hosting events, or selling non-educational products), those activities are also subject to 5% VAT.

    This distinction ensures that only the essential, curriculum-based educational services benefit from zero-rating, while all other commercial or supplementary services are treated like standard business activities under VAT law.

    VAT on Related Goods and Services

    In addition to tuition and core education, many schools and universities provide related goods and services. These can fall under different VAT categories depending on whether they are part of the recognised curriculum or additional offerings.

    1. Books and Printed Materials

    Zero-rated if the books or learning materials are directly related to the approved curriculum. For example, textbooks and required reading materials supplied by the school are zero-rated.

    2. Extracurricular Activities & After-School Programs

    Usually standard-rated (5%), unless they are an essential part of the approved curriculum. For example, sports clubs, music lessons, or hobby classes offered for an extra fee.

    3. Boarding School Accommodation & Meals

    Accommodation in student dormitories is generally exempt (like residential housing).

    Meals and food services provided separately (e.g., cafeteria, dining halls) are standard-rated (5%).

    So, if the goods or services are directly tied to the formal curriculum, they may be zero-rated. Otherwise, they are either exempt or taxable at the standard 5% rate.

    VAT Registration & Input Tax Recovery

    Educational institutions in the UAE must carefully assess whether they need to register for VAT, as this directly impacts their ability to charge VAT and recover input tax.

    Mandatory Registration:

    An institution must register for VAT if the value of its taxable supplies (standard-rated + zero-rated) exceeds AED 375,000 in the past 12 months, or if it expects to cross this amount in the next 30 days.

    Voluntary Registration:

    Institutions can also register voluntarily if their supplies or expenses exceed AED 187,500. This can be useful for recovering input VAT on purchases.

    Exemption from Registration:

    If a school or university makes only zero-rated supplies (e.g., tuition fees, curriculum books), it may apply for an exemption from VAT registration. However, this comes with a trade-off: the institution will not be able to reclaim input VAT on its expenses (like utilities, equipment, or maintenance).

    Input VAT Recovery Rules:

    Institutions that are VAT-registered can reclaim input VAT on most qualifying purchases.

    Exceptions:

    • Costs related to exempt supplies (e.g., student transport, accommodation).
    • Blocked expenses, such as entertainment services or vehicles used for personal purposes.

    How Shuraa Tax Can Assist

    VAT has a big impact on the education sector in the UAE, but the rules are designed to keep essential learning affordable. Tuition fees and curriculum-related books are usually zero-rated, while things like uniforms, meals, and transport are charged at 5% VAT. Some services, like extracurricular activities, may even be exempt. Knowing the difference helps schools, universities, and parents plan better and avoid surprises.

    That said, VAT on the education sector in the UAE can sometimes feel confusing. This is where expert support makes all the difference.

    At Shuraa Tax, we help schools and other educational institutions with everything related to VAT – from registration and filing to figuring out which services are zero-rated, exempt, or taxable. With our guidance, you can stay compliant, avoid penalties, and keep your operations stress-free.

    Reach out to Shuraa Tax, and we’ll make it simple for you.

    Commonly Asked Questions

    1. Is there VAT on educational services in the UAE?

    Yes. VAT applies differently depending on the type of service – some are zero-rated, some are exempt, and others are charged at the standard 5% rate.

    2. Are school fees subject to VAT in the UAE?

    Tuition fees charged by qualifying schools (nurseries, primary, secondary) are usually zero-rated if the school is licensed by the competent authority.

    3. Is VAT charged on university tuition fees?

    Yes, but if the university is a qualifying institution licensed by the Ministry of Education (MOE) or another authority, tuition fees are zero-rated.

    4. Do parents pay VAT on school transport and uniforms?

    School transport (home to school and back) is exempt from VAT. Uniforms are subject to 5% VAT regardless of the provider.

    5. Are books and learning materials subject to VAT?

    Books and printed or digital materials that are directly related to the official curriculum and supplied by a qualifying institution are zero-rated. Other materials not tied to the curriculum are subject to 5% VAT.

    6. Are extracurricular activities subject to VAT?

    Extracurricular activities offered for a separate fee are standard-rated (5%). If they’re part of the curriculum and offered without extra charge, they may be zero-rated.

  • What Are the Three Golden Rules of Accounting?

    What Are the Three Golden Rules of Accounting?

    Accounting is the backbone of any business, whether it’s a small startup or a large enterprise. Maintaining clear and accurate financial records is essential for making informed decisions, managing cash flow effectively, and ensuring long-term economic stability and growth.

    Understanding the basic accounting rules is necessary for keeping your books organised and compliant with legal and financial standards. These include the fundamental principles of financial accounting and the basic rules of bookkeeping, which govern how transactions are recorded, classified, and reported.

    Partnering with experts like Shuraa Tax can help businesses effectively implement these rules, ensuring accurate taxation, seamless compliance, and peace of mind. By following these fundamental principles, companies can maintain a clear financial position and focus on their core competencies.

    Why Accounting Rules Matter?

    Accounting is often referred to as the language of business, and like any language, it only functions effectively if everyone adheres to the rules. Basic accounting rules and concepts ensure that financial information is recorded accurately, consistently, and transparently. For any business, whether a startup or a multinational, adhering to these rules is essential for three main reasons: accuracy, transparency, and compliance.

    Accuracy ensures that all transactions are accurately recorded, providing business owners with a clear picture of their financial health. Transparency enables stakeholders, such as investors, banks, and regulators, to trust the information presented to them. Compliance ensures that businesses meet legal and regulatory obligations, avoiding penalties and legal issues.

    Key to Compliance and Growth in the UAE

    In the UAE business context, following basic rules of financial accounting is especially important due to stringent regulations from the Federal Tax Authority (FTA). Companies are required to maintain accurate records to file taxes correctly, submit audit reports when necessary, and demonstrate compliance with UAE corporate and VAT regulations. Errors or omissions can result in fines, delayed approvals, or reputational damage.

    This is where Shuraa Tax comes in. Shuraa Tax helps businesses handle these complex requirements by providing expert guidance on applying accounting principles correctly. From maintaining precise records to ensuring timely tax filings, Shuraa Tax ensures that companies remain fully compliant with UAE financial regulations while focusing on growth.

    By following basic accounting rules and concepts, businesses in the UAE can not only meet legal obligations but also gain valuable insights into their operations, make informed decisions, and build trust with stakeholders.

    What are the Three Golden Rules of Accounting?

    Accounting might seem tricky at first, but at its core, it’s guided by 3 basic accounting rules. These rules, also known as the basic accounting golden rules, facilitate the accurate recording of financial transactions. Let’s break them down in a simple, easy-to-understand way.

    1. Debit the Receiver, Credit the Giver (Personal Account)

    This rule applies to personal accounts, which relate to people, firms, or organisations.

    1. Rule: When someone receives value, debit them. When someone gives value, give them credit.
    2. Example: If a business buys goods on credit from Raj, Raj is giving goods, and the company is receiving them.
    • Entry
    • Debit: Purchases Account
    • Credit: Raj’s Account

    This rule ensures that the flow of value between individuals or organisations is accurately recorded.

    2. Debit What Comes In, Credit What Goes Out (Real Account)

    This rule applies to real accounts, which represent tangible assets such as cash, machinery, or inventory.

    1. Rule: When an item enters the business, debit it. When something goes out, credit it.
    2. Example: If the company buys a machine for cash:
    • Entry:
    • Debit: Machinery Account (it comes in)
    • Credit: Cash Account (it goes out)

    Using this rule helps track the movement of tangible assets accurately and efficiently.

    3. Debit Expenses and Losses, Credit Income and Gains (Nominal Account)

    This rule applies to nominal accounts, which include all incomes, expenses, gains, and losses.

    1. Rule: Record expenses and losses on the debit side, and income and gains on the credit side.
    2. Example: If the company earns interest income:
    • Entry: 
    • Debit: Bank Account (money comes in)
    • Credit: Interest Income Account

    This rule ensures that the company’s profitability is reflected correctly in the accounts.

    Why Do These 3 Basic Accounting Rules Matter?

    The basic three rules of accounting form the foundation of all bookkeeping. They simplify complex financial transactions, ensure accuracy, and make it easy to prepare financial statements. By understanding these basic accounting debit and credit rules, anyone can maintain precise and reliable records.

    Practical Application of These Rules

    Understanding the 3 basic accounting rules is one thing but seeing them in action is where their actual value shines. These rules are the backbone of day-to-day business bookkeeping and financial management.

    1. Managing Expenses

    When a business pays rent, utility bills, or salaries, these are expenses. Using the nominal account rule, Which Involves Debiting Expenses and Losses and Crediting Income and Gains, ensures that these costs are appropriately recorded.

    • Example: Paying office rent of AED 5,000:
    • Debit: Rent Expense Account AED 5,000
    • Credit: Bank Account AED 5,000

    This makes it easy to track where money is being spent and helps with budgeting for future expenses.

    2. Recording Sales

    Sales generate income, which falls under nominal accounts. Following the rule, Credit Income and Gains, record revenue accurately.

    • Example: Selling goods worth AED 10,000 on credit:
    • Debit: Accounts Receivable AED 10,000
    • Credit: Sales Account AED 10,000

    By following this approach, a business can quickly determine its earnings, thereby simplifying profit analysis.

    3. Tracking Purchases

    Purchases of goods or raw materials are part of real and personal property accounts, depending on whether they are made with cash or credit. The rules, “Debit What Comes In, Credit What Goes Out” and “Debit the Receiver, Credit the Giver,” help maintain accurate inventory and supplier balances.

    • Example: Buying stock from a supplier on credit for AED 7,000:
    • Debit: Inventory Account AED 7,000
    • Credit: Supplier’s Account AED 7,000

    This ensures the business knows exactly what it owns and owes at any given time.

    How Following These Rules Simplifies Bookkeeping?

    By applying the basic rules of bookkeeping and basic rules of financial accounting, businesses can:

    • Maintain organised, error-free records.
    • Track cash flow, income, and expenses effortlessly.
    • Make informed financial decisions quickly.
    • Prepare accurate financial statements without confusion.

    These rules turn complex transactions into a clear, manageable system, making accounting more straightforward and more reliable for businesses of all sizes.

    How Shuraa Tax Helps Businesses Follow these Rules?

    Keeping financial records accurate and compliant with regulations can be challenging for any business. This is where Shuraa Tax steps in, providing expert support to make accounting simple and reliable.

    1. Bookkeeping Made Easy

    Shuraa Tax helps businesses implement the fundamental principles of bookkeeping accurately and efficiently. From recording day-to-day transactions to tracking purchases, sales, and expenses, their services ensure that every entry follows the basic rules of financial accounting.

    Example: Properly recording a supplier payment or sales revenue according to the 3 basic accounting rules.

    2. Accounting Guidance and Compliance

    With Shuraa Tax, businesses get clear guidance on accounting practices, including:

    • Correct application of Debit and Credit rules.
    • Maintaining accurate ledgers for personal, honest, and nominal accounts.
    • Preparing audit-ready financial statements.

    This structured approach prevents errors and ensures that all financial records are accurate and reliable.

    3. Hassle-Free Tax Filing

    Compliance with UAE corporate tax laws can be complex. By following basic accounting golden rules with Shuraa Tax:

    • Businesses avoid errors in tax filings.
    • Audits and financial reviews become smoother and faster.
    • Companies can focus on growth rather than worrying about accounting compliance.

    Shuraa Tax bridges the gap between accounting principles and practical business operations, enabling businesses to maintain accurate records, stay compliant with regulations, and make informed financial decisions.

    Tips for Beginners

    Starting with accounting can feel overwhelming, but following a few simple practices makes it much easier to stick to the basic accounting rules and maintain accurate records.

    1. Understand the Three Golden Rules

    Keep the basic 3 rules of accounting in mind:

    1. Debit the Receiver, Credit the Giver (Personal Account)
    2. Debit What Comes In, Credit What Goes Out (Real Account)
    3. Debit Expenses and Losses, Credit Income and Gains (Nominal Account)

    Try associating each rule with everyday transactions to make them more relatable. For example, think of paying rent as debiting an expense; this makes the rule easier to remember.

    2. Use Simple Notation

    • Maintain transparent ledgers or use simple templates.
    • Highlight debit and credit columns to avoid confusion.
    • Practising small transactions daily helps internalise the basic accounting debit and credit rules.

    3. Leverage Digital Tools

    • Utilising accounting software or services, such as Shuraa Tax, can significantly reduce errors.
    • Digital tools automatically apply basic accounting golden rules, generate accurate reports, and simplify bookkeeping.
    • This not only saves time but ensures compliance with regulations, making audits and tax filing hassle-free.

    4. Practice Consistency

    • Record transactions promptly and regularly.
    • Regularly review your accounts to ensure that all entries comply with fundamental accounting principles and regulations.
    • Consistency builds confidence and makes financial management easier over time.

    By following these tips and utilising supportive tools like Shuraa Tax, beginners can quickly grasp the basics of accounting, maintain reliable records, and make more informed business decisions.

    Ensure Accurate Accounting with Shuraa Tax

    Following the basic accounting rules is essential for smooth business operations, accurate financial reporting, and regulatory compliance. The 3 basic accounting rules, Debit the Receiver, Credit the Giver; Debit What Comes In, Credit What Goes Out; and Debit Expenses and Losses, Credit Income and Gains, form the foundation of basic bookkeeping and financial accounting.

    By applying these basic accounting debit and credit rules and adhering to the fundamental accounting principles, businesses can maintain organised records, make informed decisions, and build trust with stakeholders.

    For companies in the UAE, understanding basic accounting rules and concepts, as well as the fundamental principles of financial accounting, is crucial for compliance with the Federal Tax Authority (FTA) and for filing taxes smoothly. Following the basic rules of bookkeeping ensures accurate tracking of income, expenses, and assets, helping businesses grow without unnecessary penalties or errors.

    Partnering with experts like Shuraa Tax simplifies this process. Their professional guidance ensures that businesses correctly implement the three fundamental accounting principles, maintain accurate records, and remain fully compliant with UAE regulations.

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

  • VAT Registration Process in Saudi Arabia

    VAT Registration Process in Saudi Arabia

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

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

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

    What is VAT (Value Added Tax)? 

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

    Current VAT Rate in KSA: 

    The standard VAT rate in Saudi Arabia is 15%. 

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

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

    Who Needs to Register for VAT in Saudi Arabia? 

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

    1. Mandatory VAT Registration: 

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

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

    2. Sector-Specific Mandates: 

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

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

    3. Voluntary VAT Registration: 

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

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

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

    Common Exempt Categories include: 

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

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

    5. Group VAT Registration: 

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

    Eligibility: 

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

    Benefits: 

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

    Documents Required for VAT Registration in Saudi Arabia 

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

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

    What is the VAT Registration Process in Saudi Arabia? 

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

    Step 1: Create an Account on the ZATCA Portal 

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

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

    Step 2: Log In and Select VAT Registration 

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

    Step 3: Enter Business Information 

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

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

    Step 4: Add Owner and Authorized Person Details 

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

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

    Step 5: Enter Financial & Bank Details 

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

    • Bank name 
    • IBAN 
    • Account holder name 

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

    Step 6: Upload Required Documents 

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

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

    Step 7: Review and Submit the Application 

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

    Step 8: Application Review by ZATCA 

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

    Step 9: Receive VAT Registration Certificate 

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

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

    VAT Responsibilities After Registration 

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

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

    VAT Deregistration in Saudi Arabia (When & How) 

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

    When Can You Apply for VAT Deregistration? 

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

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

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

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

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

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

    Penalties for Late VAT Registration in Saudi Arabia 

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

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

    Penalty Relief in 2025: 

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

    Make Your VAT Registration Simple & Stress-Free 

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

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

    Commonly Asked Questions 

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

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

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

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

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

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

    4. Can I apply for VAT registration online? 

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

    5. What happens if I register for VAT late? 

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

    6. Can a small business register for VAT voluntarily? 

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