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

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

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

VAT Reimbursement in the UAE

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

Eligibility Criteria for VAT Reimbursement

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

Businesses

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

Tourists

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

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

Government Entities and Diplomatic Missions

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

Foreign Businesses

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

Generally, to be eligible for a VAT refund:
- The VAT must have been paid on eligible business expenses.
- The entity must be registered for VAT with the FTA and have an active VAT number.
The claim should be submitted within the set time frame and accompanied by proper documentation, such as receipts and invoices.

Common Scenarios Leading to VAT Reimbursement Claims

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

1. Business Purchases

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

2. Tourist Refunds

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

3. Conferences and Events

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

4. Cross-border Trade

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

5. Excess VAT Paid

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

The VAT Reimbursement Process in the UAE

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

1. Register on the FTA Portal

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

2. Collect and Prepare Documentation

Businesses need to gather and prepare the necessary documentation to support their reimbursement claim. This typically includes:
- Tax registration certificate
- VAT returns
- Invoices for purchases and sales
- Bank statements
- Any other relevant supporting documents
3. Submit the Claim

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

4. Review and Approval

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

5. Receive the Refund

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

VAT Disbursement in the UAE

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

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

Key Features of VAT Disbursement:
- Exact Recovery: The amount recovered from the client is exactly the same as the amount paid, with no additional charges.
- No VAT Implications: Since disbursements are not treated as taxable supplies, they do not attract VAT when the client repays the business.
To qualify as a disbursement under UAE VAT law, a recovery of expense must meet the following conditions:
1. The expense must be incurred directly for the benefit of a client.
1. The amount recovered by the client must be the exact same amount that was paid by the business, with no additional markup or profit included.
1. The reimbursement must not involve the supply of any goods or services. If there is a supply element, the reimbursement may be subject to VAT.
1. The business should not recover input tax (VAT) associated with the expense paid on behalf of the client, as disbursements do not qualify for input tax recovery.
Example of VAT Disbursement in the UAE

A marketing agency, XYZ Marketing, has arranged a photoshoot for its client, ABC Enterprises. The agency hires a professional photographer and pays AED 1,050 for the service. This amount includes AED 50 VAT (5% of AED 1,000, the base cost of the service). The agency incurs this expense directly on behalf of ABC Enterprises.
- Total Amount Paid by XYZ Marketing: AED 1,050 (including AED 50 VAT).
- Base Cost of the Photoshoot Service: AED 1,000.
- VAT Paid: AED 50.
When XYZ Marketing requests reimbursement from ABC Enterprises:
- XYZ Marketing charges ABC Enterprises exactly AED 1,050, the same amount it paid the photographer.
- This transaction is considered a disbursement, not a supply, so no additional VAT is added by XYZ Marketing when billing ABC Enterprises.
- ABC Enterprises pays XYZ Marketing AED 1,050, covering the expense exactly as incurred.
Difference Between VAT Disbursement and VAT Reimbursement

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

1. Nature of the Transaction
- VAT Disbursement: It involves the recovery of expenses incurred on behalf of a client without any markup. The payment is treated as a pass-through and not as a supply, so no VAT is charged on the recovery.
- VAT Reimbursement: This refers to claiming back VAT that a business has paid on its own expenses. When businesses incur costs that include VAT, they can file a claim with the Federal Tax Authority (FTA) to recover the VAT portion if the expenses are eligible.
2. VAT Treatment
- VAT Disbursement: The disbursed amount is not subject to VAT because it is not considered a supply. For example, if a business pays AED 500 (including VAT) on behalf of a client and recovers that amount, it does not charge any additional VAT.
- VAT Reimbursement: Involves a business recovering VAT from the FTA on its business-related expenses. This means if a business pays AED 1,000 for supplies and VAT is included, it can claim back the VAT amount from the FTA if the supplies are eligible.
3. Examples
- VAT Disbursement Example: A company pays AED 1,050 (including AED 50 VAT) for a service on behalf of a client and recovers exactly AED 1,050 from the client.
- VAT Reimbursement Example: A company incurs AED 1,000 in expenses for office supplies that include AED 50 VAT. The company can file a claim to recover the AED 50 VAT from the FTA.
How Shuraa Tax Can Help with VAT Reimbursement and Disbursement

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

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

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

Frequently Asked Questions

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

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

2. Can tourists claim VAT reimbursement in the UAE?

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

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

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

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

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

5. How much VAT is refunded in the UAE?

You can typically claim a VAT refund of 85% of the total VAT amount paid in the UAE, after deducting a fee of AED 4.80 per tax-free tag. This refund is available to tourists and visitors who meet certain criteria, such as being non-residents, purchasing eligible goods, and exporting them out of the UAE within a specified timeframe.
October 17, 2024
VAT on Courier Services in the UAE
In 2018, the UAE introduced Value-Added Tax (VAT), which is a 5% tax added to most goods and services sold in the country. This includes VAT on courier services, which are an important part of the UAE’s economy. With so many businesses relying on fast and reliable delivery services, understanding how VAT affects courier services is important for both businesses and individuals.

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

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

Is VAT Applicable to Courier Services In UAE?

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

Domestic vs. International Courier Services VAT in UAE

Domestic Courier Services:

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

International Courier Services:

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

VAT Exemptions for Courier Services

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

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

How is VAT on Courier Services Calculated?

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

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

VAT Registration for Courier Services

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

VAT Registration Process:

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

2. The business will need to provide details such as:
- Company trade license.
- Financial records showing turnover.
- Details of the business activities.
3. Once registered, the business will receive a VAT registration number (TRN), which must be included on all VAT invoices issued to customers.

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

Input Tax Credits for Courier Service Providers

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

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

VAT on Imported Goods via Courier

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

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

VAT on Goods Shipped Within the UAE

For goods shipped within the UAE, VAT is applied both to the value of the goods and the delivery service if the courier company is VAT-registered. The VAT treatment depends on whether the transaction is business-to-business (B2B) or business-to-consumer (B2C):
- B2B Transactions: In B2B transactions, the supplier of the goods is generally responsible for accounting for VAT on the sale of the goods. The courier service provider is not typically required to collect or remit VAT on the value of the goods themselves.
- B2C Transactions: In B2C transactions, the courier service provider is usually responsible for collecting and remitting VAT on the value of the goods, in addition to the delivery fee.
Taxes Applicable to Delivery Services in the UAE

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

1. Value-Added Tax (VAT)

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

2. Customs Duties

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

3. Corporate Tax

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

4. Excise Tax (If Applicable)

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

5. Social Security and Insurance Contributions

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

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

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

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

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

Frequently Asked Questions

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

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

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

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

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

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

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

Courier service providers in the UAE are required to maintain detailed records of their VAT transactions, including invoices, receipts, and payment records. These records should be kept for a period of five years from the end of the tax period in which the transaction occurred.
October 7, 2024
A Guide to VAT Registration in the UAE
In the UAE, products and services supplies are subject to a tax known as the value-added tax (VAT). According to Federal Tax Authority (FTA) regulations, companies with yearly revenues of more than AED 375,000 must register for VAT on a mandatory basis.

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

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

VAT Registration Thresholds in the UAE

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

Circumstances that May Trigger Early Registration

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

1. Voluntary Registration

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

2. Importation of Goods

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

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

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

4. Government Contracts

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

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

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

Step 1: Check Eligibility
- Determine if your business meets the criteria for VAT registration.
- Check if your annual taxable turnover exceeds the mandatory registration threshold set by the UAE VAT law.
Step 2: Document Preparation

Gather all required documents, including:
- Trade license
- Memorandum of Association (if applicable)
- Emirates IDs or passports of authorized signatories
- Bank account details and proof of bank account
- Business contact information (address, PO Box, etc.)
Step 3: Create an e-Services Account with the FTA
- Visit the Federal Tax Authority website at tax.gov.ae.
- Click “Register” to set up an e-Services account.
- Enter your email address and create a secure password.
- Verify your email by clicking the link sent to your inbox.
- Once verified, log in to your account using your credentials.
Step 4: Fill Out the VAT Registration Form
- Log in to your e-Services account.
- Select the option for VAT registration.
- Provide accurate details about your business, including:
  - Business name and contact details
  - Bank account information
  - Estimated annual taxable sales and purchases
- Upload necessary documents, such as:
  - Trade license
  - Memorandum of Association (if applicable)
  - Emirates IDs or passports of authorized signatories
Step 5: Submit Your Application
- Review the information you entered to ensure it is correct.
- Submit your VAT registration form online through the FTA portal.
Step 6: Pay the Registration Fee
- The FTA will calculate your VAT registration fee based on your estimated taxable sales and imports.
- Choose a payment method, such as online banking or credit card, and complete the payment.
Step 7: Receive Your VAT Certificate
- The FTA will review your application and documents.
- Once approved, you will receive your VAT certificate, which includes your unique Tax Registration Number (TRN).
Step 8: Start Collecting and Reporting VAT
- After registration, charge VAT on all taxable sales and issue VAT-compliant invoices.
- Use the FTA portal to file VAT returns within the specified deadlines.
Step 9: Claim Input Tax Credits
- If you pay VAT on business-related purchases, you can claim input tax credits.
- File claims through the FTA portal as part of your VAT returns.
Step 10: Maintain Proper Records
- Keep detailed records of all sales, purchases, and VAT transactions.
- These records will help you file accurate returns and prepare for any FTA audits.
VAT Registration Fees in the UAE

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

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

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

How to Pay VAT in UAE?

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

1. Calculate Your VAT Liability

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

2. Submit Your VAT Return

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

3. Check Your Tax Liability

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

4. Make Payment (if applicable)

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

The FTA portal provides various payment options, including:
- Credit Card: You can use a credit card to pay your VAT liability directly through the portal.
- Electronic Funds Transfer (EFT): You can initiate an EFT from your bank account to the FTA’s designated account.
- Direct Debit: Set up a direct debit mandate to allow the FTA to automatically withdraw the VAT liability from your bank account.
5. Obtain Payment Confirmation

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

6. Keep Records

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

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

Who Should Register for VAT in the UAE?

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

1. Mandatory Registration

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

2. Voluntary Registration

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

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

3. Non-resident Registration

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

What are the VAT Exemptions in the UAE?

Zero-Rated Supplies

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

Exports outside the GCC
- International transportation
- Supply of crude oil and natural gas
- First supply of residential real estate
- Specific areas like healthcare and education
Exempted Supplies

Some goods and services are entirely exempt from VAT, such as:
- Certain financial services
- Residential properties
- Bare land
- Local passenger transport
VAT Calculation and Reporting Methods

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

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

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

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

Record-Keeping Requirements

Businesses are required to maintain detailed records of all VAT-related transactions. These records should include:
- Sales invoices: Invoices issued to customers, including the date, value of goods or services, and VAT amount.
- Purchase invoices: Invoices received from suppliers, including the date, value of goods or services, and VAT amount.
- Input tax credit claims: Documentation supporting input tax credit claims, such as purchase invoices and bank statements.
- VAT returns: Copies of filed VAT returns.
- General ledger: A general ledger recording all business transactions, including VAT-related entries.
Tax Group Registration for VAT in UAE

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

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

Related Companies

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

No Third-Party Interference

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

Same Tax Period

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

Consistent Accounting System

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

UAE VAT Executive Regulations

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

VAT Registration:

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

VAT Calculation:

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

Input Tax Credits:

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

Record-Keeping:

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

Exemptions and Zero-Rated Supplies:

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

Penalties and Interest:

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

Key Takeaways for VAT Registration

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

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

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

Frequently Asked Questions

1. How to Register for VAT in the UAE?
1. Visit the Federal Tax Authority (FTA) website and submit an online application.
1. Provide necessary documents such as trade license, passport copies, and bank statements.
1. The FTA will review your application and notify you of the decision.
2. How to Maintain Compliance Post-Registration?
- Record Keeping: Maintain accurate records of all transactions, invoices, and VAT calculations.
- Periodic Returns: Submit VAT returns quarterly or monthly, depending on your turnover.
- Payments: Pay any VAT due to the FTA within the specified deadline.
- Audits: Be prepared for potential audits by the FTA to ensure compliance.
3. How to Deregister from VAT in the UAE?

To deregister from VAT in the UAE, follow these steps:
1. Submit a deregistration application to the FTA, providing reasons for the deregistration.
1. Ensure all VAT liabilities are settled before deregistration is approved.
1. Submit a final VAT return to account for any outstanding amounts.
4. What Happens if I Don’t Register for VAT When Required?

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

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

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

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

Yes: Businesses can claim input tax credit (ITC), which is the VAT paid on purchases of goods and services used for business purposes. This reduces the amount of VAT payable on their sales.
August 26, 2024
VAT on Free Zones in UAE – Dubai
Value Added Tax (VAT) has become an important part of running a business in the UAE since it was introduced in January 2018. With a standard rate of 5%, VAT applies to many goods and services, meaning businesses need to be aware of the rules and how to comply with them. One of the unique features of the UAE is its free zones.

Free Zone is a term for free trade zones that encourage foreign ownership of businesses. Businesses in Free Zones must follow the rules set by the Free Zone Authority to do business in this area. Under UAE law, certain Free zones are known as “designated zones.” According to Article 51 of the Executive Regulations, the following meet the description of marked zones:
- A particular geographic region that is enclosed and secured.
- Security measures and customs rules are in place to keep track of who comes and goes and what moves in and out of the area.
- It has internal rules about how things should be kept, stored, and worked on in the area.
- The person in charge of the Designated Zone must follow the rules set by the FZ Authority.
Therefore, any Free zone that satisfies the requirements and is listed on the cabinet’s list will be considered a Designated zone. Some of the famous free zones include IFZA, JAFZA, DIFC, and RAKEZ.

While free zones provide great opportunities, they also have specific VAT rules that businesses need to understand, especially regarding VAT for free zone companies in UAE. For example, knowing the difference between designated and non-designated zones, what qualifies for zero-rated supplies, and the steps for VAT compliance can all affect a company’s finances. That’s why it’s essential for businesses operating in Dubai’s free zones to get a clear grasp of VAT implications.

Is there VAT for Freezone Companies in the UAE?

Yes, VAT can apply to Free Zone companies in the UAE, but it depends on several factors. Some people think that only limited companies can sign up for VAT in the UAE. Any business that meets the minimum requirement for VAT registration in the UAE must go through the FTA’s VAT registration process. A free zone company in the UAE can register independently if it makes between AED 187,500 and AED 375,000.

For free zone companies, understanding whether they reach this threshold is crucial, as it determines their VAT registration requirements. If they exceed the threshold, they must comply with all VAT obligations, including charging VAT on their taxable supplies and filing regular VAT returns. This is an important aspect of VAT registration for free zone companies in UAE.

Distinction Between Designated Zones and Non-Designated Zones

One of the key concepts in VAT for free zone companies is the distinction between designated zones and non-designated zones.

Designated Zones

Designated free zones in the UAE are specific free zones that have been designated by the Federal Tax Authority (FTA) as being outside the territorial scope of the UAE for VAT purposes. This means that goods and services supplied within these zones are generally exempt from VAT.

However, there are some exceptions:
- Supply of Services to Mainland Businesses: If a free zone company supplies services to a mainland business, VAT is applicable at a standard rate of 5%.
- Supply of Goods or Services to Non-Business Consumers: If a free zone company supplies goods or services to non-business consumers within the zone, VAT may be applicable.
Non-Designated Zones

On the other hand, non-designated zones do not enjoy the same VAT benefits as designated zones. Businesses operating in these areas are subject to the standard VAT rates. Therefore, it’s important for companies to know which category their free zone falls into to understand their VAT obligations better.

VAT Treatment in the UAE Free Zones

The standard VAT rate in the UAE Free Zone is set at 5%. This rate applies to most goods and services that do not qualify for any exemptions or special treatment. However, there are also zero-rates supplies and tax-exempt supplies.

Tax-Exempt VAT

Tax-exempt supplies are goods and services that are not subject to VAT. This means that businesses do not charge VAT on these supplies, and they also cannot claim any input tax credits on related purchases. Examples of tax-exempt supplies include certain healthcare and educational services.

Zero-Rated VAT

Zero-rated VAT means that the VAT rate charged on a good or service is 0%. Businesses can still recover the VAT incurred on their purchases related to these supplies. This treatment often applies to exports and specific goods and services that meet certain criteria. In designated free zones in the UAE, goods that are moved outside the zone may also qualify for zero-rated VAT.

Specific VAT Treatments for Goods and Services within Free Zones

The VAT treatment of goods and services in free zones can vary, with several important considerations:

Import and Export

In designated zones, imported goods can be stored without VAT until they are moved outside the zone. This can significantly reduce the cash flow burden for businesses. Exports from these zones are typically zero-rated, allowing companies to sell goods to international customers without adding VAT.

Services

When it comes to services, VAT may apply depending on the nature of the service and where it is supplied. For instance, services provided within a designated zone may not incur VAT, while services supplied to customers outside the zone might be subject to VAT.

VAT Refunds

Free zone companies may also be eligible for VAT refunds on certain expenses incurred within the zone. This can provide a financial advantage and enhance cash flow management.

How to Register for VAT in UAE Free Zone?

While most free zones in the UAE are designated zones, exempting them from VAT, some may require VAT registration depending on their specific activities and the nature of their supplies. Here’s a general process on how to register for VAT in a UAE Free Zone:

1. Determine VAT Registration Requirement

Not all free zones are designated. Designated zones are generally exempt from VAT. However, if you supply goods or services to non-business consumers within the zone or to entities outside the zone, you may need to register.

Companies in non-designated zones are subject to VAT and must register if they meet the standard VAT registration threshold i.e. AED 375,000 per year. However, businesses below this threshold can still register voluntarily if they choose.

2. Prepare Required Documents

Gather the necessary documents before beginning the registration process. Commonly required documents include:
- Trade license of the free zone company
- Copy of the owner’s passport or identification
- Proof of business address in the free zone
- Bank account details
- Financial statements (if applicable)
- Information about taxable supplies and imports
3. Access the Federal Tax Authority (FTA) Website

Visit the official website of the Federal Tax Authority (FTA) of the UAE. This is the government body responsible for managing tax matters, including VAT registration.

4. Create an Account on the FTA Portal

If you do not already have an account, you will need to create one on the FTA portal. Click on the registration section and follow the instructions to set up your account. You’ll need to provide your email address and set a password for your account.

5. Complete the VAT Registration Application

Once logged in, navigate to the VAT registration section and fill out the application form. You’ll need to provide details about your business, including:
- Business activities
- Estimated annual turnover
- Details about your free zone
Ensure all information is accurate and complete, as any discrepancies can delay the registration process.

6. Submit the Application

After filling out the application form, review all the information and submit it through the FTA portal.

7. Review and Approval

The FTA will review your application. If they require any additional information or documentation, they will contact you. Upon approval, you will receive a Tax Registration Number (TRN).

What happens if a company does not register for VAT?

If a company that works in and out of a free zone in the UAE doesn’t register for VAT in time though required as per law, the FTA will register the business from the date it should have been registered for VAT.

So, Businesses failing to comply with VAT registration rules will receive fines and must retroactively apply the correct VAT rate to all past sales. If your yearly sales hit the threshold, you can hire a licenced tax agent in the UAE to help you. This is very important if you don’t know when your business needs to be registered or if it has already reached the required size.

VAT Registration in Freezone with Shuraa Tax

Understanding VAT for free zone companies in UAE is essential for businesses operating in these areas. Whether you’re in a designated or non-designated zone, knowing the VAT rules helps you stay compliant, avoid fines, and make informed financial choices. Since VAT regulations can be tricky, it’s smart to get professional guidance to ensure your business follows all the rules.

Shuraa Business Setup not only help business owners set up their companies in mainland, free zone, and overseas areas, but we also help you get our in-house finance teams ready for accounts reporting, auditing, UAE tax support like VAT, Corporate tax, Excise Tax, Tax Residency Certification.

Our qualified tax team of advisors and UAE tax agents assist businesses to be UAE tax compliant and to have effective documentation which is required by UAE authority. Contact us today at +971508912062 or info@shuraatax.com to make the process simple and hassle-free.

Frequently Asked Questions

1. What is VAT for freezone companies in UAE?

VAT for freezone companies in the UAE is the value-added tax that businesses operating in free zones must comply with, depending on whether they are in a designated or non-designated zone. The standard VAT rate in the UAE is 5%, but designated zones enjoy special VAT treatment, such as exemptions or zero-rated supplies for certain transactions.

2. What are Designated Free Zones in UAE?

Designated free zones are specific free zones that have been designated by the Federal Tax Authority (FTA) as being outside the territorial scope of the UAE for VAT purposes. This means that goods and services supplied within these zones are generally exempt from VAT.

3. Do freezone companies need to register for VAT in the UAE?

Yes, freezone companies must register for VAT if their taxable supplies and imports exceed AED 375,000 per year. Even if they don’t meet this threshold, companies can voluntarily register for VAT to benefit from input tax recovery on their purchases.

4. How does VAT impact goods moving in and out of free zones?

In designated free zones in UAE, goods moving in and out of these areas can be VAT-free, particularly when they are exported outside the UAE. However, if goods are transferred into the UAE mainland from a designated zone, VAT will be charged at the standard rate.
September 3, 2023
Documents Required for VAT registration in Dubai
Documents required for VAT registration will be submitted to the Federal Tax Authority (FTA) via a web portal. To obtain the Tax Registration Number (TRN) for the firm, several conditions for VAT registration in the UAE must be met.

If a company’s taxable supply and imports surpass the statutory registration level of AED 375,000, it must register for VAT. Furthermore, a company may voluntarily register for VAT if the total amount of its taxable supplies and imports (or taxable costs) exceeds the AED 187,500 voluntary registration threshold.

Penalties may apply for non-compliance with the UAE VAT Executive Regulations and law. There is also the risk of a firm losing its legal position and consumer confidence due to noncompliance with regulatory requirements.

What is VAT in the UAE?

Value Added Tax (VAT) in the UAE is an indirect tax applied to most goods and services at each stage of the supply chain. Simply put, it’s a small percentage added to the price of products or services when they’re sold. Introduced on January 1, 2018, VAT is currently charged at a standard rate of 5%. Businesses collect this tax on behalf of the government and later remit it to the Federal Tax Authority (FTA).

VAT plays a crucial role in supporting the UAE’s vision to reduce its reliance on oil revenue and build a sustainable economy. While it may seem like a small addition, VAT helps fund essential public services such as healthcare, education, and infrastructure, ultimately contributing to the country’s long-term growth and stability. VAT in the UAE ensures that everyone contributes a fair share to the nation’s development while maintaining a transparent and balanced tax system.

What is VAT Registration?

VAT registration is the official process through which a business becomes recognised by the Federal Tax Authority (FTA) as a taxpayer in the UAE. Once registered, the company is authorised to collect VAT from customers on taxable goods and services and remit it to the government. In simpler terms, VAT registration gives a business its Tax Registration Number (TRN), a unique ID used for all VAT-related transactions, invoices, and filings.

Businesses in the UAE must register for VAT if their annual taxable turnover exceeds AED 375,000, which is the mandatory registration threshold. However, those with turnover above AED 187,500 but below the required limit can register voluntarily to claim input tax and enhance business credibility. Registering for VAT ensures compliance with UAE tax laws and builds trust with clients and authorities, a key step for any business operating in the country’s evolving financial landscape.

Mandatory vs Voluntary VAT Registration in the UAE

When it comes to understanding VAT registration requirements in the UAE, it’s essential to know that businesses can either register mandatorily or voluntarily depending on their turnover and taxable activities. Let’s break down the two types and why they matter for your business.

1. Mandatory VAT Registration in the UAE

If your business is growing rapidly, this part concerns you. Mandatory VAT registration applies when your total taxable supplies and imports in the past 12 months exceed AED 375,000.

Alternatively, if you expect your business turnover to cross this threshold within the next 30 days, you must register as well. This rule ensures that all qualifying businesses remain compliant with the VAT registration requirements set by the Federal Tax Authority (FTA) in the UAE.

However, it’s important to note that this threshold doesn’t apply to foreign businesses operating in the UAE; they follow different VAT obligations.

2. Voluntary VAT Registration in the UAE

Not hitting the mandatory limit doesn’t mean you’re out of the VAT system. In fact, smaller businesses can still register voluntarily, and there are good reasons to do so.

If your taxable supplies and imports or even taxable expenses over the past 12 months exceed AED 187,500, or if you expect to cross that in the next 30 days, you can apply for voluntary VAT registration.

This gives startups and small enterprises a strategic edge by allowing them to claim VAT refunds on business purchases and establish credibility in the market.

Why does VAT Registration Matters Businesses in the UAE?

Whether your registration is mandatory or voluntary, completing your VAT registration is not just about compliance; it’s about building business credibility.

Here’s why it’s so important:
- It ensures your business complies with the UAE’s tax laws.
- You can reclaim VAT paid on business expenses, reducing operational costs.
- Being VAT-registered boosts your company’s image, showing you operate transparently and professionally.
- It allows seamless transactions with other VAT-registered companies in the UAE.
Ignoring VAT registration can be costly. Businesses that fail to register or file VAT returns face a fine of AED 10,000, plus AED 1,000 per tax period for missed returns. Additionally, non-registered companies lose input tax credits, directly affecting their profits.

Documents Required for VAT Registration in the UAE

Businesses must complete the required documentation to register for VAT in the UAE. VAT registration and fee payment (for paid services) will be completed online. The documents listed below are necessary for VAT registration in the UAE.
- Business Trade License or Commercial License
- Passport copies of the owner or partners of the company mentioned on the license
- Emirates ID of the owners/ partners of companies (as per the business license)
- Memorandum of Association (MOA)
- Complete Company Address
- Authorised Signatory’s Contact with email, number
- Company Bank Details, including IBAN letter
- Details of branch (if any)
- Turnover Declaration (Signed & Stamped by the owner or the manager)
- Amount of the expected revenue, turnover, and taxable expense for the next 30 days
- To specify if the Company does GCC export or import
- Provide the custom code along with a copy of the Dubai Customs letter (if any)
- Specify if your company would like to be registered as a tax group
- As per the Federal Tax Authority, you may also require additional documents or authorisation depending on your business activity, the jurisdiction of your business and other such factors.
What is the Timeline for VAT Registration?

The materials will be submitted electronically. Upon completing online VAT registration, you will receive your Tax Registration Number (TRN) from the Federal Tax Authority (FTA). The Processing time is 20 business working days from the date of sharing complete information with FTA. The application may take longer if additional details are required.

What is the Significance of VAT Registration in Dubai?

Paying taxes is viewed by some business owners as an expense. They have no idea that registering their businesses for VAT might bring several benefits.
- It raises the company’s profile. Companies may, of course, show their VAT registration to key stakeholders and business associates, thereby enhancing their credibility and customer preference. Customers are more inclined to prefer a company that has registered for VAT than one that does not.
- Tax avoidance is sometimes considered a crime, and if found guilty, the corporation may face severe financial penalties in case of non-compliance or delayed compliance. Registering your business for VAT in Dubai avoids these situations and ensures your firm grows while also benefiting society.
- It should be underlined that VAT is not intended to burden enterprises. VAT refunds are available in certain instances.
- Overall, it helps the company capture a broader market and boost its reputation, thereby expanding its client base.
Required Documents for Tax Group Registration

Businesses in the UAE can make a tax group registration application. Several enterprises of various types can also form a tax group. According to the Federal Tax Authority (FTA), if entities are related to parties with a common ownership of 50% or more, then all those companies can be combined into one tax group. The FTA will issue a single TRN for the entire group of companies. Group structure, no objection letter, and turnover declaration need to be submitted.

How do I register for VAT in Dubai?

Online registration for VAT is available. To register for VAT, individuals or businesses must first create an account on the Federal Tax Authority (FTA) website.

Several official documents are needed for VAT registration. Before submitting a VAT registration application to the FTA, a few crucial documents must be attached to the application. After the Tax Registration Number (TRN) has been approved, a VAT Certificate will be issued. A distinctive, specific Tax Registration Number (TRN) will be assigned to each VAT certificate.

How to Register a Tax Group in the UAE?

Only the group’s representative company may apply for tax group registration. A representative firm of the group must apply for VAT registration. Each potential member of the Tax Group is required to:
- Being a person of law (not a natural person)
- Be a UAE resident who is not a part of another Tax Group.
- Must have a place of establishment or a fixed establishment in the UAE
- Must be a related party of the group members and the representative
- One or more persons conducting business in a partnership must control the others
How to Register for a Tax Registration Number in the UAE?

If you’re running a business in the UAE, one of the first steps after understanding VAT is getting your Tax Registration Number (TRN). This number is issued by the Federal Tax Authority (FTA) and acts like your business’s unique tax identity; it’s what officially makes your company recognized for VAT purposes.

Getting a TRN might sound complicated, but the process is actually straightforward if you know what to expect. Here’s a simple, step-by-step guide to help you through it:

Step 1: Create an FTA e-Services Account

Start by visiting the Federal Tax Authority’s official website — https://tax.gov.ae.
Click on “Sign Up” to create your e-Services account. You’ll need to provide basic details like your email address and set a password. Once you confirm your email, you can log in and start your tax registration journey.

Step 2: Begin Your VAT Registration Application

After logging in, head to the “VAT Registration” section. This is where you’ll fill out the form to apply for your TRN. Make sure you have all your business details ready, including:
- Your trade license number and copy
- Owner’s Emirates ID or passport copy (for non-residents)
- Contact details (email, phone, address)
- Bank account details
- Financial records showing your turnover
These details help the FTA verify your eligibility for VAT registration.

Step 3: Fill Out the VAT Application Form

Now comes the main part, completing the VAT registration form. The form will ask for information about your business structure (LLC, sole establishment, etc.), business activities, and financial data. You’ll also need to specify whether your registration is mandatory or voluntary, based on your annual taxable supplies.

Note: Be careful here; any incorrect information could delay your TRN approval.

Step 4: Submit the Application

Once you’ve filled everything out and attached all required documents, review the form carefully. After double-checking, click “Submit for Approval.”

The FTA will then review your application, which can take anywhere between 5 to 20 working days, depending on the accuracy of your submission and current processing times.

Step 5: Receive Your TRN Certificate

If your application is approved, you’ll receive your Tax Registration Number (TRN) via email. You can also download your VAT Certificate from your FTA account.

Your TRN will be a 15-digit number; this is what you’ll need to include on your invoices, tax returns, and official documents related to VAT.

Why Shuraa tax?

Businesses must create an online account on the FTA website and complete the VAT registration form to register for VAT in the UAE. The documents mentioned above can be uploaded, and the procedure can be completed while registering for VAT on the website. Contact Shuraa Tax Consultants if you are confused about how to proceed or if you have any questions concerning the paperwork necessary for VAT registration in Dubai.

Shuraa Tax Consultants provides a complete solution for UAE VAT registration services, including the documentation required for VAT registration in Dubai and throughout the UAE, as well as assistance with the online registration process. Our tax consultants guarantee that the VAT registration procedure is simple. We provide comprehensive counselling in terms of FTA VAT registration online, tax accounting services, financial record keeping, bookkeeping services, corporate taxation, and so forth. Contact Shuraa Tax Consultants right away for UAE VAT implementation! All you need to do is reach out to us at:

📞 Call: +(971) 44081900
💬 WhatsApp: +(971) 508912062
📧 Email: info@shuraatax.com
June 5, 2023
What are the VAT guidelines on the Transfer of a business as a going concern in UAE?
A person planning to make a business transfer should know the VAT guidelines centered around the TOGC i.e. Transfer of a business as a going concern. According to Article 7(2) of the Federal Decree-Law No. (8) of 2017 on VAT “transferring the whole business or an independent part of the business from a person to a taxable person for the reason of continuing the business (TOGC) is not treated as a supply for VAT purposes. These are a type of business asset transfers, which is not treated as supply, hence no VAT can be imposed.

Here are the conditions for any transfer business to be treated as a TOGC which is not subject to UAE VAT
1. The transfer of a whole or an independent part of the company
When an owner decides to make a transfer of its business, it should involve a complete takeover of the business or independent part of the business by the purchaser and not just transfer of assets as the latter does not qualify the conditions for TOGC. The transferred business should be in a working condition before and during the time of making the transfer so that the purchaser finds no difficulty in running the business.
1. A buyer is a taxable person
For a transfer of a business to be treated as a TOGC, the buyer must be a taxpayer at the time of transfer. This means he/she should be registered for VAT or has applied for the VAT registration and that application has been approved by FTA.
1. The buyer should genuinely be interested in running the business
The buyer’s intention for running a business should be genuine. They should continue the business exactly the way it was handed over to them without making any fundamental changes in the business. At the moment, there are no restrictions about how long a buyer should run a business however, what matters is the genuine intention of the buyer for running it.

Federal Tax Authority (FTA) has also clarified the concept of an asset sale, share sale, business sale. Details are as below: –

Asset sale and share sale

There’s a difference between share sale and an asset sale. A company is easily sold or bought using the shares sale. Because the company is not directly involved in the transaction, so such share transfers don’t affect the ongoing business operations, and everything stays the same except for the change in the ownership. The new owner takes over the company with all its assets and liabilities which also includes the company’s existing tax obligations.

While in the assets sale because only assets get transferred there is no change in the ownership of the businesses. The buyer of assets has nothing to do with the existing liabilities of the company. TOGC is a type of asset sale, which should qualify above mentioned three conditions and not a share sale.

Assets sale and business sale

On one hand, there’s a normal asset sale and on the second there’s asset sale involving TOGC. When a taxable person sells the assets of its company, it’s treated as a taxable supply since its supplying a good to the buyer and therefore VAT gets included. However, when the sale of assets happens as a part of TOGC, there is no real supply of goods, hence no VAT is applicable.

For example, a business owner decides to sell it’s a machinery that will be eligible for VAT. However, if the owner decides to sell ‘all machinery related to one business unit along with factory space’, which can be run independently, it should be treated as a Transfer of a business as a going concern (TOGC), meaning it is not subject to UAE VAT.

We, Shuraa Tax and Accounting Services LLC, are among the best VAT Companies in Dubai, promising to give you the best Tax agency, VAT registration, and consultancy services in the UAE. To inquire more, contact our expert team members and know more about the VAT guidelines under TOGC.
October 16, 2019
Is commercial real estate subject to VAT in Dubai?

Yes, all commercial properties are subject to VAT in Dubai as well as all over the UAE. The Federal Tax Authority (FTA) and the Dubai Land Department (DLD) are in agreement to charge 5% VAT on commercial properties and related real estate services.

As per the authorities, any sale or purchase of a vacant commercial property or the off-plan sale of commercial properties – which could be under the building license is subject to 5% VAT.

Nevertheless, the value-added-tax paid during the lease period can be recovered by the tenant, if they are taxable and are registered as well as entitled to a tax refund. Value-added-tax paid towards the purchase of an entire building may be refunded depending on the capital asset scheme. For example, if the cost of the property exceeds Dh5 million.

Also, real estate services related to such commercial properties are also subjected to VAT in Dubai, UAE. VAT is also applied to management fees, brokerage and other real estate consultancy charges are subject to 5 % VAT. These charges are levied and taxed on the value of the service provided at the given location of the property and according to the normal taxation standards.

Is VAT applicable on residential properties as well?

No, VAT in Dubai as well as in any other Emirates is not applicable on residential buildings and residential properties such as villas, accommodation for armed forces, elderly homes, nursing homes, etc. Residential buildings are not taxable if sold or rented, but this law is not applied to buildings not fixed on lands, buildings offering services in addition to housing, hotels and hotel apartments, etc. Also, real estate transactions related to residential buildings are zero-rate.

Residential properties constructed recently by developers or business entities are eligible for a tax refund if the supply is made within three years after the completion certificate.

However, residential property leased out on a short-term basis to non-residents falls under the commercial category. If a lease is less than six months and the person living there doesn’t have an Emirates ID, it would be deemed commercial from a VAT perspective.

So, is there VAT applicable if you buy a commercial building and convert it into a residential building?

If you purchase or even rent a commercial property and convert it into a residential building, you are entitled to get a refund on the tax paid within a period of three years from the date of transfer.

However, for mixed-use buildings – the residential area will be zero rate or exemption from tax; whereas the commercial area will be subjected to VAT in Dubai, UAE. The area will be converted into a percentage of VAT allotment.

Will a real estate or property owner require tax registration in Dubai, UAE?

No, property owners of the residential real estate do not have to register for VAT in Dubai or elsewhere in the UAE, if they do not have any other business. In case, if residential property owners have other commercial businesses, then they should consider registering VAT in Dubai, UAE.

On the other hand, the owners of commercial properties must register for VAT in Dubai or any other Emirates if they exceed the threshold of supplies for the commercial property. If the value of supplies exceeds the threshold of 375,000 AED in a year – then VAT registration becomes mandatory.

Is VAT also applicable on rented properties?

VAT is not applicable on residential rented properties, however, rented commercial properties are subjected to 5% VAT in Dubai as well as across the UAE.

Still, have doubts with regards to VAT on a property and real estate in the UAE? Contact SHURAA TAX CONSULTANTS for any further queries or book yourself a free appointment with one of our tax consultants in Dubai. To know more call, us at +971508912062 or email us at info@shuraatax.com

May 2, 2018