The UAE introduced VAT on January 1, 2018, imposing a 5% VAT rate on the supply of goods and services within the country. Businesses registered under the UAE VAT system have the responsibility to apply a 5% VAT, collect it, and remit it to the government. This 5% VAT rate is generally applied to most supplies in the UAE, with certain goods and services falling under exempt or zero-rated categories. Therefore, the tax structure can be broadly categorized as follows:
UAE VAT Rate Structure
Rate Type
Rate of Tax
Standard Rate
5%
Zero-Rated Supplies
0%
Exempt Supplies
Nil
As indicated in the table above, a standard rate of 5% applies to all taxable supplies of goods or services in the UAE, including imports. The 5% VAT is calculated based on the taxable value, determined in accordance with the relevant legal provisions. In most cases, this taxable value corresponds to the sale price.
It’s important to note that the 5% standard VAT rate is consistent across all GCC member states.
Now, how do you determine whether a supply qualifies as a taxable supply, making it subject to the 5% VAT rate? It’s a straightforward process:
1. **Identify whether your supplies fall under the zero-rated or exempt supplies categories.
2. If none of your supplies are classified as zero-rated or exempt, then all of your supplies are considered taxable, and you should apply a 5% VAT.
3. If a few of your supplies are zero-rated or exempt, the 5% VAT rate should be applied to all other supplies.
The executive regulations will provide detailed information on which supplies are zero-rated and which goods or services are exempted. Typically, exports are zero-rated, subject to specific conditions, while certain services, such as designated financial services, residential buildings, and local transportation, fall under the exempt supplies category.
It is of utmost importance for businesses to accurately determine which supplies are subject to the 5% VAT. Early identification and compliance will allow you to prepare effectively and avoid the consequences of non-compliance.
You can also register VAT Registration in our website:
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