All About VAT in Abu Dhabi

by Zaara 02, Dec 2020

All About VAT in Abu Dhabi

Value Added Tax (VAT) came into action in the UAE on 1 January 2018. VAT in UAE can provide the country with a new stream of revenue that can continue to be used to deliver high-quality public services. 

This would also help the government push toward reducing dependence on oil and other hydrocarbons as a source of revenue. If a person fails to file his/her tax returns within the prescribed period, the infringer will be liable for fines according to Cabinet Resolution No. 40 of 2017 on administrative fines for Violating Tax Laws.

VAT in Abu Dhabi

After a business setup in Abu Dhabi, taxable undertakings must periodically file VAT returns with FTA and typically within 28 days of the end of the 'tax period' as specified for each form of business. A “tax period” is a fixed period over which the tax due is measured and paid. 

The standard fiscal period is given below. For companies with annual turnover below AED 150 million per quarter and monthly for businesses with a yearly turnover of AED 150 million or more. So:

   1. When its taxable sales and imports surpass AED 375,000 per annum, a company must file for VAT

   2. It is optional for companies whose exports and imports surpass AED 187,500 per year. 

The FTA may allocate a different tax period for certain types of businesses of its choice. 

How to Proceed with the VAT Registration in Abu Dhabi?

Here are some of the steps involved in the VAT registration process.

1. Documents Submission to the Federal Tax Authority, Abu Dhabi

You need to have some documents and information in handy before you can register for VAT. Below is a non-exhaustive checklist of the documentation you may need. 

The specific list is decided according to the company's legal status and business activities. 

  • Trade license for companies 
  • Articles of Association
  • Certificate of incorporation 
  • Bank account details 
  • Authorized signatory identity documents (e.g., passport copy, Emirates ID, etc.) 
  • Description of the commercial activities 
  • Last 12 months figures for turnover 
  • Predicted future turnover sales 
  • Estimated import and export values.

Keep in mind that just soft copies of the documents are required. During the registration process, you will be asked to upload these.

2. Create a Login Account

  • Open the FTA website and click on Create New User Account
  • Fill out the application form and check your email for a verification email
  • After you verify with your mail, you will get access to your account.

3. Registration of Your Business 

Login to your account and navigate to the VAT registration form. The registration process includes several navigable pages. You can switch between them, back and forth. 

You can save your application as a "draft" at any point and then restart the registration process.

4. Submit the Application Form and the TRN

Submit your application after you have entered all the necessary details on your application form and are pleased with the accuracy of the information you submitted. The FTA will evaluate your application, and you will receive a confirmation by email, along with your TRN, if everything is well. 

You will also obtain a tax registration certificate, which is available for download from the portal.

5. Comply with the Regulations and Procedures

Once you complete your registration process for VAT, you will have to comply with VAT rules, regulations, and procedures. Here are the significant procedures you will have to comply with:

  • Update Your Invoices
  • Coordinate With Your Suppliers
  • Maintain Proper Records.

The Abu Dhabi VAT Rate and Categories

The VAT implementation in UAE was at a rate of 5 percent. Foreign businesses may also recover the VAT they incur when visiting the UAE. 

The value-added tax is categorized as given below.  

Standard Rate

The standard rate is a supply on which tax is charged at 5 percent and deductible from the related input tax. All supplies other than those goods/services not listed in Exempted & Zero Rated below are taxable at a standard rate. 

Exempted

An excluded supply is a service on which tax is not paid, and the associated input tax cannot be deducted.  The categories of supplies mentioned below will be exempt from VAT:

  • Bare land
  • Local passenger transport
  • Residential properties
  • The supply of some financial services.

Zero Rated

A zero-rated supply is a taxable supply on which tax is charged at 0 percent and deductible from the related input tax. VAT is charged at zero percent for the following big supply categories:

  • Exports of goods outside the GCC 
  • Global transportation and associated supplies  
  • Supplies of specific modes of transportation (such as aircraft and ships) 
  • Other precious metal investments (e.g., gold, silver, 99% purity) 
  • Recently constructed residential properties, which are for the first time supplied within three years of their construction 
  • Provision of other educational services and the delivery of the related goods and services 
  • Provision of certain healthcare services and the provision of goods and services concerned.

We provide all kinds of services required for setting up a business in Abu Dhabi. To get some expert advice, please contact us today. 

FAQs

When must a company register for VAT in Abu Dhabi?

When its taxable sales and imports surpass AED 375,000 per annum, a company must file for VAT. It is optional for companies whose exports and imports surpass AED 187,500 per year.

What is the required documentation to apply for VAT in Abu Dhabi?

The essential documents are as follows:

  • Trade license for companies 
  • Articles of Association
  • Certificate of incorporation 
  • Bank account details 
  • Authorized signatory identity documents (e.g., passport copy, Emirates ID, etc.) 
  • Description of the commercial activities 
  • Last 12 months figures for turnover 
  • Predicted future turnover sales 

Estimated import and export values.

Which categories are exempted from VAT?

The categories of supplies mentioned below will be exempt from VAT:

  • Bare land
  • Local passenger transport
  • Residential properties
  • The supply of some financial services.

What is the significant procedure to be followed after your VAT registration process is over?

Here are the significant procedures you will have to comply with:

  • Update Your Invoices
  • Coordinate With Your Suppliers
  • Maintain Proper Records.

Which categories fall under the zero-rated category of VAT?

VAT is charged at zero percent for the following big supply categories:

  • Exports of goods outside the GCC 
  • Global transportation and associated supplies  
  • Supplies of specific modes of transportation (such as aircraft and ships) 
  • Other precious metal investments (e.g., gold, silver, 99% purity) 
  • Recently constructed residential properties, which are for the first time supplied within three years of their construction 
  • Provision of other educational services and the delivery of the related goods and services 
  • Provision of certain healthcare services and the provision of goods and services concerned.

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