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VAT refers to Value Added Tax. It is being introduced in the UAE starting 2018. Here’s all you need to know about it.

What is VAT?

Value Added Tax (VAT) is a consumption tax applied on a good as its value is increased each stage of its production or distribution. It is an indirect tax that is related to a taxpayer’s consumption and not their income. VAT is applicable in more than 160 countries.

When Will VAT Come into Effect?

VAT, at the rate of 5%, shall be introduced in the UAE and other GCC countries from 1 January 2018. Businesses can start registering for VAT three months before the launch date (1 October 2017).

What Shall Be Taxed?

VAT would be applicable to non-essential consumer goods. Anything apart from basic food and essential commodities would fall in this taxable bracket. This would include automobiles, electronics, jewellery, restaurant services, and entertainment.

What Will Be Exempt from VAT?

The Government of UAE has stated that about items in about 100 categories like food, education, health, bicycle, fuel, transport and social services would be exempted from VAT.

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Who Shall Be Taxed?

  • Corporations: Businesses providing goods or services falling in the taxable category, with an annual revenue of over AED 375,000, would be required to register for VAT. It is optional for companies with annual supplies and imports less than AED 375,000 but over AED 187,500. Here, companies providing health or education services may reclaim the VAT from the government.
  • Consumers: Anyone purchasing a non-essential is liable to pay VAT. Realtors: Any sale or renting of property for commercial purposes would attract VAT.

With the introduction of VAT in the UAE, there are considerations that businesses would have to take care of with regard to tax consulting. We at Commitbiz have our team of experts to help you with company formation, registration and counselling. For any queries on VAT or tax consultation for companies in the UAE, feel free to reach out to us.

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