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UAE VAT Overview

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  • UAE VAT Overview
VAT is an indirect and multi-point sales tax i.e. tax levied on production of goods and services at every stage in the supply chain.
VAT is a tax on consumption and does not apply on business. It is tax on value addition on goods or through services. This applies in principle to all commercial activities involving the production and distribution of goods and services. It is not a charge on companies but supposed to be finally paid by the consumers and remitted to the tax authority.

  • VAT System in GCC & UAE
    • VAT system has been adopted by more than 150 countries in the world that includes Australia, European Union (EU), China, India, Japan, New Zealand etc.
    • VAT has been adopted by GCC to reduce their dependency on oil and hydrocarbon products as their main source of revenue.
    • GCC framework will be directive followed by local legislation by every member state.
  • VAT Implementation
    • VAT will be implemented in UAE on January 1st 2018, in which the first VAT return would be filed on April 2018.
    • VAT will be implemented in rest of GCC latest by January 1st 2019
    • UAE businesses will be able to start VAT registration in Q3 2017. It is compulsory to be registered by Q4 2017
  • VAT Rates in UAE
    • The Standard VAT Rate is 5%
    • Basic necessities goods like Education, Healthcare or Unpacked Food Items will have zero percent VAT rate.

    1. Standard Rate

    • Transactions in which seller collects standard amount of VAT and allowed to set it off against an input VAT paid on purchase of raw material or services for good sold
    • Electronics, Jewellery are Standard rated

    2. Zero Rated

    • Transactions in which sellers collect no output tax and the corresponding input tax is fully refundable
    • Exports are zero rated

    3. Exemption

    • Transactions in which seller collects no output tax but the input tax is also non-refundable and to be absorbed by the seller as cost of production
    • Life Saving Drugs are exempted
  • Steps in VAT Calculation

Explanation:

The Manufacturer manufactures the Mobile Phones, and are sold to the Wholesaler,

  • Input VAT – AED 0
  • Output VAT – AED 5
  • VAT payable to the Government – AED 5

The Wholesaler stocks the Mobile Phones for the sale to the Retailer

  • Input VAT – AED 5
  • Output VAT – AED 15
  • VAT payable to the Government – AED 10

The Retailer sells the Mobile Phones to the Consumer

  • Input VAT – AED 15
  • Output VAT – AED 25
  • VAT payable to the Government – AED 10

Consumer buys the Mobile Phone from the Retailer

  • VAT payable to the Government – AED 25
Fortune Consultancy Services,

SAIF Zone, P.O.Box 122059, Sharjah - UAE

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+971 585778927

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