Getting Ready for VAT
It is important to understand any potential obligations you or your business may have under the UAE VAT Law. The FTA is committed to providing extensive support and guidance to assist with this, however the responsibility lies with the business to make sure that any required compliance obligations are fulfilled. The FTA does have the power to conduct audits on taxable persons and subsequently impose penal measures on those that are not compliant with the law.
To fully comply with the UAE VAT law, businesses may need to make some changes to their core operations, financial management and book-keeping, technology, and perhaps even their human resources.
It is essential that businesses try to understand the implications of the new taxes and make every effort to align their business model to government reporting and compliance requirements.
In the UAE, VAT will be levied at a rate of 5% on most goods and services, although there will be some exceptions.
End-consumers generally bear the VAT cost in the form of a 5% increase of most goods and services they purchase in the UAE, while VAT registered businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government.
VAT will be charged at 0% in respect of the following main categories of supplies:
Exports of goods and services to outside the GCC States that implement VAT
International transportation, and related supplies
Supplies of certain sea, air and land means of transportation (such as aircrafts and ships)
Certain investment grade precious metals (e.g. gold, silver, of 99% purity)
Newly constructed residential properties, that are supplied for the first time within 3 years of their construction
Supply of certain education services, and supply of relevant goods and services
Supply of certain Healthcare services, and supply of relevant goods and services
The following categories of supplies will be exempt from VAT: