The UAE VAT Guide: Essential Insights for Businesses and Entrepreneurs

While many people perceive the UAE as a tax-free haven, the reality is that the country has a well-established tax regime, with several taxes contributing to its fiscal framework. Among these is Value Added Tax (VAT), a consumption tax introduced in 2018, as part of the UAE's efforts to diversify its revenue sources and reduce reliance on oil income. Governed by the Federal Tax Authority (FTA), VAT is now a significant component of the UAE's tax system, applying a 5% levy on most goods and services across the nation.

The UAE generates substantial revenue from VAT, with estimates suggesting it raises approximately AED 30-35 billion (about USD 8-9.5 billion) annually. This revenue plays a crucial role in supporting the country's economic diversification and funding public services and infrastructure projects. The exact figures can vary yearly based on economic conditions and changes in consumer spending.

VAT does not apply to all businesses and many entrepreneurs starting out may not have to register immediately. That said, in certain cases it may be advantageous to register dependent upon your circumstances, so it is worth understanding the intricacies of the law. Businesses with an annual turnover exceeding AED 375,000 are required to register for VAT, while those with turnover between AED 187,500 and AED 375,000 may voluntarily register.

Once registered, a return will be prepared either on a monthly or quarterly basis, detailing inputs & outputs that will determine the tax liability (or asset) for that period. The returns must be filed through the FTA’s e-Services portal by the 28th of the following moth to avoid any penalties.

At Full Stack Finance we support clients by using bespoke compliance frameworks, ensuring the burden of deadlines and reporting is taken care of to allow you to focus on your high-value activities.

We are happy to meet with you and determine whether you need to register and if you do, we can handle the process from start to finish. Thanks for reading!

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