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A Complete Primer on Value Added Tax (VAT) in UAE

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A Complete Primer on Value Added Tax (VAT) in UAE

A Complete Primer on Value Added Tax (VAT) in UAE

Globally, UAE is recognized as a tax-heaven destination as a limited number of taxes are levied on the residents and expats. Value Added Tax (VAT) is one such popular tax that is imposed on the customer while they consume goods and services. This tax is imposed on the point of sale. It is observed that people are not much aware of this taxation system and pay the price of goods and services in utter ignorance.

In this article, we are going to unpack all the facets of Value Added Tax (VAT) with the assistance of our top taxation lawyers of UAE.

History of VAT

On 1st January 2018, VAT was introduced in the country for the very first time. Our best taxation lawyers of Dubai have pointed out that the new tax was introduced to boost government revenue which can be utilized to satisfy the essential needs of the people and improve the standard of living. Further, it was also aimed to reduce the dependency on oil and hydrocarbon sources. The Federal Decree Law No. (8) of 2017 governs all the provisions of VAT in the country. A Federal Tax Authority is also set up to oversee and administer the VAT collection process.

How is VAT collected?

VAT is an indirect tax that is received by the suppliers on the behalf of the government when a consumer buys any good or avail any services within the country. The value of VAT is already included in the sale price in the form of a 5% increase in the final price. For instance – If any product is available for sale at AED 100, you must aware that the cost of the product is AED 95 and the balance amount of 5 AED is VAT. After collecting VAT from the customers, the seller will deposit the same with the government through the FTA portal.

Our best taxation lawyers of Dubai have highlighted that failure to deposit the VAT returns on time will make you viable in accordance with the provisions of Cabinet Resolution No. 40 of 2017 (Penalties for Violation of Tax Laws)

Is it mandatory to register for VAT?

Our best legal consultants of Dubai have highlighted that it is mandatory for a business to register for VAT if its taxable supplies and import are above the threshold of AED 375,000 per annum. Businesses having taxable supply below this threshold, are given an option to either register for it or not. Our consultants from the best law firm of Dubai have pointed out that getting registered for VAT is advisable considering a large number of benefits associated thereto. The seller will receive a refund from the government on the tax that it paid to its suppliers. Further, to avoid double taxation, foreign businessmen are also entitled to recover the VAT paid during their visit to UAE. During Expo 2020, many business houses took the advantage of VAT refunds.

Conclusion

In simple words, VAT is the difference between the output tax payable and the input tax recoverable for the same tax period. The differential amount is deposited to the Federal Tax Authority. It is mandatory for VAT-registered businesses to file their VAT returns quarterly (if annual turnover is below AED 150 million) and monthly (if annual turnover exceeds AED 150 million). To know more about VAT, you can contact Dubai’s best taxation lawyers. 

BSB legal is a specialized taxation law firm of Dubai. Our best lawyers will assist you in advisory, litigation, and other such matters. To know more information, kindly contact one of our best taxation lawyers in UAE. You can email us at info@bsb.legal or call +97150 8014003.

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