VAT Registration and Reporting Services in the UAE

In the United Arab Emirates, Value Added Tax is applied to goods and services provided to local customers in the UAE (in certain cases - customers coming from the Persian Gulf countries) at a rate of 5%.

The annual VAT registration threshold is 375 000 Arab Dirhams. If taxable supplies and imports exceed the threshold, the company must either:

Apply for VAT registration exemption

or

register as a VAT payer.

This requirement concerns the free zone companies as well.

The company may apply for VAT registration exemption only if it does not have any local customers. Application process is the same as registration for the VAT: the company must provide required information and documents, and the authorities might accept or reject this request at their discretion.

It is important to mention that if a company makes at least one taxable transaction, it must register as a VAT payer and is no longer eligible for the aforementioned exemption. For example, if the company generates a turnover of 400,000 AED, and, in this turnover, there is a single transaction of 100 AED which involves a local customer, under such circumstances, this company will no longer be able to apply for the VAT registration exemption and will be obliged to register as a VAT payer.

Becoming a VAT-registered company comes with the obligation to submit quarterly VAT returns, however, only the transactions involving local customers are taxable, therefore, if, for example, the company generates a turnover of 100 000 AED per month and, out of it, only one transaction of 100 AED involves a local customer, in the quarterly VAT return, even though the company must report all transactions, only 100 Dirhams will be taxed with 5% VAT.

The client might not have local transactions at all, but they may decide to become registered as a VAT payer and submit quarterly VAT returns, since the VAT reporting in UAE is not complex and it helps the company to create a stronger economic substance. Moreover, the UAE does not issue tax identification numbers if you are a free zone company, therefore, having a VAT payer number makes the company look better in the eyes of foreign partners and payment service providers.

Contact us and get all your questions answered - or you can find more information about VAT and other tax-related matters in our FAQ section.