FAQ

Value Added Tax (or VAT) is an indirect tax which is imposed on all goods, services, imports and deemed supply, with very few exceptions, and not on profit or income.

1. The full text of the VAT Law is available in:
   https://www.tax.gov.ae/pdf/VAT-Decree-Law-No-8-of-2017.pdf
2. The full text of the VAT Implementing Regulations is available in:
   https://www.tax.gov.ae/pdf/Cabinet-Decision-No-52-of-2017.pdf

VAT was introduced in the United Arab Emirates on January 1, 2018.

All goods and services will be subject to VAT, except for certain goods and services which will be either VAT zero rated or VAT exempt.

The VAT rate will be at a standard rate of 5%, except for certain goods and services which will be VAT zero rated.

1. Export of goods.
2. Services provided to non-residents of United Arab Emirates.
3. Transportation services of goods or passengers outside the United Arab Emirates.
4. Supply of qualifying means of transport or of any vessel or aircraft used principally for international transportation of passengers and goods, and related services.
5. First supply of: (a) residential buildings, (b) charity-related buildings, and (c) newly converted residential buildings.
6. Supply of preventive and basic healthcare services and related goods and services.
7. Crude oil and natural gas.
8. The first supply of qualifying metals.
9. Educational services owned or funded by Government (Federal/Local).

1. Supply of local passenger transport.
2. Supply of residential properties through sale or lease, other than zero-rated.
3. Certain financial services.
4. Supply of bare land.

A Taxable Person is an individual or company or partnerships conducting any business activity in making a taxable supply for the purpose of generating income and who is registered or required to register for VAT under the United Arab Emirates VAT Laws and Regulations.

VAT registration falls into two categories:

1. Mandatory — taxable persons with annual revenues of AED 375,000 or more. The annual revenues include revenues subject to 5% VAT and revenues subject to 0% VAT, but excludes revenues which are exempt.
2. Voluntary — taxable persons with annual revenues of AED 187,500 but not more than AED 375,000.

To issue a valid Tax Invoice and to charge Output VAT on the supply of goods and services.

The supplier should have a valid VAT number and a valid tax invoice. To check the authenticity of the supplier’s VAT number, please obtain a copy of the supplier VAT registration certificate and confirm the supplier’s VAT number with the government VAT website.

None, however from a cash flow perspective, customer should pay the output VAT charge by the supplier.

There is no VAT requirement to stop doing business with a supplier who is not VAT registered. However, the supplier should not charge Output VAT on its invoice. Also, please be on guard for any increase in the price of the supplier due to unrecoverable VAT from its purchases.

There is no VAT requirement to stop doing business with customer who is not VAT registered. However, please ensure that the Price is exclusive of VAT and that the Output VAT is charge separately in the tax invoice and the relevant VAT clause is included either in the tax invoice or in the sales agreement, as follows:

“If any supply made by the supplier under or in connection with this contract is subject to Value-Added Tax, the supplier shall collect these taxes at the applicable rate on the contract price and the customer hereby undertakes to pay these taxes.”

Time of supply determines when the liability to account for output VAT arises.

Tax shall be calculated on the date of supply of goods or services, which shall be earlier of any of the following dates (Article 25 of the Law):

1. The date on which goods were transferred, if such transfer was under the supervision of the supplier.
2. The date on which the recipient of goods took possession of the goods, if the transfer was not supervised by the supplier.
3. Where goods are supplied with assembly and installation, the date on which the assembly or installation of the goods was completed.
4. The date on which the goods are imported under the Customs Legislation.
5. The date on which the recipient of goods accepted the supply, or a date no later than 12 months after the date on which the goods were transferred or placed under the recipient of goods for disposal, if the supply was made on a returnable basis.
6. The date on which the services were completed.
7. The date of receipt of payment or the date on which the tax invoice was issued.

Value of supply is the taxable base for VAT purposes which may not necessarily be the same as the agreed price.

The taxable base for VAT purposes shall be as follows:

1. The consideration received or receivable in monetary terms.
2. If all or part of the consideration is in kind, the consideration is fair market value of that supply.
3. For services received by the taxable person who is obligated to calculate the tax under reverse charge, the value of the supply shall be equal to the market value of the consideration without addition of the tax on that supply.
4. The value of supply in the case of a deemed supply shall be equal to the total cost incurred by the taxable person to make this deemed supply of goods or services.
5. The value of supply should include all expenses, fees, taxes on the supply.

The value of supply or taxable base can be adjusted for the following circumstances:

1. The supply is cancelled or terminated after the supply has taken place, in whole or in part.
2. When discounts are made before or after the date of supply, or subsidies are provided by the State to the supplier for that supply.

The Tax Invoice should have the following contents:

1. The words “Tax Invoice” clearly displayed on the invoice.
2. The name, address, and Tax Registration Number (TRN) of the registrant making the supply.
3. Where a recipient of the supply is a registrant, the name, address, and TRN of the recipient.
4. A sequential tax invoice number or a unique number which enables identification of the tax invoice and the order of the tax invoice in any sequence of invoices.
5. The date of issuing the tax invoice, the date of supply if different from the date the tax invoice was issued.
6. A description of the goods or services supplied.
7. For each good or service, the unit price, the quantity or volume supplied, the rate of tax and the amount payable expressed in AED.
8. The amount of any discount offered.
9. The gross amount payable expressed in AED.
10. The tax amount payable expressed in AED together with the rate of exchange applied where the currency is converted from a currency other than the United Arab Emirates Dirham.
11. Where the invoice relates to a supply under which the recipient of goods or services is required to account for the tax, a statement that the recipient is required to account for the tax, and a reference to the relevant provision of the Decree-Law.

The United Arab Emirates VAT implementing regulations provide that in case a supplier issues invoice or receives consideration before January 1, 2018 but the goods or services are supplied after January 1, 2018, the date of supply is after the implementation date of VAT and the supply shall be subject to VAT. In this regard, the supplier needs to issue an additional invoice for the VAT.