VAT
Frequently Asked Questions (FAQs) Related to Value Added Tax (VAT) in the UAE
- Who should register mandatory for VAT in U.A.E?
- A business must register for VAT if its taxable supplies and imports exceed AED 375,000 within the preceding 12 months. Upon registration, the Federal Tax Authority will issue a Tax Registration Number (TRN).
- When should a business voluntarily register for VAT in U.A.E?
- A business may choose to register voluntarily if its supplies and imports are at least AED 187,500 (half of the mandatory registration threshold). Similarly, a startup business may register voluntarily if its initial expenditure exceeds AED 187,500 to be eligible for input VAT.
- Why should a business register for VAT in U.A.E?
- VAT registration allows businesses to claim input VAT paid on purchases and expenses. Non-registered businesses cannot claim VAT, which can increase costs and reduce market competitiveness. Additionally, non-registration can lead to fines and penalties.
- Which document should be submitted by a business as proof of turnover for VAT registration?
- In-house financial statements stating annual turnover, duly certified by management, should be submitted.
- Does a business (L.L.C) need to disclose shareholding details of their UAE national sponsor in other companies at the time of VAT registration?
- Yes, details of the sponsor’s shareholding in other companies, including trade license copies, must be disclosed.
- What is the Reverse Charge Mechanism?
- It requires the recipient of goods or services to account for VAT instead of the supplier when the supplier is not a taxable person in the UAE. Examples include imports from outside the UAE or GCC countries.
- Are non-residents required to register for VAT in U.A.E?
- Non-residents making taxable supplies in the UAE must register for VAT unless a UAE resident person is responsible for VAT accounting on their behalf.
- Who is a Taxable Person?
- A taxable person is any individual or entity registered or required to register for VAT under the VAT Decree-Law No 8 of 2017.
- What are Taxable Supplies?
- Supplies of goods or services for consideration by a business, excluding exempt supplies. Taxable supplies include standard rated supplies (5%), zero-rated supplies (0%), reverse charged services, and imported goods.
- Do high seas sales constitute taxable supplies?
- No, as goods do not touch UAE soil, high seas sales are not considered taxable supplies.
- Do cost or reimbursements billed to customers constitute taxable supplies?
- No, cost or reimbursements do not constitute taxable supplies but goods or services sold are subject to VAT.
- Are personal assets purchases subject to VAT?
- No, personal assets not related to business are not subject to VAT.
- Are annual maintenance charges for residential and commercial property taxable?
- Yes, annual maintenance charges are taxable regardless of property type.
- Are transport-related services for exportation of goods taxable?
- Yes, but charged at a zero rate.
- What is a Deemed Supply and is tax chargeable?
- A deemed supply is considered a taxable supply under specific conditions, and yes, tax is chargeable.
- Are samples and gifts issued to customers subject to VAT?
- Yes, they are considered deemed supplies and subject to VAT.
- What is not considered a taxable supply?
- Sales or issuance of vouchers below their advertised value and the transfer of a business segment to continue its operation are not considered taxable supplies.
- What are exempt supplies?
- Exempt supplies are those where no VAT is chargeable, such as the supply of bare land and specified financial services.
- What are zero-rated supplies?
- Supplies on which VAT is charged at a zero rate include basic educational and healthcare services, exported goods, and certain investments.
- Are special medical services like cosmetics and plastic surgery taxable at a zero rate?
- No, they are not considered basic healthcare services and are subject to the standard VAT rate.
- What is the difference between zero-rated and exempt supplies?
- Suppliers of zero-rated supplies can reclaim full input VAT, while suppliers of exempt supplies cannot reclaim input VAT.
- What is considered a business according to the Federal Tax Authority?
- Any regular, ongoing activity conducted independently for profit, including industrial, commercial, and professional activities.
- What is Consideration?
- Consideration is any payment received or expected for the supply of goods or services, whether in money or other forms.
- What is Input VAT?
- VAT paid on purchases of goods or services used for business purposes.
- What is Output VAT?
- VAT charged on sales of goods and services.
- How should a business determine the place of supply?
- For goods, it’s where the goods are located; for services, it’s where the supplier is established, with special rules for certain categories.
- Why is the place of supply important for Intra GCC transactions?
- It determines whether VAT is payable in the UAE or another GCC state.
- Who are related parties?
- Persons who are connected economically, financially, or regulatory, where one has control over the others.
- What is a Tax Group?
- Two or more related persons conducting business who apply for joint tax registration under specific conditions.
- Who is a Tax Agent?
- A person appointed to represent another before the Federal Tax Authority and assist with tax obligations.
- Can Output VAT be claimed on bad debts?
- Yes, if the debt is written off, the recipient has been notified, and six months have passed since the supply date.
- What causes non-compliance of VAT law?
- Failing to register, submit tax returns, maintain records, or deliberate tax evasion can lead to penalties.
- Under what conditions can businesses claim input VAT?
- Businesses must be taxable persons, hold valid documentation, and use goods/services for taxable supplies.
- Are there transitional rules for VAT introduction?
- Yes, rules address supplies spanning the VAT introduction date, such as VAT on supplies paid for before but delivered after VAT implementation.
- What is the minimum period for retaining VAT records?
- Records should be maintained for at least 5 years.
- What is the Margin Scheme?
- VAT is calculated on the profit margin for sales of used goods bought from unregistered persons.
- Should Freezone companies register for VAT?
- Yes, if their taxable supplies exceed AED 375,000 annually.
- Are fines imposed for lost original VAT documents?
- Yes, fines are AED 10,000 for the first instance and AED 50,000 for repeated loss, with disallowed input VAT credit.
- Does a natural person need to register for VAT?
- Yes, if their income from activities like renting exceeds AED 375,000.
- Can tourists claim VAT refunds in the UAE?
- Yes, if they leave the country within 90 days of purchase, subject to specific conditions.
- Does a school need to register for VAT?
- Schools providing recognized educational services have zero-rated tuition fees, but other services like uniforms and canteen supplies are subject to VAT.
- Are water and telephone bills subject to VAT?
- Yes, they are subject to VAT.
- How is a mixed-use building (residential and commercial) treated for VAT?
- Residential parts are zero-rated or exempt depending on the supply stage, while commercial parts are subject to 5% VAT. The tax incurred must be apportioned accordingly.
Corporate Tax
- What is Corporate Tax?
Corporate Tax is a direct tax imposed on the profit or net income of businesses or corporations. It’s also known as Business Profits Tax or Corporate Income Tax in different jurisdictions. - Why is the UAE introducing Corporate Tax?
The UAE aims to align with international tax standards, improve tax transparency, and strengthen its position as a global business hub. This move supports strategic development and broadens its economic goals. - Is the UAE the first country to introduce Corporate Tax?
No, many countries, including several GCC member states, already have Corporate Tax regimes. - When will Corporate Tax become effective in the UAE?
Corporate Tax applies to financial years starting on or after June 1, 2023. For example:
- A business with a fiscal year from January 1, 2023, to December 31, 2023, will face CT from January 1, 2024.
- A business with a fiscal year from July 1, 2023, to June 30, 2024, will face CT from July 1, 2023.
- Will Corporate Tax be imposed on every business in the UAE?
Yes, as a federal tax, Corporate Tax applies to businesses operating in all Emirates. - What are the responsibilities of the Federal Tax Authority (FTA)?
The FTA will oversee the enforcement, administration, and collection of Corporate Tax. - What will the Ministry of Finance handle?
The Ministry of Finance will manage internal tax information exchanges and international agreements. - How is “business” defined for Corporate Tax purposes?
Business activities by a legal entity are considered within the scope of Corporate Tax. - How is “business” defined for individuals?
An individual must have a permit or business license to be considered as operating a business subject to Corporate Tax. - How is taxable business income determined?
Taxable income is the net profit reported in financial statements prepared according to international accounting standards. - What are the Corporate Tax rates in the UAE?
- 0% on taxable income up to AED 375,000
- 9% on taxable income above AED 375,000
- Will an individual’s salary or employment income be taxed?
No, Corporate Tax does not apply to salaries or employment income. - Will Corporate Tax apply to individuals with commercial licenses in Dubai?
Yes, income from business activities under a commercial license is subject to Corporate Tax. - Will Corporate Tax apply to individual investment returns?
No, Corporate Tax does not apply to personal investment returns, dividends, capital gains, or securities. - Will Corporate Tax apply to freelance professionals?
Freelancers must pay Corporate Tax only if their annual net income exceeds AED 375,000. - Will income from bank deposits be taxed?
No, interest from bank deposits and savings schemes is not subject to Corporate Tax. - Are there any exemptions from Corporate Tax?
Yes, businesses involved in natural resource extraction are exempt and remain under Emirate-level taxation. - Will foreign businesses or individuals be subject to Corporate Tax?
Foreign entities are only subject to Corporate Tax if they operate businesses regularly in the UAE. - Will foreign investment income be taxed?
No, Corporate Tax does not apply to foreign investors’ income from dividends, interests, capital gains, or royalties. - Will businesses in free zones be subject to Corporate Tax?
Yes, businesses in free zones are subject to Corporate Tax and must register and file returns. - Will the Corporate Tax treatment differ for businesses in financial free zones?
No, the Corporate Tax treatment is consistent across all free zones. - Will the oil and gas sectors be taxed?
No, the oil and gas sectors remain under Emirate-level taxation. - Will the banking sector be taxed?
Yes, the banking sector is within the scope of Corporate Tax. - Will the real estate sector be taxed?
Yes, real estate-related activities such as construction, management, and brokerage are subject to Corporate Tax. - Must companies register for Corporate Tax?
Yes, all businesses must register for Corporate Tax purposes. - How often must businesses file Corporate Tax returns?
Businesses must file a Corporate Tax return annually, with no advance filings required. - How should Corporate Tax returns be filed?
Returns must be filed electronically. - Will companies have to pay Corporate Tax in advance?
No, advance tax payments are not required. - Are there penalties for non-compliance?
Yes, non-compliance with Corporate Tax regulations will result in penalties similar to those for other taxes like VAT.
Accounting and Bookkeeping
The Accountant: Recognized for offering both high-quality and cost-effective bookkeeping services, providing comprehensive financial insights and efficient management of financial operations.
Why Outsource Accounting and Bookkeeping Services in Dubai?
Expertise and Specialization: Outsourcing provides access to specialized knowledge and expertise that may be lacking in-house. This can improve accuracy and compliance with local regulations and international standards.
Cost-Effectiveness: For many small and mid-sized businesses, hiring a full-time in-house accounting team can be costly. Outsourcing is often more affordable, with firms offering services at lower rates compared to the cost of hiring, training, and maintaining a full-time team.
Scalability: Outsourcing allows businesses to scale their accounting services up or down based on their needs without the complexities of adjusting internal staff levels.
Focus on Core Business: By outsourcing accounting functions, businesses can focus more on their core operations and strategic goals rather than getting bogged down by financial details.
Access to Advanced Technology: Outsourcing firms often use the latest accounting software and technologies, which can enhance efficiency and accuracy in financial reporting.
Regulatory Compliance: Professional accounting services ensure compliance with local regulations and tax laws, reducing the risk of legal issues or penalties.
Which Firm Provides the Best Accounting and Bookkeeping Services in Dubai?
The Accountant: This firm is noted for its comprehensive and cost-effective accounting and bookkeeping services. It offers specialized support for small and mid-sized businesses, including bookkeeping, professional accounting, and tax return preparation.
How Are Monthly Bookkeeping Services Priced?
Pricing: Monthly bookkeeping services typically range from $80 to $100, depending on the scope of services, business size, and complexity of the financial needs. Outsourcing is generally more affordable compared to maintaining an in-house team.
Benefits of Accounting Services in Dubai
Efficient Processes: Streamlined accounting processes improve efficiency and accuracy.
Financial Insights: Detailed financial analyses help in making informed business decisions.
Compliance: Ensures adherence to statutory requirements and regulations.
Growth Support: Facilitates scaling up operations with minimal hassle.
Technology Integration: Leverages advanced tools and software for better financial management.
How Can Accounting Services Help My Business?
Operational Regulation: Helps manage and regulate financial operations.
Financial Analysis: Provides insights through analysis of financial statements.
Compliance: Ensures compliance with VAT and other tax obligations.
Payroll Management: Manages payroll and related financial tasks.
Tax and VAT Consultation: Offers expert advice on tax matters.
5 Benefits of Accounting Outsourcing Services
Cost Savings: Reduced costs compared to in-house accounting teams.
Error Reduction: Minimizes errors through professional expertise and technology.
Financial Analysis: Provides insights into financial statements and cash flow.
Regulatory Compliance: Ensures compliance with financial regulations and tax laws.
Efficiency: Streamlines accounting processes and improves overall efficiency.
Who Provides the Best and Cheapest Bookkeeping Service in Dubai?
Dubai Residency
Can I Move to Dubai Without a Work Visa?
- While a work visa is typically required for employment, Dubai does offer various residency options that do not necessarily require a work visa. For example, individuals can obtain a residency visa through property investment or other types of long-term visas. However, for employment purposes, a work visa is generally needed.
Does Buying a House in Dubai Qualify Me for a Residency Visa?
- Yes, purchasing property in Dubai can qualify you for a residency visa. To be eligible, the property must be completed and worth at least AED 1 million. This investor visa also allows you to sponsor dependents.
What Is the Best Way to Live Permanently in the UAE?
- The most common ways to obtain long-term residency are through employment, owning a business, or investing in real estate. Employment in a priority sector or investing in property worth at least AED 5 million can help secure long-term residency or a five-year visa.
What Are the Benefits of Dubai Residency?
- Benefits include:
- Access to financial facilities
- Ability to open a bank account
- Eligibility for a driving license
- Access to government health services and health insurance
- Opportunities to work and invest
Who Is Eligible for a Dubai Residence Visa?
- Applicants must undergo a medical examination and pass a security check. They also need to apply for an Emirates ID from the Federal Authority for Identity and Citizenship. For specific information on the residential visa process, you can contact the Amer Centre at Al Quoz Mall.
Can I Live Permanently in Dubai?
- Permanent residency is typically available through employment in a priority sector or substantial property investment (AED 5 million or more). A long-term visa or residency permit can be obtained under these conditions.
Difference Between a Residency Visa and a Work Visa?
A work visa allows an individual to be employed by a company in Dubai, while a residency visa permits long-term residence without necessarily being tied to employment. Work visas and residency visas are issued by different government authorities and serve distinct purposes.
Golden Visa
What is the Golden Visa?
The Golden Visa is a long-term residence visa introduced by the UAE government that allows individuals to live, work, and study in the UAE without the need for a local national sponsor. It offers a stable and extended stay option compared to standard residence visas.
Does the Golden Visa Offer Permanent Residency?
No, the Golden Visa does not provide permanent residency. It is issued for a duration of five or ten years, depending on the visa category, and must be renewed upon expiration, provided the eligibility criteria are still met.
Key Benefits of the Golden Visa
- Long-Term Stability: Provides long-term residency, which offers stability and allows individuals to plan for the future without the need for frequent visa renewals.
- Investment Opportunities: Enables individuals to invest in various sectors and build careers in the UAE with greater security.
- Family Sponsorship: Allows holders to sponsor family members, dependents, and, in some cases, senior employees, based on the specific visa category.
- Career Flexibility: Supports career development and offers the opportunity to build a lasting professional presence in the UAE.
Eligibility for the Golden Visa
The Golden Visa is available to several categories of individuals, including:
- Investors: Those investing in the UAE’s economy or business sectors.
- Real Estate Investors: Individuals investing in real estate properties of a specified value.
- Entrepreneurs: Founders and business owners with innovative business ideas.
- Doctors and Scientists: Professionals with significant contributions to their fields.
- Creatives (Art & Culture): Artists, cultural figures, and other creative professionals.
- Inventors: Individuals with significant innovations or patents.
- Executive Directors: Senior executives with critical roles in their organizations.
- Specialists: Experts in priority educational fields, sports professionals, and other specialized areas.
- PhD Holders: Academics with advanced degrees in relevant fields.
- High School and University Graduates: Graduates with exceptional academic achievements.
Age Restrictions
There are no specific age restrictions for applying for the Golden Visa. Applicants of any age can apply as long as they meet the eligibility criteria for their respective category.
Golden Visa Application Process Timing
For Applicants Within the UAE (Existing Residents)
- Initial Approval:
- Once all required documents are successfully submitted, the initial approval process typically takes up to 48 hours.
- Visa Issuance:
- After obtaining initial approval, the following steps are required:
- Cancellation of Current Visa: Your existing UAE visa needs to be canceled.
- Medical Assessment: A medical assessment must be completed.
- The Golden Visa will generally be issued within three to five working days after these steps are completed.
- After obtaining initial approval, the following steps are required:
Overall, the entire process from initial approval to receiving the Golden Visa can take approximately one to two weeks, assuming there are no additional delays or issues.
Processing of Emirates ID for Golden Visa Applicants
The Golden Visa processing center that manages the Golden Visa applications will also handle the issuance of Emirates IDs. This process is overseen by the Federal Authority for Identity & Citizenship (ICA).
Cancellation of Existing Visa
Upon approval of the Golden Visa application, the responsibility for canceling the applicant’s existing visa lies with the applicant’s sponsor. The applicant must coordinate with their sponsor to ensure that the current visa is properly canceled before the new Golden Visa is issued.
Financial Guarantees for Sponsoring Dependents
Golden Visa holders do not need to provide a financial guarantee when sponsoring family members or other dependents. This is different from other residency visa categories, where such guarantees might be required.
Medical Insurance Requirements
For applicants already residing in the UAE, it is mandatory to provide a valid medical insurance policy as part of the Golden Visa application process. This ensures that applicants meet the health insurance requirements set by UAE authorities.
Sponsoring Family Members with the Golden Visa
Can the Golden Visa be extended to applicants’ family members?
Yes, the Golden Visa can be extended to include sponsorship for:
- Spouses
- Children
- Parents
- Dependent siblings
There is no limit to the number of children who can be sponsored. However:
- Male children can be sponsored until the age of 18.
- Female children can be sponsored until marriage.
When can Golden Visa applicants begin to sponsor family members?
Golden Visa holders can start the process of sponsoring family members immediately after receiving their Golden Visa.
What will happen to the visas of family members currently sponsored, once the applicant cancels his/her visa during the Golden Visa application?
When the applicant’s current visa is canceled during the Golden Visa application process, the family members’ visas can be handled in two ways:
- Placed on Hold: If the visas are placed on hold, a refundable financial guarantee must be submitted until the new Golden Visa is issued.
- Cancelled: If the visas are canceled, no financial guarantee is required.
Can Golden Visa holders sponsor domestic helpers?
Yes, Golden Visa holders can sponsor domestic helpers. The standard rules and regulations for sponsoring domestic helpers will apply.
Is there a limit to the number of people who can be sponsored?
The number of people who can be sponsored, excluding dependent children, is subject to approval by the Federal Authority for Identity & Citizenship.
Renewal and Termination of the Golden Visa
What is the validity of the Golden Visa?
- The Golden Visa is issued for either five or ten years, depending on the specific category of the visa.
Do holders need to renew their Golden Visa?
- Yes, the Golden Visa must be renewed every five or ten years, based on the initial issuance period.
Do I need a sponsor to renew my Golden Visa?
- No, you do not need a sponsor for the renewal of the Golden Visa. However, you must meet all the related application requirements for the renewal process.
Is the Emirates ID also renewed with the Golden Visa?
- Yes, the Emirates ID is renewed along with the Golden Visa. The validity of your Emirates ID will match the validity of your Golden Visa:
- A ten-year Golden Visa will have a ten-year Emirates ID.
- A five-year Golden Visa will have a five-year Emirates ID.
In the event that an Investor Golden Visa holder’s business fails, how will his/her visa status in the country be affected?
- The status of a Golden Visa holder in such circumstances will be reviewed on a case-by-case basis by the UAE government. Depending on the situation, visa holders may be able to change their Golden Visa category if they meet the eligibility criteria and conditions set by the authorities.