All the new changes will come into effect from 1st January 2023.
UAE’s Value Added Tax (VAT) was first introduced back in 2018 and is set at 5%. Simply put, VAT is an indirect tax levied on the consumption or use of goods and services. It is charged at each step of the supply process. The end consumers bear the costs of VAT while registered businesses collect and account for VAT, acting as tax collectors on behalf of the government.
The UAE’s government recently made some amendments to some of the provisions in VAT, which will take effect from 1st November 2023. There are 24 changes in total; some major ones are listed below.
UAE’s New VAT Rules
- The new rule states that registered persons can apply for an exception from VAT registration if all of their supplies are zero-rated or if they no longer make any supplies other than zero-rated.
Zero-rated supplies are supplies of property and services that are taxable at 0%. Some examples of zero-rated items include certain foods and beverages, exported goods, donated goods sold by charity shops, equipment for the disabled and prescription medications and is determined by the taxing authority.
- There is a 14-day setting period to issue a tax credit note to settle output tax, in line with the time frame set for issuing tax invoices. The federal Tax Authority may forcibly deregister persons in specific cases if deemed necessary.
- There is a provision to clarify and confirm the intended meaning of the text; to rephrase; or to improve the legislative sequence of legal provisions.
VAT Rules for Business
- For businesses, there is a mandatory registration limit of AED 375,000; if a company’s taxable supplies and imports exceed this amount, the business must register for VAT.
- Businesses can also choose to register for VAT voluntarily if their supplies and imports exceed AED 187,500.
- Similarly, a business may register voluntarily if its expenses exceed the voluntary registration level. This is designed to enable start-up businesses with no turnover to register for VAT.
- Businesses in the UAE are required to record their financial transactions and maintain up-to-date records.
VAT Exempted Sectors
- Residential properties
- Bare land
- The supply of some financial services
- Local passenger transport
Register for VAT with Creative Zone
Understanding and registering for VAT might be challenging if you are just starting out. Creative Zone Tax & Accounting works with individuals and companies of all sizes to ensure that your business complies with all relevant rules and regulations.