Indirect Taxation

VAT

The UAE VAT (Value Added Tax) law was introduced as part of the government's efforts to diversify revenue sources. Here are the key points about its introduction:

1

VAT was introduced in the UAE on January 1, 2018. This marked a significant shift in the country's fiscal policy.

2

The standard rate of VAT in the UAE is 5%. Certain goods and services are exempt or zerorated, such as healthcare, education, and certain  financial services.

3

The framework for VAT in the UAE is based on the GCC (Gulf Cooperation Council) VAT framework, with each member state having the flexibility to implement it according to its economic needs.

4

The Federal Tax Authority (FTA) is the entity responsible for overseeing VAT implementation, registration of  businesses, collection of VAT, and  enforcement of regulations.

5

The introduction of VAT aimed to enhance the UAE's fiscal sustainability, improve public services, and encourage more sustainable economic growth. It also aimed to bring the UAE in line with global taxation standards.

Compliance:

Businesses operating in the UAE are required to register for VAT if their taxable supplies and imports exceed certain thresholds. They must also maintain proper records and submit periodic VAT returns.

Exemptions and Special Cases

While most goods and services are subject to VAT at the standard rate, there are specific exemptions and special cases where VAT does not apply or is charged at a zero rate. Overall, the introduction of VAT in the UAE represented a significant policy shift aimed at creating a more diversified and sustainable economy while aligning with global fiscal norms.

Excise Tax

Excise Tax is a form of indirect tax levied on specific goods. These goods are typically those that are harmful to human health or the environment. The intent of Excise Tax is to reduce consumption of these commodities while also raising revenues for the government that can be spent on public services.

All businesses that import, produce or release excise goods from a designated zone must consider their registration requirements and compliance responsibilities related to filing and paying Excise Tax.