VAT in the UAE

VAT Rates in the UAE

VAT rates in the UAE were introduced in 2018 at a standard rate of 5% and a 0% rating (applying to insurance services, land and domestic transport.

Businesses that are registered for VAT collect VAT from their customers and also pay VAT when buying goods or services. They can recover the difference from the UAE government.

UAE VAT Registration

Businesses are required to register for VAT in the UAE if the value of their taxable supplies and imports exceeds AED 375,000 per year. Non-UAE-based businesses that make taxable supplies in the UAE must register for VAT regardless of the value of those supplies. Businesses with annual revenue exceeding AED 187,500 may choose to register voluntarily.

Distance selling into the UAE

Any distance B2C sales (directly to consumers) made into the UAE are subject to VAT on import. As a foreign business cannot be the recorded importer the import VAT must be paid to a shipping agent to remit at the border, the import VAT in the UAE is non-reclaimable by the seller. At the point of sale, VAT works the same as in the EU, VAT is collected on purchase and remitted via VAT return to the tax authorities. VAT registration is required from the first sale made; there is no sales threshold.

Distance sales made to UAE incorporated business (B2B transactions) respectively trigger no liabilities for sellers. The purchasing entity will account for the import VAT and offset VAT using reverse charge mechanism. There is no sales VAT applicable and no VAT registration or reporting requirement for the seller, but it is the responsibility of the seller to correctly identify which customers meet these criteria.

Importing to store in the UAE

Goods can only be imported into the UAE by a company incorporated there. That means that a non-domestic business cannot be a registered importer or reclaim any import VAT.

• Import VAT is non-reclaimable so must be considered an expense.
• No marketplace collection – VAT must be collected on all sales.
• No reverse charge mechanism on B2B sales, VAT must be collected and remitted.

Penalty structure for VAT offences in the UAE

The penalty structure for VAT offences established by the FTA in the UAE is the following:

• Late VAT Filing: AED 1,000 for first offence, AED 2,000 for subsequent offences
• Late VAT Payment: Fixed 2% of VAT due, followed by 4% of the value of the unpaid tax per month, it remains outstanding.
• Failure to Register: AED 10,000

UAE VAT Deregistration

It is mandatory to deregister when you stop conducting business in the corresponding territory. Deregistration is not permitted until all outstanding returns up until that point are submitted and all outstanding payments are made.