Value added tax in the Emirates is a tax whose goal is to achieve sustainable development in the Emirates and support the local economy, as well as support the economic and social development sectors and in this article, we will be keen to learn about this type of tax, how to calculate it, when it must be paid, and what are the goods and services on which this tax is imposed, so follow us.
Definition of value added tax in the UAE
Tax is an important means adopted by governments around the world to raise the revenues necessary to finance public services and achieve economic development, as these tax revenues are an essential source of funding for hospitals, schools, public universities, civil defense, in addition to many other aspects of life that contribute to improving the standard of life for citizens and in the UAE, taxes are of several types, including value-added tax (VAT), income tax, and other government fees, as these taxes provide the financial resources necessary to develop infrastructure, provide public services, and support social programs in the country.
VAT is an indirect tax imposed on transactions at every stage of the supply chain, as the cost of the tax is generally borne by the end consumer, while the registered business calculates and collects the tax, acting as a tax collector on behalf of the Federal Tax Authority.
Types of added tax
Direct tax is the tax that an individual pays directly to the government, and it includes several types of taxes such as income tax and corporate tax and while indirect tax is the tax collected from individuals through an intermediary, such as retailers, and includes several types of taxes such as value-added tax and sales tax. It is worth noting that VAT is applied in more than 180 countries around the world, including OECD countries, with the exception of the United States, where VAT is not applied there.
What is the added tax rate in the UAE?
The value-added tax rate in the UAE is 5%, and it was implemented for the first time in the country on January 1, 2018, as this tax is imposed on most goods and services at every stage of the supply chain, with the cost borne by the final consumer, as companies calculate and collect the tax for the government.
As for the impact of the value-added tax on real estate in the Emirates, the revenues from this tax will contribute to financial sustainability and provide a new source of income for the state and this, in turn, will contribute to ensuring the continuity of providing high-quality government services in the future, and will provide support to the real estate sector in the Emirates.
How to register VAT in the UAE
You can register for VAT through the electronic services section available on the Federal Tax Authority website, as to benefit from electronic services, you must first create an electronic account on the website. Here are the steps necessary to register for VAT through the Federal Tax Authority website:
1. Create an account dedicated to electronic services on the Authority’s “Emirates Tax” website and activate it.
2. Log in to the Emirates Tax account control panel.
3. Add a new taxable person and go to the Taxable Person Account page.
4. Click on the “Register” button available under the VAT option.
5. Complete the registration process and follow the instructions provided
After completing these steps, you will have successfully registered for VAT via the Federal Tax Authority website
The difference between value added tax and general sales tax in the UAE
Although general sales tax and value added tax are two types of indirect taxes, there are differences between them and in the case of sales tax, the tax is imposed on the final consumer of the good or service, while value-added tax is imposed and collected at every stage of the circulation and production of the good or service, as VAT is more complex as the tax is levied and collected at each stage of production and distribution and because of its ability to adapt to changing economies and provide stable financial sources of income, the value-added tax has replaced the sales tax in many countries, to provide a more efficient and fair tax system.
Latest amendments to the value-added tax law in the UAE
The UAE Ministry of Finance announced new amendments to the provisions of Federal Decree No. 8 of 2017 related to value-added tax, effective January 1, 2023, as this amendment comes in line with global best practices in accordance with the Unified Value-Added Tax Agreement for the Gulf Cooperation Council countries.
The main amendments included in the amended decree include allowing registrants who import taxable materials to submit a request for exemption from registration, provided that all of their supplies are only zero-rated or they make zero-rated supplies, as a period of 14 days has also been set for issuing a tax credit note to settle the output tax, based on the period for which tax invoices are issued and the Federal Tax Authority is permitted to forcibly deregister registered persons in certain cases where necessary.
These amendments are consistent with global standards and reflect the UAE’s commitment to improving the tax system and enhancing transparency and efficiency in tax administration.
By constantly modernizing and developing the tax system, the UAE seeks to enhance the business environment and enhance confidence among local and international investors, as through the recent amendments to the Value Added Tax Law, the UAE appears committed to applying global best practices and achieving a balance between generating tax revenues and supporting vital sectors of the economy and with these steps, the UAE demonstrates its commitment to financial sustainability and enhancing the economic environment to face future challenges with confidence and positivity.
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