VAT was introduced in the UAE with effect from 1 January 2018. The standard rate of VAT is 5%. In addition, there is a zero-rate and exemptions, which apply to certain types of supply.
The threshold for mandatory VAT registration in the UAE is AED 375,000 (approx. US$100,000) per annum. This threshold is measured based on the quantum of taxable supplies made by a company historically, over the preceding 12 months or prospectively, within the next 30 days. There is also a voluntary registration threshold of AED187,500. The voluntary registration threshold can be measured based on either taxable supplies or taxable expenses.
Non-resident companies making taxable supplies in the UAE are liable to register for VAT unless the VAT is paid by the UAE customer through the reverse charge mechanism. There is no registration threshold for non-resident companies.
VAT registered businesses are required to file periodic VAT returns through the FTA’s online portal. Most taxpayers file quarterly returns. However, some depending on the industry or value of taxable supplies, are required to file monthly returns. Bi-yearly and yearly VAT returns can also be granted on a case-by-case basis.
Companies that are entitled to a VAT refund are required to make refund applications, in addition to the VAT returns, if they require a cash refund.