After the introduction of value-added tax in the UAE, major changes will take place in the way UAE companies supply, record transaction records and issue invoices. Companies registered with VAT are also expected to complete other compliance tasks, such as return filing and tax payment. Let us answer some frequently asked questions about the implementation of VAT by companies.
FAQ 1: Should I register for VAT?
Answer: If your taxable turnover, that is, the value of the goods and services you provide and any imports, but does not include any tax-free supplies (such as certain financial services and life insurance, certain property transactions and local passenger transportation), If you exceed AED 375,000 in a year and within 12 months, or if you want your taxable turnover in the next 30 days to exceed AED 375,000, you need to register for VAT. If your taxable turnover or the incurred VAT fees are less than Dh375,000 but more than Dh187,500, you can register for VAT voluntarily.
You can learn more about VAT registration in our article “VAT registration in the UAE”.
FAQ 2: Can I form a tax group?
Answer: Relevant enterprises with economic, financial and regulatory relationships (whether legal, equity or voting rights), if they have an establishment in the UAE and are a legal person under common control, can be registered as a tax group. Transactions between group members are deemed to be outside the scope of VAT, and one member of the group (called a “representative member”) will submit a consolidated VAT report covering the group’s activities. In addition, although all members of the group will still be jointly and severally liable for the value-added tax debt, all supplies provided or received by any tax group member will be deemed to be provided by the representative member of the group.
You can learn more about taxable groups in our article “VAT group registration”.
FAQ 3: How to register?
Answer: The VAT registration form and tax group registration form can be found on the FTA website.
You can learn more about the registration process in our article “VAT registration in the UAE”.
FAQ 4: How does VAT work?
Answer: After registering for VAT, you will have to charge VAT on all supplies provided, unless they are tax-exempt or zero-rated, and state the value-added collected and collected from customers through the tax return submitted by the free trade agreement tax. As long as you have a tax invoice or other supply or import certificate, and have paid the value-added tax you want to recover, you can recover the value-added tax (input tax) you paid to the supplier on the tax return.
FAQ 5: Is there any input tax that I cannot recover?
Answer: Yes. Entertainment expenses, motor vehicles used for personal purposes, and employee-related expenses cannot be recovered.
To learn more about the cost of preventing VAT recovery, please see our article “Business Costs Preventing Input VAT Recovery”.
FAQ 6: When do I need to pay any taxes?
Answer: You will need to pay any tax before the due date of each tax return, that is, before the 28th of the next month after the end of each tax period (if the normal due date is a national holiday, the next Before weekdays) or weekends).
FAQ 7: When and how do I submit my tax return and what will appear on the tax return?
Answer: Generally, you will allocate a quarterly or one-month tax period based on your annual turnover, but if the FTA considers it appropriate, you can allow a shorter or longer tax period. You need to submit a tax return for each tax period on the 28th of the next month after the end of each tax period (if the normal due date is a national holiday or weekend, the next business day). Tax returns will be submitted electronically through the FTA portal.
In each tax return, you need to display:
1. The value of priced supplies obtained by each emirate during the tax period and the output tax levied
2. The value of zero-rated supply during the tax period
3. The value of duty-free goods during the tax period
4. The value of any offset supplies received during the tax period
5. The amount of expenses incurred during the tax period when you are trying to recover input tax and the amount of tax that can be recovered
6. The total amount of taxes payable and recoverable input taxes during the tax period
7. Taxes payable (or refundable) during the tax period.
FAQ 8: When will I receive the refund I requested?
Answer: If you are eligible for a tax refund, the free trade zone will notify you of the approval or rejection of the refund application within 20 working days. In some special cases, the FTA may notify you, which will take more time.
The implementation of VAT requires companies in the UAE to understand all aspects of the law, be prepared for the law, and implement the required activities and processes in their business to ensure compliance with regulations under VAT. These VAT FAQs will help companies assess their VAT readiness and knowledge.