Since January 1, 2018, VAT has been introduced in the UAE, and the VAT rate applicable to the supply of goods and services in the state is 5%. Companies registered under the UAE’s value-added tax are obliged to collect 5% value-added tax, which is collected and remitted to the government. For most supplies in the UAE, a 5% value-added tax rate will be levied, and certain specific goods or services and certain supplies will be classified as duty-free supplies and zero-rated supplies. Therefore, in terms of levy, the tax structure can be roughly divided into the following categories:
UAE VAT rate structure
Rate type tax rate
Standard interest rate 5%
Zero interest rate supplies 0%
Exempt supplies Nil
As mentioned in the table above, all supplies of taxable goods or services (including imports) in the state will be subject to a standard rate of 5%. The value-added tax rate is 5% of the taxable amount and should be determined by the registrant in accordance with the provisions of the decree or regulation. In most cases, the taxable value is the sales value.
The standard rate of 5% is uniform among the member states of the Gulf Cooperation Council.
How will I determine whether a supply is taxable? Therefore, the standard VAT rate of 5% can be levied when providing goods and services.
do not worry! Very simple
The term “taxable supply” refers only to all types of supplies of goods or services considered by taxable persons doing business in the state, including zero-rated supplies but not tax-exempt supplies. Although zero-rated supplies are included as taxable supplies, the tax rate will be zero.
Therefore, with the exception of zero-rated supplies and duty-free supplies, a 5% value-added tax rate should be levied on all other supplies.
In order to determine whether a 5% VAT should be levied on supplies, what you need to do is:
1. Determine whether any of your consumables are under the zero-tax rate or tax-free consumables list.
2. If all your consumables do not belong to the zero tax rate list and the tax exemption list, you should understand that all the consumables are taxable consumables, and you need to collect value-added tax at a tax rate of 5%.
3. If a very small part of your spare parts list belongs to the zero-tax rate list or the tax-exempt list, all other spare parts will become taxable spare parts, and you need to collect value-added tax at a tax rate of 5%.
Administrative regulations will provide detailed information on zero-rated supplies and duty-free goods or services. Generally, all exports are at zero tax rate, but conditions must be met. Notifying that financial services, residential construction, local transportation and other materials are very few examples of tax-exempt materials.
For companies, it is important to determine the taxable supplies subject to a 5% value-added tax rate. Making a decision early will help you prepare in advance to avoid the consequences of violations.
1. UAE VAT Rate Manual
2. Spare parts in UAE VAT
3. UAE duty-free goods