Value Added Tax (VAT)

Value-added tax or VAT is a tax on the consumption or use of goods and services imposed on every aspect of sales. VAT is a form of indirect tax and is levied in more than 180 countries worldwide. The end-consumer ultimately bears the cost. Businesses collect and account for taxes on behalf of the government.

 Value Added Tax (VAT) was imposed in the United Arab Emirates on 1 January 2018. The rate of VAT is 5 percent. VAT will provide a new source of income to the UAE which will be used to provide high quality public services. It will also help the government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.

Criteria for registration for VAT. If the taxable supply and import of VAT exceeds AED 375,000 per year, then every business company should register for VAT. It is optional for businesses whose supplies and imports exceed AED 187,500 per year. The government, a business house, pays the tax it collects from its customers.

E-commerce supply chains can be extremely complex, making transaction identification and VAT analysis challenging. The publication of the much-awaited e-commerce VAT Guide (30-page / 437 KB PDF) by the UAE's Federal Tax Authority (FTA) in August 2020, two and a half years after VAT was implemented in the UAE, is therefore extremely important.

This guide summarizes the correct application of common UAE VAT principles in the context of e-commerce transactions and scenarios, and has provided further insights on the areas of legislation specific to e-commerce that are required to do business in the region Remain unclear.

Documents Required for VAT Registration

• Trade License
• Emirates ID
• Passport
• Immigration ID (MOL Card)
• Bank Details
• Audit Report